Diamond Offshore Announces Second Quarter 2016 Results

Three Months Ended

June 30,
2016

Change

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)%

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

Net (loss) income

$

(589,937)

$

90,386

$

(502,512)

$

(165,323)

(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

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
2016

First Quarter
2016

Second Quarter
2015

Average
Dayrate
⁽¹⁾

Utilization
⁽²⁾

Operational
Efficiency
⁽³⁾

Average
Dayrate
⁽¹⁾

Utilization
⁽²⁾

Operational
Efficiency
⁽³⁾

Average
Dayrate
⁽¹⁾

Utilization
⁽²⁾

Operational
Efficiency
⁽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.