UBS Maintains a 'Buy' on Diamond Offshore (DO); Lowering Numbers on Higher Opex and Tax

UBS maintains a 'Buy' on Diamond Offshore (NYSE: DO) price target lowered from $75 to $70.

UBS analyst says, "Although Q4-11 results benefited from non-operational items, we were encouraged by DO’s execution. Operating expense guidance for 2012 of $1.65 bil (up 6% y-o-y) reflects higher surveys, mobilizations and labor costs. DO is building three ultra-deepwater rigs (one remains uncontracted), a necessary step to help upgrade its fleet in our view."

"Key Takeaways from Conference Call: (1) DO already seeing strong customer interest for the soon to be upgraded, Ocean Onyx rig (delivery in Q3-2013), (2) mgmt sees one more opportunity for a similar upgrade of an older rig, (3) OpEx for 2012 guided to $1.65 bil, up $100 mil y-o-y, (4) about 12 rigs will undergo 5-year surveys in 2012, but could decline to 8 rigs in 2013, and (5) some potential to reactivate one of the four stacked jackups in GOM."

UBS slashes FY12 EPS estimate from $5.02 to $4.00 and FY13 from $5.59 to $5.01.

For an analyst ratings summary and ratings history on Diamond Offshore click here. For more ratings news on Diamond Offshore click here.

Shares of Diamond Offshore closed at $63.13 yesterday.

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