Diamond Offshore Drilling Inc. ( DO ) reported first
quarter 2013 earnings of $1.27 per share, surpassing the Zacks
Consensus Estimate of $1.15. The outperformance was mainly backed
by lower contract drilling expenses and interest overhead. Also,
the quarterly results increased approximately 5% from the
year-earlier earnings of $1.21 per share.DIAMOND OFFSHOR (DO): Free Stock Analysis
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Total revenue in the quarter, however, decreased 5.1% year over
year to $729.7 million and lagged the Zacks Consensus Estimate of
Diamond Offshore declared a special dividend of 75 cents per share
in the quarter, unchanged from the prior quarter. The company will
also pay its regular quarterly dividend of 12.5 cents per share (50
cents per share annualized). Both dividends are payable on Jun 3,
2013 to shareholders of record on May 7, 2013.
In the first quarter, revenues from the Contract Drilling segment
fell 7.3% year over year to approximately $700.0 million, mainly
due to a 6.8% decrease in total floaters revenue. These floaters
accounted for 94.4% of the total quarterly contract drilling
revenue, while jackups contributed 5.6%.
Ultra-Deepwater floaters recorded an average dayrate of $360,000
during the quarter, down from $364,000 in the year-earlier quarter.
Deepwater floaters realized an average dayrate of $389,000 versus
$359,000 in the year-ago quarter. Mid-water floaters recorded an
average dayrate of $262,000, down from $266,000 in the year-earlier
quarter. Jackup rigs' dayrates averaged $85,000, down from $87,000
in the first quarter of 2012.
Rig utilization for Ultra-Deepwater floaters decreased to 73% from
85% in the year-ago quarter. Utilization of Deepwater floaters
increased to 94% from 88% in the year-ago quarter. Mid-water
category rig utilization was 64% compared with 65% in the
comparable quarter last year while jackup rig utilization increased
to 71% from 44%.
As of Mar 31, 2013, Diamond Offshore had approximately $308.1
million in cash and cash equivalents, while long-term debt was
$1,496.1 million. Debt-to-capitalization ratio at the end of the
quarter was 24.4% (down from about 24.6% in the preceding
Houston, Texas-based Diamond Offshore exhibits long-term earnings
growth visibility based on its strong leverage to the offshore
deepwater drilling market. Additionally, the company's significant
free cash flow generation potential and healthy balance sheet
enhances the possibility of further share buybacks and/or special
dividends, going forward.
However, given the volatile oil and gas price scenario as well as
geopolitical risks associated with international operations, we
maintain a Zacks Rank #3 (short-term Hold rating) on Diamond
However, there are other stocks in the oil and gas industry, like
Harvest Natural Resources Inc. ( HNR ), EPL Oil
& Gas, Inc ( EPL ) and Range
Resources Corporation ( RRC ), which appear
more promising and carry a Zacks Rank #1 (Strong Buy).