* Diamond Q2 EPS ex-items $1.91 vs $1.92 Wall St estimate
* Noble CEO fears more regular rig downtime after Q2 hit
* Diamond see more days off work for rigs amid scrutiny
* Transocean estimates cut by an analyst on rigs idle time
* Diamond shrs dip 4 pct, Transocean off 1 pct; Noble flat
(Adds analyst comments, Transocean estimate cut, byline)
By Braden Reddall
SAN FRANCISCO, July 21 Two of the five largest
offshore rig contractors expressed concern on Thursday about a
systemic rise in downtime due to greater complexity and more
scrutiny of equipment, even as their 2012 outlook brightens.
Noble Corp (NE.N), after reporting disappointing profits
due to service interruptions [ID:nN1E76J1Z8], said while its
second-quarter delays would have occurred regardless, they were
a reminder that the regulatory pressure following last year's
disastrous Gulf of Mexico oil spill would mean higher costs.
"The operator will bear some of that and we will bear some
of it. The ultimate saddle for this is riding on the backs of
the consumer," Noble Chief Executive David Williams said.
"Ultimately it is going to cost more to drill these wells."
Diamond Offshore Drilling Inc (DO.N) posted second-quarter
numbers just short of the average estimate and expected more
downtime for 2011, sending its shares down 4 percent.
The company made $1.91 per share excluding one-time items,
while analysts' average forecast was $1.92 per share, according
to Thomson Reuters I/B/E/S. UBS analyst Angie Sedita said its
operating costs were 4 percent above her estimates.
Diamond executives went on to say they suffered more rig
stoppages this month due to work on blowout preventers. "We've
seen instances where we think in the past we might not have had
to take some period of downtime," CEO Larry Dickerson said.
Chief Financial Officer Gary Krenek does not see any major
surprises in idle time in the next few quarters, with seven
rigs going out of service, but beyond that it was less clear.
"What becomes very difficult is when we try to give some
estimates for next year and the downtime for 2012 before we do
those engineering studies," he told analysts on a conference
call. "Those days can certainly shift in the future."
CONTRACTS ROLL IN
But Diamond, which is majority owned by Loews Corp (L.N),
also said on Thursday that it signed 10 new contracts in the
past 45 days worth $1 billion in revenue. [ID:nN1E76J234]
As for Noble, the Switzerland-based company is spending
heavily to upgrade its fleet. It is building seven deepwater
rigs and four jackups, and has a deepwater option expiring Aug.
31 and two jackup options that run to the end of this year.
Williams said the options still looked well priced and he
would update investors after discussing them with the board.
Like industry leader Transocean Ltd RIGN.VX(RIG.N), Noble
is pondering sales and even a potential spin-off of old rigs to
clear the way for the new models. [ID:nN31126320] Williams said
the shape that will take was still under study.
Analysts at Stephens Research reduced their 2011 profit
estimate for Transocean on Thursday by 18 percent, but remain
"overweight" on the stock and only tweaked their 2012 numbers.
"The basic question that divides the bulls and the bears is
will the older rigs find work in the future," said Mike Breard,
oil analyst at Hodges Capital in Dallas. He sees drilling
picking up in response to $100-per-barrel oil and noted that an
oversupplied rig market can turn very quickly.
"All you really need is for every oil company in the world
to decide to add one more rig," he added. "The offshore fleet's
not that big."
Noble shares, which already took a hit when it reported rig
idle time this month, were nearly unchanged in late afternoon
trading on the New York Stock Exchange. Diamond shares dropped
$2.65 to $70.08, and Transocean fell 1.5 percent to $63.06.
Shares of Noble and Diamond are now both up 5 percent so
far in 2011. No. 2 player Ensco Plc (ESV.N) is down 2 percent
and Transocean had fallen 9 percent.
(Reporting by Braden Reddall; editing by Andre Grenon, Gary