LOEWS CORPORATION HOUSTON, Aug. 1, 2016 /PRNewswire/ -- Diamond Offshore Drilling, Inc. (NYSE: DO) today reported results for the second quarter of 2016.
Three Months Ended
------------------
Thousands of dollars, except per share data June 30, March 31, Change
2016 2016
--- ---- ----
Total revenues $388,747 $470,543 (17)%
Operating (loss) income (626,669) 111,569 (662)%
Adjusted operating income 51,476 111,569 (54)%
Net (loss) income (589,937) 87,425 (775)%
Adjusted net income 22,295 87,425 (74)%
(Loss) earnings per diluted share ($4.30) $0.64 (772)%
Adjusted earnings per diluted share $0.16 $0.64 (75)%
"Despite facing both market and operational headwinds during the quarter, Diamond was able to record adjusted earnings per share of $0.16," said Marc Edwards, President and Chief Executive Officer.
Results for the second quarter were significantly impacted by impairment charges and related taxes of $612 million, or $4.46 per diluted share, primarily relating to the carrying value of eight semisubmersible rigs and associated inventory.
Operational efficiency of the Company's fleet was 92.7% in the second quarter, compared to 98.2% in the first quarter of 2016. The decline in operational efficiency was primarily driven by issues experienced within the ultra-deepwater floater category, specifically as it relates to four unplanned retrievals of blowout preventers.
Utilization in the deep-water segment increased by 25% in the second quarter of 2016, compared to the first quarter of 2016. The increase was driven by the Ocean Apex beginning its 18-month contract with Woodside in Australia at a rate of $285,000 per day. The rig was recently awarded a three-month extension at $205,000 per day, which will keep the rig working until February 2018.
During the quarter, the Company elected to cold stack the Ocean Endeavor and Ocean Scepter. The Company's decision was guided by its desire to minimize costs associated with the rigs, while ensuring the rigs are preserved in such a manner as to enable a quick reactivation when the market recovers. Additionally, the Company intends to scrap the Ocean Quest and Ocean Star.
As of June 30, 2016, the Company's total contracted backlog was $4.4 billion, which represents 28 rig years of work. Approximately 86% of the Company's available ultra-deepwater rig days for the remainder of 2016 are contracted with top tier customers.
Edwards also commented on the recently announced Helical Buoyancy(TM) riser joint development agreement with Trelleborg, stating, "This is another example of Diamond Offshore differentiating itself in an oversupplied market. As with our Pressure Control by the Hour(TM) service model, Diamond Offshore is providing the industry with thought leadership to drive efficiencies and lower the cost of operating offshore."
Reflecting on the market, Edwards went on to say, "Although the market continues to be challenged, our focus is on striking a balance between controlling costs and laying the foundation to ensure Diamond Offshore is well positioned for the recovery."
CONFERENCE CALL
A conference call to discuss Diamond Offshore's earnings results has been scheduled for 7:30 a.m. CDT today. A live webcast of the call will be available online on the Company's website, www.diamondoffshore.com. Those interested in participating in the question and answer session should dial 800-247-9979 or 973-321-1100, for international callers. The conference ID number is 47948706. An online replay will also be available on www.diamondoffshore.com following the call.
ABOUT DIAMOND OFFSHORE
Diamond Offshore is a leader in offshore drilling, providing contract drilling services to the energy industry around the globe. Additional information and access to the Company's SEC filings are available at www.diamondoffshore.com. Diamond Offshore is owned 53% by Loews Corporation (NYSE: L).
FORWARD-LOOKING STATEMENTS
Statements contained in this press release or made during the above conference call that are not historical facts are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are inherently uncertain and subject to a variety of assumptions, risks and uncertainties that could cause actual results to differ materially from those anticipated or expected by management of the Company. A discussion of the important risk factors and other considerations that could materially impact these matters as well as the Company's overall business and financial performance can be found in the Company's reports filed with the Securities and Exchange Commission, and readers of this press release are urged to review those reports carefully when considering these forward-looking statements. Copies of these reports are available through the Company's website at www.diamondoffshore.com. These risk factors include, among others, risks associated with worldwide demand for drilling services, level of activity in the oil and gas industry, renewing or replacing expired or terminated contracts, contract cancellations and terminations, maintenance and realization of backlog, competition and industry fleet capacity, impairments and retirements, operating risks, changes in tax laws and rates, regulatory initiatives and compliance with governmental regulations, construction of new builds, casualty losses, and various other factors, many of which are beyond the Company's control. Given these risk factors, investors and analysts should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Revenues:
Contract drilling $357,409 $617,442 $800,932 $1,217,019
Revenues related to reimbursable expenses 31,338 16,590 58,358 37,069
------ ------ ------ ------
Total revenues 388,747 634,032 859,290 1,254,088
------- ------- ------- ---------
Operating expenses:
Contract drilling, excluding depreciation 198,336 342,869 411,177 693,527
Reimbursable expenses 16,527 16,336 43,318 36,428
Depreciation 105,016 123,329 209,256 260,628
General and administrative 18,139 16,548 33,537 34,000
Impairment of assets 678,145 -- 678,145 358,528
Restructuring and separation costs -- 993 -- 7,161
Gain on disposition of assets (747) (164) (1,043) (775)
---- ---- ------ ----
Total operating expenses 1,015,416 499,911 1,374,390 1,389,497
--------- ------- --------- ---------
Operating (loss) income (626,669) 134,121 (515,100) (135,409)
Other income (expense):
Interest income 269 584 442 1,167
Interest expense (24,156) (25,468) (49,672) (49,450)
Foreign currency transaction (loss) gain (3,513) (3,473) (7,121) 2,117
Other, net (12,046) 264 (11,468) 485
------- --- ------- ---
(Loss) income before income tax benefit (expense) (666,115) 106,028 (582,919) (181,090)
Income tax benefit (expense) 76,178 (15,642) 80,407 15,767
(589,937) 90,386 (502,512) (165,323)
Net (loss) income $ $ $ $
=== === === ===
(Loss) income per share $(4.30) $0.66 $(3.66) $(1.21)
Weighted-average shares outstanding:
Shares of common stock 137,170 137,159 137,166 137,155
Dilutive potential shares of common stock -- 42 -- --
--- --- --- ---
Total weighted average shares outstanding 137,170 137,201 137,166 137,155
======= ======= ======= =======
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
June 30, March 31, June 30,
-------- --------- --------
2016 2016 2015
---- ---- ----
REVENUES
Floaters:
Ultra-Deepwater $214,102 $325,961 $315,670
Deepwater 67,191 59,117 181,104
Mid-water 56,694 47,672 96,926
------ ------ ------
Total Floaters 337,987 432,750 593,700
Jack-ups 19,422 10,773 23,742
Total Contract Drilling Revenue $357,409 $443,523 $617,442
=== ===
Revenues Related to Reimbursable Expenses $31,338 $27,020 $16,590
=== ===
CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater $127,185 $123,736 $161,485
Deepwater 34,776 47,509 86,464
Mid-water 25,862 23,884 66,735
------ ------ ------
Total Floaters 187,823 195,129 314,684
Jack-ups 6,876 6,055 20,873
Other 3,637 11,657 7,312
----- ------ -----
Total Contract Drilling Expense $198,336 $212,841 $342,869
=== ===
Reimbursable Expenses $16,527 $26,791 $16,336
=== ===
OPERATING (LOSS) INCOME
Floaters:
Ultra-Deepwater $86,917 $202,225 $154,185
Deepwater 32,415 11,608 94,640
Mid-water 30,832 23,788 30,191
------ ------ ------
Total Floaters 150,164 237,621 279,016
Jack-ups 12,546 4,718 2,869
Other (3,637) (11,657) (7,312)
Reimbursable expenses, net 14,811 229 254
Depreciation (105,016) (104,240) (123,329)
General and administrative expense (18,139) (15,398) (16,548)
Impairment of assets (678,145) -- --
Restructuring and separation costs -- -- (993)
Gain on disposition of assets 747 296 164
Total Operating (Loss) Income $(626,669) $111,569 $134,121
=== ===
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
June 30, December 31,
-------- ------------
2016 2015
---- ----
ASSETS
Current assets:
Cash and cash equivalents $103,279 $119,028
Marketable securities 57 11,518
Accounts receivable, net of allowance for bad
debts 324,588 405,370
Prepaid expenses and other current assets 112,293 119,479
Assets held for sale 6,200 14,200
Total current assets 546,417 669,595
Drilling and other property and equipment, net of
accumulated depreciation 5,848,172 6,378,814
Other assets 110,689 101,485
Total assets $6,505,278 $7,149,894
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $327,300 $286,589
Other current liabilities 300,688 339,134
Long-term debt 1,980,324 1,979,778
Deferred tax liability 114,384 276,529
Other liabilities 164,505 155,094
Stockholders' equity 3,618,077 4,112,770
Total liabilities and
stockholders' equity $6,505,278 $7,149,894
========== ==========
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
AVERAGE DAYRATE, UTILIZATION AND OPERATIONAL EFFICIENCY
(Dayrate in thousands)
Second Quarter First Quarter Second Quarter
2016 2016 2015
---- ---- ----
Average Utilization Operational Average Utilization Operational Average Utilization Operational
Dayrate (2) Efficiency Dayrate (2) Efficiency Dayrate (2) Efficiency
(1) (3) (1) (3) (1) (3)
--- --- --- --- --- ---
Ultra-Deepwater
Floaters $452 47% 86.7% $533 61% 98.4% $483 63% 90.9%
Deepwater
Floaters $301 35% 100% $335 28% 97.1% $451 63% 99.3%
Mid-Water
floaters $313 30% 99.4% $263 25% 97.7% $278 32% 99.7%
Jack-ups $335 13% 100% $118 18% 100% $83 53% 98.6%
Fleet Total 92.7% 98.2% 95.9%
(1) Average dayrate is defined as contract
drilling revenue for all of the specified
rigs in our fleet per revenue earning day.
A revenue earning day is defined as a
24-hour period during which a rig earns a
dayrate after commencement of operations
and excludes mobilization, demobilization
and contract preparation days.
(2) Utilization is calculated as the ratio of
total revenue-earning days divided by the
total calendar days in the period for all
specified rigs in our fleet (including
cold-stacked rigs, but excluding rigs
under construction). As of June 30, 2016,
our cold-stacked rigs included four
ultra-deepwater semisubmersibles, four
deepwater semisubmersibles, four mid-
water semisubmersibles and five jack-up
rigs.
(3) Operational efficiency is calculated as the
ratio of total revenue-earning days
divided by the sum of total revenue-
earning days plus the number of days (or
portions thereof) associated with
unanticipated equipment downtime.
Non-GAAP Financial Measures (Unaudited)
To supplement the Company's unaudited condensed consolidated financial statements presented on a GAAP basis, this press release provides investors with adjusted operating income, adjusted
net income and adjusted earnings per diluted share, which are non-GAAP financial measures. Management believes that these measures provide meaningful information about the Company's
performance by excluding certain charges that may not be indicative of the Company's ongoing operating results. This allows investors and others to better compare the company's financial
results across previous and subsequent accounting periods and to those of peer companies and to better understand the long-term performance of the Company. Non-GAAP financial measures
should be considered to be a supplement to, and not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
Three Months Ended
June 30, 2016
Reconciliation of As Reported Operating (Loss) Income to Adjusted Operating Income:
(In thousands)
As reported operating loss $(626,669)
Impairments and other charges:
Impairment of rigs and associated inventory (1) 678,145
-------
Adjusted operating income $51,476
=======
Reconciliation of As Reported Net Loss to Adjusted Net Income:
(In thousands)
As reported net loss $(589,937)
Impairments and other charges:
Impairment of rigs and associated inventory (1) 678,145
Tax effect of impairments and other charges:
Impairment of rigs and associated inventory (2) (143,165)
Discrete tax items (3) 77,252
Adjusted net income $22,295
=======
Reconciliation of As Reported Loss per Diluted Share to Adjusted Earnings per Diluted Share:
As reported loss per diluted share $(4.30)
Impairments and other charges:
Impairment of rigs and associated inventory (1) 4.94
Tax effect of impairments and other charges:
Impairment of rigs and associated inventory (2) (1.04)
Other discrete tax items (3) 0.56
Adjusted earnings per diluted share $0.16
=====
______________________________
(1) Represents the aggregate amount of impairment losses recognized during
the second quarter of 2016 related to eight of our drilling rigs and
associated inventory.
(2) Represents the income tax effects of the aggregate impairment loss
recognized in the second quarter of 2016.
(3) Represents the aggregate of certain discrete income tax adjustments
recognized during the second quarter of 2016, primarily related to
valuation allowances for current and prior year tax assets associated
with foreign tax credits, which we no longer expect to be able to
utilize to offset income taxes in the U.S. tax jurisdiction.
Contact:
Samir Ali
Sr. Director, Investor Relations & Corporate Development
(281) 647-4035
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SOURCE Diamond Offshore Drilling, Inc.
