Diamond Offshore Drilling, Inc. (DO) announced that its president and chief executive officer (CEO) Lawrence R. Dickerson will retire from his post by early next year. Dickerson will continue to play his present roles until a successor is elected by Mar 31, 2014. Russell Reynolds Associates has been retained by the board to assist in its search for the new CEO.
The outgoing CEO has served Diamond Offshore for the past thirty years. Under his tenure, Diamond Offshore substantially modernized its fleet and created tremendous value for its shareholders, including paying total dividends of more than $5 billion or over $36 per share to shareholders since 2006.
Houston, Texas-based Diamond Offshore Drilling is a major contract driller, providing comprehensive offshore drilling services to the global energy industry. The company’s drilling fleet of 46 consists of 32 semi-submersibles, 13 jackups and a dynamically positioned drillship.
Diamond Offshore currently has two drillships on order, one of which is expected to be delivered in the fourth quarter of 2013. The second drillship is expected to be delivered at the end of the second quarter of 2014. The company’s rigs operate in the Gulf of Mexico (GoM), the U.K. North Sea, South America, Africa, Australia and Southeast Asia.
We continue to have a favorable view on Diamond Offshore based on its leverage to the global deepwater markets, attractive yield and solid backlog position. Going forward, the driller will likely present investors with solid fundamentals, significant free cash flow potential and a clean balance sheet, which would enhance the possibility of further share buybacks and/or special dividends.
Diamond aims to increase its footprint in emerging markets (such as Brazil, Australia and West Africa) to reap benefits from the recent discoveries of deepwater fields. Again, gradual improvement in the GoM drilling market (especially post embargo), along with better bidding activity, will prove beneficial for a contract drilling company like Diamond Offshore.
However going forward, Diamond expects higher downtime and operating costs in 2013, which are likely to affect its profitability. Further, the company's decision to reclassify four cold-stacked rigs as held for sale is likely to restrict the capacity for upgrades as was in the case of Ocean Apex and Ocean Onyx.
Diamond carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
Other energy sector stocks that are expected to significantly outperform the equity markets in the next one to three months are Zacks Ranked #1 (Strong Buy) Pembina Pipeline Corporation (PBA), Stone Energy Corp. (SGY), and China Petroleum & Chemical Corp. (SNP).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment