Diamond Offshore Announces Fourth Quarter 2017 Results
HOUSTON, Feb. 12, 2018 /PRNewswire/ -- Diamond Offshore Drilling, Inc. (NYSE: DO) today reported the following results for the fourth quarter of 2017:
Three Months Ended
------------------
Thousands of dollars, except per share data December 31, 2017 September 30, 2017 Change
------------------------------------------- ----------------- ------------------ ------
Total revenues $346,208 $366,023 (5)%
Operating (loss) income (6,385) 58,581 (111)%
Adjusted operating income 27,389 58,581 (53)%
Net (loss) income (31,941) 10,799 (396)%
Adjusted net (loss) income (7,343) 33,787 (122)%
(Loss) earnings per diluted share $(0.23) $0.08 (388)%
Adjusted (loss) earnings per diluted share $(0.05) $0.25 (120)%
"Although market conditions continue to be challenging, we were able to secure additional work for the Ocean Valor and Ocean Valiant, extending both of the rigs' current contracts through 2020," said Marc Edwards, President and Chief Executive Officer. "These contract extensions comprise a majority of the additional 48 months of backlog Diamond was able to secure this past quarter." Edwards went on to say, "The moored market continues to tighten, evidenced by our three other contract wins during the quarter."
Operational efficiency of the Company's fleet was 98.8% in the fourth quarter, compared to 94.3% in the third quarter of 2017, reflecting continued improvements from the Company's Pressure Control by the Hour(®) service model.
As of December 31, 2017, the Company's total contracted backlog was $2.4 billion, which represents approximately 21 rig years of work.
CONFERENCE CALL
A conference call to discuss Diamond Offshore's earnings results has been scheduled for 7:30 a.m. CST 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 844-492-6043 or 478-219-0839 for international callers. The conference ID number is 7894978. 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 certain 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, litigation and disputes, 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, 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
Revenues:
Contract drilling $337,809 $384,646 $1,451,219 $1,525,214
Revenues related to reimbursable expenses 8,399 7,228 34,527 75,128
Total revenues 346,208 391,874 1,485,746 1,600,342
------- ------- --------- ---------
Operating expenses:
Contract drilling, excluding depreciation 204,152 174,342 801,964 772,173
Reimbursable expenses 8,256 6,775 33,744 58,058
Depreciation 86,203 86,031 348,695 381,760
General and administrative 20,206 14,786 74,505 63,560
Impairment of assets 28,045 - 99,313 678,145
Restucturing and separation costs 14,146 - 14,146 -
(Gain) loss on disposition of assets (8,415) 6,060 (10,500) 3,795
Other - (265) - (265)
Total operating expenses 352,593 287,729 1,361,867 1,957,226
------- ------- --------- ---------
Operating (loss) income (6,385) 104,145 123,879 (356,884)
Other income (expense):
Interest income 1,126 176 2,473 768
Interest expense, net of amounts capitalized (30,119) (21,230) (113,528) (89,934)
Foreign currency transaction loss (611) (3,689) (1,128) (11,522)
Loss on extinguishment of senior notes - - (35,366) -
Other, net 908 472 2,230 (10,727)
--- --- ----- -------
(Loss) income before income tax benefit (35,081) 79,874 (21,440) (468,299)
Income tax benefit 3,140 36,208 39,786 95,796
----- ------ ------ ------
Net (loss) income $(31,941) $116,082 $18,346 $(372,503)
======== ======== ======= =========
(Loss) income per share $(0.23) $0.85 $0.13 $(2.72)
====== ===== ===== ======
Weighted-average shares outstanding:
Shares of common stock 137,228 137,170 137,213 137,168
Dilutive potential shares of common stock - 93 52 -
--- --- --- ---
Total weighted-average shares outstanding 137,228 137,263 137,265 137,168
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DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
------------------
December 31, September 30, December 31,
------------ ------------- ------------
2017 2017 2016
---- ---- ----
REVENUES
Floaters:
Ultra-Deepwater $288,280 $275,859 $231,820
Deepwater 31,847 35,634 64,678
Mid-water 13,163 39,616 88,130
------ ------ ------
Total Floaters 333,290 351,109 384,628
Jack-ups 4,519 6,574 18
----- ----- ---
Total Contract Drilling Revenue $337,809 $357,683 $384,646
======== ======== ========
Revenues Related to Reimbursable Expenses $8,399 $8,340 $7,228
====== ====== ======
CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater $143,352 $139,619 $119,490
Deepwater 23,791 27,139 30,481
Mid-water 16,259 17,753 16,814
------ ------ ------
Total Floaters 183,402 184,511 166,785
Jack-ups 6,930 6,197 3,090
Other 13,820 7,364 4,467
------ ----- -----
Total Contract Drilling Expense $204,152 $198,072 $174,342
======== ======== ========
Reimbursable Expenses $8,256 $8,220 $6,775
====== ====== ======
OPERATING (LOSS) INCOME
Floaters:
Ultra-Deepwater $144,928 $136,240 $112,330
Deepwater 8,056 8,495 34,197
Mid-water (3,096) 21,863 71,316
------ ------ ------
Total Floaters 149,888 166,598 217,843
Jack-ups (2,411) 377 (3,072)
Other (13,820) (7,364) (4,467)
Reimbursable expenses, net 143 120 453
Depreciation (86,203) (83,281) (86,031)
General and administrative expense (20,206) (17,806) (14,786)
Impairment of assets (28,045) - -
Restucturing and separation costs (14,146) - -
Gain (loss) on disposition of assets 8,415 (63) (6,060)
Other - - 265
--- --- ---
Total Operating (Loss) Income $(6,385) $58,581 $104,145
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DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
December 31, December 31,
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $376,037 $156,233
Accounts receivable, net of
allowance for bad debts 256,730 247,028
Prepaid expenses and other
current assets 157,625 102,146
Assets held for sale 96,261 400
------ ---
Total current assets 886,653 505,807
Drilling and other property and equipment, net of
accumulated
depreciation 5,261,641 5,726,935
Other assets 102,276 139,135
------- -------
Total assets $6,250,570 $6,371,877
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ - $104,200
Other current liabilities 223,288 236,299
Long-term debt 1,972,225 1,980,884
Deferred tax liability 167,299 197,011
Other liabilities 113,497 103,349
Stockholders' equity 3,774,261 3,750,134
--------- ---------
Total liabilities and
stockholders' equity $6,250,570 $6,371,877
========== ==========
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Year Ended
December 31,
------------
2017 2016
---- ----
Operating activities:
Net income (loss) $18,346 $(372,503)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation 348,695 381,760
Loss on impairment of assets 99,313 678,145
Loss on extinguishment of senior
notes 35,366 -
Deferred tax provision (72,127) (106,263)
Deferred income, net 8,676 (29,108)
Deferred expenses, net 46,337 (20,155)
Other 16,315 21,567
Net changes in operating working
capital (7,113) 93,111
Net cash provided by operating
activities 493,808 646,554
------- -------
Investing activities:
Capital expenditures (including
rig construction) (139,581) (652,673)
Proceeds from disposition of
assets, net of disposal costs 15,196 221,722
Other 35 4,614
Net cash used in investing
activities (124,350) (426,337)
-------- --------
Financing activities:
Redemption of senior notes (500,000) -
Payment of debt extinguishment
costs (34,395) -
Proceeds from issuance of senior
notes 496,360 -
Net repayment of short-term
borrowings (104,200) (182,389)
Other (7,419) (623)
Net cash used in financing
activities (149,654) (183,012)
-------- --------
Net change in cash and cash
equivalents 219,804 37,205
Cash and cash equivalents,
beginning of period 156,233 119,028
Cash and cash equivalents, end of
period $376,037 $156,233
======== ========
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
AVERAGE DAYRATE, UTILIZATION AND OPERATIONAL EFFICIENCY
(Dayrate in thousands)
Fourth Quarter Third Quarter Fourth Quarter
2017 2017 2016
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- $424 65% 98.5% $407 61% 92.0% $456 49% 92.0%
Deepwater
Floaters
Deepwater $175 37% 99.1% $195 33% 99.6% $287 39% 92.1%
Floaters
Mid-Water $266 17% 100.0% $322 27% 98.8% $478 35% 99.9%
floaters
Jack-ups $75 65% 100.0% $75 95% 95.3% -- -- --
Fleet Total 98.8% 94.3% 93.5%
---- ---- ----
(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). Our
current fleet includes three ultra-
deepwater and two deepwater
semisubmersible rigs that are cold
stacked.
(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.
In order to fully assess the financial operating results of the Company, management believes that the results of operations adjusted to exclude the impairment charges related to rigs and associated inventory, gains and losses on the sale of rigs, the fourth quarter 2017 restructuring and separation costs, which include costs associated with the termination of our Brazilian agency agreement, and the third quarter 2017 loss on extinguishment of debt, as well as the related tax effects thereof and other discrete tax items, are appropriate measures of the continuing and normal operations of the Company. However, these measures should be considered in addition to, and not as a substitute for, or superior to, contract drilling revenue, contract drilling expense, operating income, cash flows from operations or other measures of financial performance prepared in accordance with GAAP.
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31, September 30, December 31, December 31,
2017 2017 2017 2016
---- ---- ---- ----
Reconciliation of As Reported Operating (Loss)
Income to Adjusted Operating Income:
(In thousands)
As reported operating (loss) income $(6,385) $58,581 $123,879 $(356,884)
Impairments and other charges:
Impairment of rigs(1) 28,045 - 99,313 678,145
Restructuring and separation costs (2) 14,146 - 14,146 -
(Gain) loss on sale of rigs (3) (8,417) - (8,919) 4,938
------ --- ------ -----
Adjusted operating income $27,389 $58,581 $228,419 $326,199
======= ======= ======== ========
Reconciliation of As Reported Net (Loss)
Income to Adjusted Net (Loss) Income:
(In thousands)
As reported net (loss) income $(31,941) $10,799 $18,346 $(372,503)
Impairments and other charges:
Impairment of rigs(1) 28,045 - 99,313 678,145
Restructuring and separation costs (2) 14,146 - 14,146 -
(Gain) loss on sale of rigs (3) (8,417) - (8,919) 4,938
Loss on extinguishment of senior notes (4) - 35,366 35,366 -
Tax effect of impairments and other charges:
Impairment of rigs (5) (9,816) - (34,760) (143,165)
Restructuring and separation costs (5) (1,070) - (1,070) -
(Gain) loss on sale of rigs (5) 556 - 720 (1,718)
Loss on extinguishment of senior notes (5) - (12,378) (12,378) -
Other discrete items (6) 1,154 - 1,154 77,252
----- --- ----- ------
Adjusted net (loss) income $(7,343) $33,787 $111,918 $242,949
======= ======= ======== ========
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31, September 30, December 31, December 31,
2017 2017 2017 2016
---- ---- ---- ----
Reconciliation of As Reported (Loss) Income
per Diluted Share to Adjusted Earnings per Diluted
Share:
As reported (loss) income per diluted share $(0.23) $0.08 $0.13 $(2.72)
Impairments and other charges:
Impairment of rigs(1) 0.21 - 0.72 4.94
Restructuring and separation costs (2) 0.10 - 0.10 -
(Gain) loss on sale of rigs (3) (0.06) - (0.06) 0.04
Loss on extinguishment of senior notes (4) - 0.26 0.26 -
Tax effect of impairments and other charges:
Impairment of rigs (5) (0.07) - (0.25) (1.04)
Restructuring and separation costs (5) (0.01) - (0.01) -
(Gain) loss on sale of rigs (5) - - 0.01 (0.01)
Loss on extinguishment of senior notes (5) - (0.09) (0.09) -
Other discrete items (6) 0.01 - 0.01 0.56
---- --- ---- ----
Adjusted (loss) earnings per diluted share $(0.05) $0.25 $0.82 $1.77
====== ===== ===== =====
(1) Represents the aggregate amount of
impairment losses recognized during
2016 and 2017 related to certain of
our drilling rigs and associated
inventory.
(2) Represents restructuring and
separation costs recognized in the
fourth quarter of 2017 associated
with a plan to restructure our
world-wide operations, including a
reduction in workforce at our
corporate facilities and onshore
bases, and costs associated with the
termination of our Brazilian agency
agreement.
(3) Represents the aggregate amount of
(gains) losses recognized during
2016 and 2017 related to the sale of
one ultra-deepwater, two deepwater
and six mid-water semi-submersible
rigs and five jack-up rigs.
(4) Represents the loss recognized during
the third quarter of 2017 related to
the early retirement of our 5.875%
senior notes due 2019.
(5) Represents the income tax effects of
the aggregate impairment losses and
(gains) losses on the sale of rigs
recognized during 2016 and 2017, the
aggregate restructuring and
separation costs recognized in the
fourth quarter of 2017 and the loss
on extinguishment of the 2019 senior
notes recognized in the third
quarter of 2017. The income tax
effects have been calculated on a
discrete tax basis, utilizing the
statutory tax rates for the
applicable tax jurisdictions. We
believe that this approach provides
investors and others with useful
information regarding the actual tax
impact of these transactions when
the appropriate tax returns are
filed with the taxing authorities.
(6) Represents the aggregate of certain
discrete income tax adjustments
recognized during the fourth quarter
of 2017, related to the recently
enacted U.S. tax reform legislation
and 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
Vice President, Investor Relations & Corporate Development
(281) 647-4035
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SOURCE Diamond Offshore Drilling, Inc.
