* First-qtr adj profit $0.93/shr vs est $0.65/shr
* Dayrates rise for all rig types, drilling costs fall
* 2014-15 could be a tough for offshore drillers-CEO
* To pay special cash dividend
* Shares rise as much as 10.5 pct
(Adds details, CEO and analyst comment, Helmerich & Payne
results, updates shares)
By Shubhankar Chakravorty
April 24 Diamond Offshore Drilling Inc,
one of the world's top five offshore rig contractors, reported a
better-than-expected quarterly profit as it cut drilling costs
and hiked prices, sending its shares up as much as 10.5 percent.
The company - owned 50.4 percent by hotel, energy and
financial services conglomerate Loews Corp - also said it
would pay a special cash dividend of 75 cents per share on top
of its regular quarterly dividend of 13 cents.
Diamond Offshore, which has one of the oldest fleet of rigs,
said dayrates rose across all four drilling businesses, while
drilling costs fell 1.4 percent in the quarter ended March 31.
"Diamond managed to record better-than-expected cost
containment results across all segments of the floater market,"
Cowen and Co analyst J.B. Lowe said in a note to clients.
The contract driller is adding capacity and upgrading its
fleet of 45 ultra-deepwater, deepwater, mid-water and jack-ups
rigs, which have an average age of 25.7 years. A rig in service
for more than 25 years is considered old.
"We will continue to invest as we grow the fleet but at the
same time let's not underestimate the capability of some of the
assets that are described as older in our fleet," Chief
Executive Marc Edwards said on a conference call.
To be sure, two of the company's 40 plus-year-old deepwater
rigs are returning to work in the next two months - one
sooner-than-expected and one at a higher rate than expected. (r.reuters.com/wap78v)
However, Edwards, a former Halliburton Co executive
who took charge at Diamond Offshore in February, warned that
2014-15 "could be a tough environment for offshore drillers."
Demand for contract drilling is softening as vessels ordered
during boom times are being delivered now, just as energy
companies tighten spending on exploration.
Analysts expect only a modest recovery in demand in the
second half of 2014, with rig utilization rates staying below
While the fall in demand and utilization is likely to affect
the entire sector, analysts expect Diamond Offshore to fare
worse than rivals, given the age of its fleet.
Diamond Offshore, whose competitors include Ensco Plc
, Transocean Ltd and Helmerich & Payne Inc
, has two rigs due for delivery in 2014 but has not yet
announced any contracts for them.
Helmerich & Payne on Thursday reported a 14 percent rise in
revenue from its offshore contract drilling business as average
rig revenue per day rose. However, utilization rates stayed flat
in the second quarter ended March 31.
Diamond Offshore's utilization rates, however, fell for its
ultra-deepwater, deepwater and mid-water rigs in the quarter.
Rates rose for its jack-up rigs, but that business is the
The company's net profit fell 17 percent to $145.8 million,
or $1.05 per share. Excluding a tax gain, its profit of 93 cents
per share beat analysts' average estimate of 65 cents per share.
Drilling costs fell 1.4 percent to $369.8 million, driven by
a 9 percent drop in ultra-deepwater drilling expenses.
Revenue fell about 3 percent to $709.4 million, also beating
the average analysts' estimate of $686.3 million, according to
Thomson Reuters I/B/E/S.
Diamond Offshore's shares, which had fallen about 30 percent
in the last nine months to Wednesday, were up 7.7 percent at
$52.25 in afternoon trading on the New York Stock Exchange.
Helmerich & Payne's shares were down 6 percent at $107.09.
(Editing by Sriraj Kalluvila, Ted Kerr and Savio D'Souza)