Diamond Offshore Drilling Inc. (DO) has reported third quarter 2011 earnings of $1.85 per share. Results strode ahead of the Zacks Consensus Estimate of $1.47 and improved from $1.43 earned a year ago.
Total revenue in the quarter increased nearly 10% year over year to $878.2 million, neatly beating the Zacks Consensus Estimate of $818 million.
Dividend Story
Diamond Offshore declared a 75 cent per share special dividend in the quarter, which remained unchanged from the prior quarter. The company will also pay its regular quarterly dividend of 12.5 cents per share (50 cents per share annualized).
Operational Performance
Revenue from the Contract Drilling segment improved 15% year over year to $861.5 million, mainly on the back of a 52% year-over-year revenue growth in high specification floaters. These floaters accounted for nearly 54% of the total quarterly contract drilling revenue, while intermediate semi-submersibles and jackups contributed 41% and 5%, respectively.
High specification floaters recorded an average dayrate of $380,000 during the quarter, up from $364,000 in the year-earlier quarter. Intermediate semi-submersible rigs realized an average dayrate of $268,000 versus $280,000 in the year-ago quarter. Jackup rigs’ dayrates averaged $84,000, up from $82,000 in the third quarter of 2010.
Rig utilization for high specification floaters improved significantly to 93% during the quarter from 56% in the year-ago quarter. Intermediate category rig utilization was 68% compared with 76% in the comparable quarter last year, while jackup rig utilization decreased to 44% from 60% in the year-earlier quarter.
Financials
As of September 30, 2011, Diamond Offshore had approximately $348.0 million in cash and cash equivalents, while long-term debt stood at $1,495.8 million. The debt-to-capitalization ratio at the end of the quarter was about 26.0% (down from 26.6% in the preceding quarter).
Outlook
Houston, Texas-based Diamond Offshore exhibits long-term earnings growth visibility based on its strong leverage to the offshore deepwater drilling market. Additionally, the company’s significant free cash flow generation potential and healthy balance sheet enhances the possibility of further share buybacks and/or special dividends, going forward.
This major contract driller, providing comprehensive offshore drilling services to the global energy industry has also signed 14 new agreements since the second quarter that will likely contribute $1.4 billion of revenue backlog and represent over 18 years of contract drilling backlog.
Diamond’s rival Noble Corporation (NE) reported third quarter earnings of 49 cents (excluding one-time items), failing to meet the Zacks Consensus Estimate but showed an improvement from the year-earlier profit, mainly on solid demand for its rigs and vessels.
We maintain our long-term Neutral recommendation for Diamond Offshore shares, given the volatile oil and gas prices scenario, geopolitical risks associated with international operations and the uneven mid-water markets along with the expectation of a gradual decline in Midwater rates. Diamond Offshore currently holds a Zacks #3 Rank (short-term Hold rating).
DIAMOND OFFSHOR (DO): Free Stock Analysis Report
NOBLE CORP (NE): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment