DO Diamond Offshore Drilling Inc

Three Months Ended

September 30, 2016

June 30, 2016

Change

Total revenues

$           349,178

$           388,747

(10)%

Operating income (loss)

54,071

(626,669)

--

Adjusted operating income

54,071

51,476

5%

Net income (loss)

13,927

(589,937)

--

Adjusted net income

13,927

22,295

(38)%

Earnings (loss) per diluted share

$                  0.10

$              (4.30)

--

Adjusted earnings per diluted share

$                  0.10

$                0.16

(38)%

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2016

2016

2015

Revenues:

    Contract drilling

$     339,636

$    599,036

$ 1,140,568

$   1,816,055

   Revenues related to reimbursable expenses

9,542

10,706

67,900

47,775

            Total revenues

349,178

609,742

1,208,468

1,863,830

Operating expenses:

        Contract drilling, excluding depreciation

186,654

277,944

597,831

971,471

        Reimbursable expenses

7,965

10,476

51,283

46,904

        Depreciation

86,473

118,086

295,729

378,714

        General and administrative

15,237

16,888

48,774

50,888

        Impairment of assets

--

2,546

678,145

361,074

        Restructuring and separation costs

--

1,574

--

8,735

        (Gain) loss on disposition of assets

(1,222)

794

(2,265)

19

            Total operating expenses

295,107

428,308

1,669,497

1,817,805

Operating income (loss)

54,071

181,434

(461,029)

46,025

Other income (expense):

        Interest income

150

629

592

1,796

        Interest expense

(19,032)

(21,350)

(68,704)

(70,800)

        Foreign currency transaction (loss) gain

(712)

(1,163)

(7,833)

954

        Other, net

269

217

(11,199)

702

Income (loss) before income tax (expense) 
     benefit

34,746

159,767

(548,173)

(21,323)

Income tax (expense) benefit

(20,819)

(23,345)

59,588

(7,578)

Net income (loss)

$         13,927

$      136,422

$   (488,585)

$      (28,901)

Income (loss) per share

$            0.10

$            0.99

$         (3.56)

$          (0.21)

Weighted-average shares outstanding:

    Shares of common stock

137,170

137,159

137,167

137,156

    Dilutive potential shares of common stock

84

44

--

--

        Total weighted-average shares outstanding

137,254

137,203

137,167

137,156

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

September 30,

December 31,

2016

2015

ASSETS

Current assets:

      Cash and cash equivalents

$        81,329

$        119,028

      Marketable securities

46

11,518

      Accounts receivable, net of allowance for bad debts

273,982

405,370

      Prepaid expenses and other current assets

114,166

119,479

      Assets held for sale

7,600

14,200

            Total current assets

477,123

669,595

Drilling and other property and equipment, net of accumulated 
     depreciation

5,819,309

6,378,814

Other assets

112,743

101,485

            Total assets

$    6,409,175

$     7,149,894

LIABILITIES AND STOCKHOLDERS' EQUITY

Short-term borrowings

$      182,100

$        286,589

Other current liabilities

297,781

339,134

Long-term debt

1,980,602

1,979,778

Deferred tax liability

164,389

276,529

Other liabilities

151,375

155,094

Stockholders' equity

3,632,928

4,112,770

            Total liabilities and stockholders' equity

$    6,409,175

$     7,149,894

Third Quarter

2016

Second Quarter

2016

Third Quarter

2015

Average

Dayrate ⁽¹⁾

Utilization ⁽²⁾

Operational Efficiency

⁽³⁾

Average

Dayrate ⁽¹⁾

Utilization ⁽²⁾

Operational Efficiency

⁽³⁾

Average

Dayrate

⁽¹⁾

Utilization ⁽²⁾

Operational Efficiency

⁽³⁾

Ultra-Deepwater Floaters

$452

48%

87.1%

$452

47%

86.7%

$479

71%

96.8%

Deepwater Floaters

$303

34%

94.5%

$301

35%

100%

$361

59%

90.3%

Mid-Water floaters

$311

33%

98.4%

$313

30%

99.4%

$289

31%

97.5%

Jack-ups

--

--

--

$335

13%

100%

$97

31%

99.8%

Fleet Total

91.0%

92.7%

95.5%

(1)

Average dayrate is defined as contract drilling revenue for all of the specified rigs in our fleet per revenue earning day.  A revenue earning day is defined as a 24-hour period during which a rig earns a dayrate after commencement of operations and excludes mobilization, demobilization and contract preparation days.

(2)

Utilization is calculated as the ratio of total revenue-earning days divided by the total calendar days in the period for all specified rigs in our fleet (including cold-stacked rigs, but excluding rigs under construction).  As of September 30, 2016, our cold-stacked rigs included four ultra-deepwater semisubmersibles, three deepwater semisubmersibles, three mid-water semisubmersibles and four marketed-for-sale jack-up rigs. 

(3)

Operational efficiency is calculated as the ratio of total revenue-earning days divided by the sum of total revenue-earning days plus the number of days (or portions thereof) associated with unanticipated equipment downtime.

Three Months Ended

September 30,
2016

June 30,

2016

Reconciliation of As Reported Operating (Loss) Income to 
     Adjusted Operating Income:

(In thousands)

As reported operating income (loss)

$           54,071

$      (626,669)

    Impairments and other charges:

        Impairment of rigs and associated inventory ⁽¹⁾

--

678,145

Adjusted operating income

$           54,071

$         51,476

Reconciliation of As Reported Net Loss to Adjusted Net Income:

(In thousands)

As reported net income (loss)

$           13,927

$      (589,937)

    Impairments and other charges:

        Impairment of rigs and associated inventory ⁽¹⁾

--

678,145

    Tax effect of impairments and other charges:

        Impairment of rigs and associated inventory ⁽²⁾

--

(143,165)

        Discrete tax items ⁽³⁾

77,252

Adjusted net income

$           13,927

$         22,295

Three Months Ended

September 30,
2016

June 30,

2016

Reconciliation of As Reported Income (Loss) per Diluted Share 
     to Adjusted Earnings per Diluted Share:

As reported income (loss) per diluted share

$                0.10

$                   (4.30)

    Impairments and other charges:

        Impairment of rigs and associated inventory ⁽¹⁾

--

4.94

    Tax effect of impairments and other charges:

        Impairment of rigs and associated inventory ⁽²⁾

--

(1.04)

        Other discrete tax items ⁽³⁾

--

0.56

Adjusted earnings per diluted share

$                0.10

$                      0.16

⁽¹⁾      

Represents the aggregate amount of impairment losses recognized during the second quarter of 2016 related to eight of our drilling rigs and associated inventory. 

⁽²⁾      

Represents the income tax effects of the aggregate impairment loss recognized in the second quarter of 2016.

⁽³⁾      

Represents the aggregate of certain discrete income tax adjustments recognized 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.