Diamond Offshore Announces Fourth Quarter 2017 Results

Three Months Ended

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)

%

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

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

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)

2017

2017

2016

Utilization (2)

Operational Efficiency (3)

Average Dayrate (1)

Utilization (2)

Operational Efficiency (3)

Average Dayrate (1)

Utilization (2)

Operational Efficiency (3)

Ultra-DeepwaterFloaters

$424

65%

98.5%

$407

61%

92.0%

$456

49%

92.0%

Deepwater Floaters

$175

37%

99.1%

$195

33%

99.6%

$287

39%

92.1%

Mid-Water floaters

$266

17%

100.0%

$322

27%

98.8%

$478

35%

99.9%

Jack-ups

$75

65%

100.0%

$75

95%

95.3%

--

--

--

Fleet Total

98.8%

94.3%

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.