WRAPUP 1-Downtime dampens deepwater joy for Noble, Diamond

Thu Oct 20, 2011 12:15pm EDT

* Noble Q3 EPS ex-items 49 cents vs view 52 cents

* Diamond Q3 EPS $1.85 vs Wall Street estimate $1.48

By Braden Reddall

Oct 20 (Reuters) - A long-anticipated surge in deepwater drilling, which suffered a huge setback with the Gulf of Mexico oil well disaster, has given a boost to Diamond Offshore Drilling Inc and Noble Corp that is dampened only by their rig downtime.

A shift of shipyard work and surveys to the fourth quarter helped Diamond beat third-quarter estimates, while also putting a dent in its near-term prospects. Noble reported a 57 percent rise in profit that fell short of estimates as its rig utilization rate declined.

Yet shares of Noble, owner of the world's third-largest offshore drilling fleet, gained more than 3 percent in midday trading as its outlook for rigs securing work, particularly in deeper waters, kept getting stronger.

Noble also expected leading deepwater rates to keep heading higher from the $500,000-per-day level, with only one bid in the latest Brazilian rig tender process coming in below that.

Roger Hunt, Noble's senior vice-president for marketing and contracts, also said only two of 17 newly built ultra-deepwater rigs delivered this year were without a contract.

"We (also) see operators committing on units with deliveries in 2012. This is an impressive turn of events to say the least," Hunt told investors on a conference call, pointing to 20 ultra-deepwater contract deals in the past quarter alone.

This was largely driven by resilient crude oil prices and the fact that 2011 is set to be the fourth straight year of 20 or more deepwater discoveries worldwide, including emerging areas such as Australia, India and various parts of Africa.

"It is a good story. It something other than just a Brazil story," Hunt said.

Leaving out one-time items, Noble made 49 cents per share in the third quarter, compared with the 52 cents expected by analysts on average on Thomson Reuters I/B/E/S.

Diamond, another top-five offshore driller that is majority owned by Loews Corp , said third-quarter net income was $1.85 per share, compared with the $1.48 analysts expected.

Both sets of results were up sharply from the same quarter last year -- the first full quarter of the U.S. moratorium on deepwater drilling that followed the Deepwater Horizon disaster, which shook the entire industry.

But Gary Krenek, Diamond's chief financial officer, said the anticipated rise in rig downtime to 550 days for the fourth quarter from 495 days in the first nine months of the year would affect revenue and costs for the current quarter.

RBC Capital Markets analyst Victor Marchon said Diamond's 2012 downtime estimate was 979 days, up from 894 days before.

Diamond shares were largely unchanged in morning trading.

A slide in oil prices has hurt the entire business. As of Wednesday, Noble had lost a quarter of its value in the past six months, while Diamond is down 21 percent, No. 2 player Ensco Plc is down 18 percent and industry leader Transocean Ltd has lost 31 percent.