Diamond Offshore Q4 Earnings Shine - Analyst Blog

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Diamond Offshore Drilling Inc . ( DO ) reported fourth quarter 2013 earnings of 96 cents per share, surpassing the Zacks Consensus Estimate of 79 cents. The outperformance was mainly backed by higher ultra deepwater and jackup rig utilization. However, the quarter's results decreased 31.9% from the year-earlier earnings of $1.41 per share.

For full-year 2013, the company registered earnings of $3.95 per share, missing the Zacks Consensus Estimate of $4.62 per share and decreasing from the year-earlier earnings of $5.18.

Total revenue in the quarter decreased 3.2% year over year to $726.5 million but surpassed the Zacks Consensus Estimate of $704.0 million. In 2013, total revenue decreased 2.2% year over year to $2,920.4 million. Also, total revenue came in below the Zacks Consensus Estimate of $2,928.0 million.

Dividend Story

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 will be paid on Mar 3, 2014 to shareholders of record on Feb 19.

Operational Performance

In the fourth quarter, revenue from the Contract Drilling segment fell 5.7% year over year to approximately $708.0 million, mainly due to a 5.3% decrease in total floaters revenue. These floaters accounted for 93.9% of the total quarterly contract drilling revenue, while jackups contributed 6.1%.

Ultra-Deepwater floaters recorded an average dayrate of $350,000 during the quarter, up from $348,000 in the year-earlier quarter. Deepwater floaters realized an average dayrate of $402,000 versus $372,000 in the year-ago quarter. Mid-water floaters recorded an average dayrate of $277,000, up from $268,000 in the year-earlier quarter. Jackup rigs' dayrates averaged $87,000, up from $85,000 in the fourth quarter of 2012.

Rig utilization for Ultra-Deepwater floaters increased to 91% from 89% in the year-ago quarter. Utilization of Deepwater floaters dropped to 65% during the quarter from 85% in the year-ago quarter. Mid-water category rig utilization was 66% compared with 70% in the comparable quarter last year while jackup rig utilization increased to 76% from 71%.

Financials

As of Dec 31, 2013, Diamond Offshore had approximately $347.0 million in cash and cash equivalents, while long-term debt stood at $2,244.2 million. Debt-to-capitalization ratio at the end of the quarter was 21.1% (down from about 24.6% in the year-ago quarter).

Outlook

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 enhance the possibility of further share buybacks and/or special dividends, going forward.

Diamond Offshore carries a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months.  

However, there are better-ranked stocks in the oil and gas sector. These include Cabot Oil & Gas Corp. ( COG ), QEP Midstream Partners, LP ( QEPM ) and Swift Energy Co. ( SFY ), each sporting a Zacks Rank #1 (Strong Buy).



CABOT OIL & GAS (COG): Free Stock Analysis Report

DIAMOND OFFSHOR (DO): Free Stock Analysis Report

QEP MIDSTRM PTR (QEPM): Free Stock Analysis Report

SWIFT ENERGY CO (SFY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: COG , DO , QEPM , SFY

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