(Diamond Offshore, 6.Aug.2024) — Diamond Offshore Drilling, Inc. reported the following results for the second quarter of 2024:
Bernie Wolford, Jr., President and Chief Executive Officer of Diamond Offshore, stated, “We are pleased with our second quarter results, achieving adjusted EBITDA of $58mn, which is in line with our guided range. Our results for the quarter also include the recognition of $8.7mn in well-performance bonuses in Senegal, reflecting the exceptional performance of our deepwater drillships and the crews that operate them. Additionally, repairs to the Ocean GreatWhite were completed during the quarter, and the rig resumed operations under its contract in the North Sea in early July.”
New Contract Awards and Other Updates
As previously disclosed, the company secured a two-year contract extension for the Ocean Blackhawk, representing $350mn in contract backlog.
In addition, after quarter-end, the Ocean BlackRhino was awarded a contract for work in the U.S. Gulf of Mexico (or USGOM) with a minimum duration of 180 days for a total contract value of approximately $89mn, excluding mobilization and any additional services. The contract also includes two option periods. Following the completion of its Special Periodical Survey and Managed Pressure Drilling upgrade project in Las Palmas, the Ocean BlackRhino is expected to mobilize to the USGOM in late December or early January for contract commencement in the first quarter of 2025. in the first quarter of 2025.
These contract awards, combined with previously announced awards in the first quarter of 2024, total nearly $1.2bn of contract value secured so far in 2024. The company’s total backlog at 1 July 2024 was in excess of $2bn.
On 31 July 2024, the Company received notice of early termination from its customer related to a previously announced, one-well campaign offshore Ivory Coast for the Ocean BlackRhino. In accordance with the contract, the company is entitled to retain $8 million in prepaid customer deposits as an early termination fee.
Q2 Financial Results
Revenue for the second quarter of 2024 totaled $253mn compared to $275 million in the prior quarter. The decrease in revenue quarter-over-quarter was primarily driven by the absence of revenues for the West Auriga, which was returned to the rig owner in the first quarter upon termination of the charter for the rig, and the Ocean GreatWhite being off rate for repairs in the quarter. The decrease in revenue was partially offset by the impact of $8.7mn in performance bonuses earned in Senegal during the second quarter.
Contract drilling expense for the second quarter of 2024 was $164mn, representing a $20mn decrease from the prior quarter. The decrease in contract drilling expense was primarily due to lower charter and other operating expenses attributable to the West Auriga, the recovery of operating costs as part of the insurance claim for the Ocean GreatWhite’s LMRP equipment incident, as well as the absence of $7.6mn in insurance deductible recorded in contract drilling expense in the first quarter related to the incident. The reduction in contract drilling expense in the second quarter was partially offset by higher overall operating costs across the fleet including repair and maintenance cost, equipment rentals and integrated services.
General and administrative expenses were $23mn in the second quarter of 2024 compared to $19mn in the prior quarter and included approximately $5mn in financial advisor and legal fees associated with the announced merger with Noble Corporation plc.
For the second quarter of 2024, the company recognized net tax expense of $8mn compared to a net tax benefit of $3mn for the first quarter of 2024. The tax benefit in the first quarter of 2024 includes a $12mn benefit for the remeasurement of uncertain tax positions in Egypt.
Operational Highlights
Operationally, the company’s rigs continued to perform exceptionally well, achieving revenue efficiency of approximately 95% across the fleet for the third successive quarter, excluding the Ocean GreatWhite incident. Including the $8.7mn in well-performance bonuses earned during the quarter, the Ocean BlackHawk and Ocean BlackRhino together have earned a total of $20.5mn in bonuses over the course of the Senegal campaign. The achievement of these well bonuses was a direct result of the efficient and injury-free performance of the company’s rigs and crews in Senegal. Also in the second quarter, the Ocean Apex completed its campaign with Inpex and transitioned to a new contract that will occupy the rig until the first quarter of 2025. In addition, the Ocean Patriot completed its plug & abandonment (or P&A) program with Serica and is on standby until the first quarter of 2025 when the rig will commence an estimated three-year P&A program with another customer.
Ocean GreatWhite
Repairs to the Ocean GreatWhite have been completed and, in early July, the rig resumed operations in the North Sea. The Company continues to anticipate that the repairs and equipment replacement cost associated with the equipment incident in the first quarter will be covered under the company’s hull & machinery insurance policy. The company currently estimates that all incremental costs, less a $10mn deductible, will be reimbursable under the policy. The company has so far received insurance proceeds of $20mn.
In addition, the company carries loss-of-hire insurance on the Ocean GreatWhite. After a 60-day waiting period, the company’s loss-of-hire insurance provides $150,000 per day, for up to 180 days, for each day of lost revenue as a result of a covered property loss claim. The company currently estimates that it will be entitled to approximately 90 days of loss-of-hire insurance recovery. The Company’s second quarter financial results do not reflect the recovery of loss-of-hire insurance proceeds.
CONFERENCE CALL AND 2024 GUIDANCE
Due to the pending merger with Noble announced on 10 June 2024, Diamond Offshore has discontinued providing quarterly and annual financial guidance. Accordingly, investors should not rely on any previously disclosed financial guidance and are cautioned not to rely on forward-looking statements that were made prior to the merger announcement, as those forward-looking statements were the estimates of management only as of the date provided and were subject to the specific risks and uncertainties that accompanied such forward-looking statements.
Additionally, as a result of the pending merger, Diamond Offshore will not hold a conference call to review the company’s second quarter results.
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