Diamond Offshore Reports Third Quarter 2023 Results and Announces Contract Awards of $240 Million

• Awarded $240 Million in New Contracts, including a 35-well P&A Campaign for the Ocean Patriot
• Issued $550 Million 8.5% Senior Secured Second Lien Notes due 2030
• 7^th Performance Bonus Earned by Senegal Rigs
• Ocean BlackHawk Mobilized to Gulf of Mexico for Q4 Contract Commencement
• Ocean Courage Shipyard Project Commenced; Multi-year Contract to Commence in Late Q4

HOUSTON, Nov. 6, 2023 /PRNewswire/ -- Diamond Offshore Drilling, Inc. (NYSE: DO) today reported the following results for the third quarter of 2023:

Bernie Wolford, Jr., President and Chief Executive Officer of Diamond Offshore, stated "Our business continues to benefit from improving energy industry fundamentals.  As we enter the fourth quarter, we see a continuation of positive indicators of a strong and lasting upcycle, including growing rig demand, increased investment in offshore upstream projects, and shrinking rig availability. Particularly encouraging is the increased demand we are seeing in the U.K. sector. Recently, we signed a thirty-five well P&A campaign for the Ocean Patriot, representing approximately three years of firm work estimated to commence in early 2025 with up to seventeen additional P&A wells under priced options that would add a fourth year of duration. In addition, our customer in the U.K. exercised its second and third options for the Ocean GreatWhite that extends its contracted term to August 2024. We now have $1.6 billion of backlog with notable day-rate improvement, as we transition to new contracts.

As previously announced, we completed a refinancing transaction that resulted in the issuance of $550 million of senior secured second lien notes at a meaningfully lower interest rate and later maturity date than our previously outstanding debt as well as an amended $300 million revolving credit facility. Our balance sheet is now stronger with an improved liquidity position, more financial and operational flexibility, and with debt maturities extended to 2030."

Third Quarter Results

Revenue for the third quarter totaled $245 million compared to $282 million in the second quarter of 2023. The decrease in revenue quarter-over-quarter was primarily driven by the Ocean BlackHawk's completion of its Senegal contract and being in shipyard for upgrades and contract preparation work for the duration of the quarter along with the Ocean Patriot being between contracts, partially offset by the Ocean Apex's return to work after completion of its second quarter shipyard projects and special survey.

Contract drilling expense for the third quarter was $182 million, or a $31.0 million decrease from the prior quarter, largely due to lower operating costs and the deferral of certain costs associated with the Ocean BlackHawk's shipyard activities, as the Company prepared the rig for its contract commencing in the fourth quarter in the Gulf of Mexico. The decrease in contract drilling expense in the quarter also reflected lower repair and maintenance-related costs for the Company's owned and managed fleet.

General and administrative expenses were $17 million in the third quarter, in line with the prior quarter.

Third quarter results also included a $6.5 million pre-tax loss on extinguishment of debt as a result of the retirement of all existing debt upon the issuance of the senior secured second lien notes.

Tax expense for the third quarter was $125 million compared to a $243 million tax benefit in the prior quarter. The tax expense in the third quarter reflects the expected normalization of the Company's tax expense and reversal of a portion of the previously recorded benefit. The Company expects further normalization of its tax expense in the fourth quarter without any meaningful impact to cash tax expense expectations for the full year.  

Operational Highlights

Operationally, the Company's rigs continued to perform well, achieving revenue efficiency of approximately 95% across the fleet during the quarter. This is a notable achievement given the extensive movement of rigs in and out of shipyards and the completion and start-up of contracts during the quarter. Of note, the Ocean BlackHawk completed upgrades and contract preparation work in Las Palmas and has now mobilized to the Gulf of Mexico, the Ocean Apex resumed its drilling program after completion of a second quarter shipyard stay and the Ocean Courage has now moved to Guanabara Bay after completion of a long-term campaign to prepare for its next multi-year contract offshore Brazil. In addition, the Company earned a seventh bonus for efficient, injury-free performance in Senegal as a result of the combined efforts of the Ocean BlackHawk and Ocean BlackRhino.

CONFERENCE CALL

A conference call to discuss Diamond Offshore's earnings results has been scheduled for 8:00 a.m. CST on Tuesday, November 7, 2023.  A live webcast of the call will be available online on the Company's website, www.diamondoffshore.com. Participants who want to join the call via telephone or want to participate in the question-and-answer session may register here to receive the dial-in numbers and unique PIN to access the call. 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 innovation, thought leadership and contract drilling services to solve complex deepwater challenges around the globe. Additional information and access to the Company's SEC filings are available at http://www.diamondoffshore.com/.

FORWARD-LOOKING STATEMENTS

Statements contained in this press release and made in the referenced conference call that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, any statement that may project, indicate or imply future results, events, performance or achievements, including statements relating to future financial results; future recovery in the offshore contract drilling industry; expectations regarding the Company's plans, strategies and opportunities; expectations regarding the Company's business or financial outlook; future borrowing capacity and liquidity; expected utilization, dayrates, revenues, operating expenses, rig commitments and availability, cash flows, tax rates and accounting treatment, contract status, terms and duration, contract backlog, capital expenditures, insurance, financing and funding; the effect, impact, potential duration and other implications of the COVID-19 pandemic; the offshore drilling market, including supply and demand, customer drilling programs, repricings, stacking of rigs, effects of new rigs on the market and effect of the volatility of commodity prices; expected work commitments, awards and contracts; future operations; increasing regulatory complexity; general market, business and industry conditions, trends and outlook; and general political conditions, including political tensions, conflicts and war, including Russia's invasion of Ukraine and related sanctions. 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 certain of the 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 Item 1A "Risk Factors" in the Company's most recent annual report on Form 10-K and the Company's other 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, levels 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, litigation and disputes, permits and approvals for drilling operations, the COVID-19 pandemic and related disruptions to the global economy, supply chain and normal business operations across sectors and countries, changes in tax laws and rates, regulatory initiatives and compliance with governmental regulations, casualty losses, and various other factors, many of which are beyond the Company's control. Given these risk factors and other considerations, 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, and 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.

Non-GAAP Financial Measures (Unaudited)

To supplement the Company's unaudited condensed consolidated financial statements presented on a basis in conformity with generally accepted accounting principles in the United States (GAAP), this press release provides investors with adjusted earnings before interest, taxes, depreciation and amortization and loss on extinguishment of debt (or Adjusted EBITDA), which is a non-GAAP financial measure. Management believes that this measure provides meaningful information about the Company's performance by excluding certain items 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 a supplement to, and not as a substitute for, or superior to, contract drilling revenue, contract drilling expense, operating income or loss, cash flows from operations or other measures of financial performance prepared in accordance with GAAP. 

Contact:
Kevin Bordosky
Senior Director, Investor Relations
(281) 647-4035

SOURCE Diamond Offshore Drilling, Inc.