Diamond Offshore Reports Third Quarter 2014 Results

HOUSTON, Oct. 23, 2014 /PRNewswire/ -- 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."

CONFERENCE CALL

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.

ABOUT DIAMOND OFFSHORE

Diamond Offshore is a leader in offshore drilling, providing contract drilling services to the energy industry around the globe with a total fleet of 38 offshore drilling rigs, including five rigs under construction.  Diamond Offshore's fleet consists of 27 semisubmersibles, two of which are under construction, five dynamically positioned drillships, three of which are under construction, and six jack-ups. Additional information about the Company and access to the Company's SEC filings are available at www.diamondoffshore.com. Diamond Offshore is owned 51% by Loews Corporation (NYSE: L).

FORWARD-LOOKING STATEMENTS

Contract revenue as stated above assumes 100% rig utilization.  Rig utilization rates vary depending on a variety of circumstances, many of which are beyond the Company's control.  Rig utilization rates generally approach 92-98% during contracted periods; however, utilization rates can be adversely impacted by additional downtime due to various operating factors, including, but not limited to, weather conditions and unscheduled repairs and maintenance.  Additional information on the Company and access to the Company's SEC filings is available on the Internet at www.diamondoffshore.com.

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.  Such statements include, but are not limited to, statements concerning drilling rig deliveries, operations and timing; contract effectiveness and effective dates; plans regarding retirement and scrapping of drilling rigs; expectations of future backlog, revenue, operating costs and performance; future liquidity, financial condition, market conditions and strategic opportunities; revenue expected to result from backlog; and other statements that are not of historical fact.  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 general economic and business conditions, contract cancellations, customer or vendor bankruptcy, operations, litigation, casualty losses, industry fleet capacity, changes in foreign and domestic oil and gas exploration and production activity, competition, changes in foreign, political, social and economic conditions, regulatory and sanction initiatives and compliance with governmental regulations, customer preferences, obtaining necessary partner and third party approvals, timing of construction of new builds, collection of receivables, and various other matters, 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.

Contact:          
Darren Daugherty
Director, Investor Relations
(281) 492-5370

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SOURCE Diamond Offshore Drilling, Inc.

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