Diamond Offshore Drilling, Inc. (NYSE: DO) today reported third quarter 2014 net income of $53 million, or $0.38 per share, compared to net income of $95 million, or $0.68 per share, in the third quarter of 2013. Revenues in the third quarter of 2014 were $738 million, compared to revenues of $706 million in the third quarter of 2013.
The Company today announced plans to retire and scrap six of its mid-water semisubmersible rigs, resulting in a non-cash impairment charge in the third quarter of $109 million before tax, or $0.84 per share after tax. The retired units include the Ocean Epoch, Ocean New Era and Ocean Whittington, which are currently cold-stacked, and the Ocean Concord and Ocean Yatzy, which are currently idle in Brazil. The sixth unit, the Ocean Winner, will be retired and scrapped upon completion of its current contract term in Brazil.
Results for the quarter include favorable settlements of tax audits in Brazil and Malaysia and expiration of the statute of limitations in various jurisdictions for which tax expense had previously been recognized. As a result of these items, tax expense was reduced by $0.23 per share, and a related decrease in interest expense benefited results by $0.03 per share.
The Company also announced today that a subsidiary of the Company has entered into term drilling contracts with Hess Corporation for employment of the Company’s new-build drillships Ocean BlackRhino and Ocean BlackLion. The drilling contracts are contingent upon Hess obtaining full project sanction from partners. Once effective, the commitments for the two units are expected to generate combined total revenue to the Company of approximately $1.02 billion and represent seven years of contract drilling backlog. The Ocean BlackLion is anticipated to commence operations in the U.S. Gulf of Mexico in the fourth quarter of 2015 on a four-year term, and the Ocean BlackRhino is expected to begin working in the U.S. Gulf of Mexico in the fourth quarter of 2016 on a three-year term.
“We are pleased to have the opportunity to place our newest rigs under contract with Hess, continuing a successful long-term relationship,” said Marc Edwards, President and Chief Executive Officer. “With this announcement, all of our new-build units—four drillships and a harsh environment semisubmersible—are contracted into 2019 or beyond.”
“By operating all of our new-build drillships in the U.S. Gulf, we are positioned to enjoy meaningfully lower operating costs than in other ultra-deepwater markets,” added Mr. Edwards.
The Company also announced that it has received from Petrobras contract extensions on three ultra-deepwater semisubmersibles expected to generate maximum total revenue of $1.4 billion and represent nine years of contract drilling backlog. The new contract terms and dayrates are as follows:
- Ocean Baroness: Three-year term extension at $310,000 per day.
- Ocean Courage: Three-year term extension at $455,000 per day, plus a $112,000 uplift in day rate for a period of 390 days, related to the early termination of the Ocean Concord.
- Ocean Valor: Three-year term extension at $455,000 per day.
“Today we have announced term contracts and extensions that add more than $2.4 billion to our existing revenue backlog, bringing the total to $8.2 billion,” said Mr. Edwards. “In addition, we recently increased our revolving credit facility to $1.5 billion, which will provide added flexibility to our already strong balance sheet.”
A conference call to discuss Diamond Offshore’s earnings results has been scheduled for 8:00 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 20299415. An online replay will also be available on www.diamondoffshore.com following the call.
Source: DIAMOND OFFSHORE