Houston, Texas-based
Diamond Offshore Drilling, Inc. (
) reported its second quarter results before today’s market opened. The company posted earnings per diluted share of $2.79 per share, above our expectations of $2.75 and market expectations of $2.64.
The positive comparisons were driven by higher dayrates for all types of drilling rigs. However, total revenue for the quarter declined slightly mainly due to lower revenue for high specification floaters.?
Importantly, Diamond maintained its special cash dividend of $1.875 per share in this quarter. This is in addition to its regular quarterly dividend of $0.125 per share ($0.50 per share annualized). Both dividends are payable on September 1 to shareholders of record on August 3, 2009.
Contract drilling revenue was $923.5 million, down nearly 1% year-over-year, reflecting slightly lower dayrates for high specification floaters. The high-spec floaters accounted for 36% of the total quarterly contract drilling revenue, while intermediate semi-submersibles and jackups accounted for 50% and 14% of the total, respectively.
Diamond’s GoM high-spec floaters recorded an average dayrate of $381,000 during the quarter, down nearly 1% year-over-year. Intermediate semi-submersible rigs realized an average dayrate of $286,000, up slightly year-over-year, while jackup rigs’ dayrates averaged $146,000, up approximately 42% year-over-year.
High-spec rig utilization was 79% during the quarter, down from 92% in the year-ago quarter. Intermediate category rig utilization was 93%, flat year-over-year. Jackup rig utilization meanwhile was 63%, down significantly from 92% in the prior-year quarter.
Total operating expenses for the quarter were $428.8 million, up approximately 14% year-over-year. Overall costs increased between periods. The higher costs reflected increased maintenance and repair expenses due to the impact of high, sustained utilization of the company’s drilling units across all fleet categories and geographic regions as well as industry-wide cost inflation.
While contract drilling expenses increased more than 11% to $305 million, contract drilling operating income fell by more than 6% to $626 million. At the end of the quarter, Diamond had approximately $470 million in cash on hand and $999 million in long-term debt. Debt-to-capitalization ratio at the end of the quarter stood at about 22%.
While the macro backdrop in the oil patch is tentative yet, the outlook on offshore drilling, particularly the deepwater end of it, still remains favorable. With the majority of Diamond’s rigs contracted till the end of this year and beyond along with a healthy backlog position, the company offers a high level of earnings and cash flow visibility. This is reflected by the company’s generous dividend payout. Our Buy recommendation remains unchanged.
