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Diamond Offshore Drilling, Inc. (DO)

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Diamond Offshore Drilling Inc. (DO)

Q2 2018 Results Earnings Conference Call

July 30, 2018, 08:30 AM ET

Executives

Samir Ali - Vice President, Investor Relations and Corporate Development

Marc Edwards - President and Chief Executive Officer

Scott Kornblau - Senior Vice President and Chief Financial Officer

Ron Woll - Senior Vice President and Chief Commercial Officer

Analysts

Judson Bailey - Wells Fargo Securities

James West - Evercore ISI

James Wicklund - Credit Suisse

Ian Macpherson - Simmons & Company International

Sean Meakim - J.P. Morgan

Scott Gruber - Citi

Kurt Hallead - RBC Capital Markets

Sasha Sanwal - UBS

Haithum Notka - Clarkson Platou Securities

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2018 Diamond Offshore Drilling Inc. earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Samir Ali, Vice President of Investor Relations. Sir, you may begin.

Samir Ali

Thank you, Joelle. Good morning, everyone, and thank you for joining us. With me on the call today are Marc Edwards, President and Chief Executive Officer; Ron Woll, Senior Vice President and Chief Commercial Officer; and Scott Kornblau, Senior Vice President and Chief Financial Officer.

Before we begin our remarks, I remind you that the information reported on this call speaks only as of today. And, therefore, you are advised that time-sensitive information may no longer be accurate at any time of replay of this call.

In addition, certain statements made during this call may be forward-looking in nature. Those statements are based on our current expectations and include known and unknown risks and uncertainties, many of which we are unable to predict or control, that may cause our actual results or performance to differ materially from any future results or performance expressed or implied by these statements. These risks and uncertainties include the risk factors disclosed in our filing with the SEC, included in our 10-K and 10-Q filings.

Further, we expressly disclaim any obligation to update or revise any forward-looking statements. Please refer to the disclosure regarding forward-looking statements incorporated in our press release issued earlier today. And please note that the contents of our call are covered by that disclosure.

We will be referencing non-GAAP figures on our call today. Please find the reconciliation to GAAP financials on our website.

And now, I will turn the call over to Marc.

Marc Edwards

Thank you, Samir. Good morning, everyone, and thank you for joining us today. For the second quarter of 2018, Diamond Offshore announced earnings of minus $0.50 per share which includes restructuring costs and a non-cash impairment charge related to the sale of the ocean scepter.

Excluding these adjustments, our earnings per share for the second quarter of 2018 were minus $0.33.

The offshore drilling market remains challenged. However, the decline quarter-over-quarter was primarily driven by the previously disclosed out-of-service time on the Ocean Courage and Ocean Valiant. We do not expect either of these events to repeat in the third quarter of 2018.

In prior calls, I've spoken to a series of innovations that help reduce the cost of deepwater drilling for our clients. These have included the Floating Factory, Pressure Control by the Hour, Sim-Stack service and our Helical riser system.

And in the past quarter, we have further provided thought leadership to our industry by introducing our Blockchain Drilling service. This is one of the first publicly disclosed Blockchain technology applications in upstream activities and will be used to drive efficiencies across entire value chain.

Blockchain technology shines when there are multiple parties to a single longitudinal transaction, which in offshore drilling is the manufacturer of a well. The technology will provide an immutable platform for the optimization of well construction activities, including drilling-related services, matériel and the supply chain, both offshore and shore-based.

Current tracking systems rely on a unidirectional flow of data from outside sources on to a central database. Instead, the Blockchain drilling service enables a bidirectional flow of data between all nodes in a system, which is then confirmed using consensus algorithms.

By enabling automated actions and removing the lag associated with updating currently available databases, Blockchain has the ability to make the exchange of goods and services associated with the manufacture of a well quicker, more efficient, more reliable and more automated.

Greater resolution on activities encourages greater accountability, which then further enables pricing to be better structured around performance. This would not only be the case for transactions between Diamond and the operator, but also for other third-party service providers and the operator on any of Diamond's Blockchain-enabled rigs.

Diamond will commence installation of this service in the fourth quarter and will plan to take it fleetwide in coming quarters.

Initial customer response has been very positive and further helps differentiate our fleet from our peers.

I've previously spoken at length on the success of our prior innovations, but please allow me to provide a very brief update.

In this past quarter alone, three of our drill ships achieved 100% operational efficiency. One of these drill ships manufacturing wells to 32,000 feet here in the Gulf of Mexico operated with only nine hours of subsea downtime in a 12-month period, while another is currently at three hours of downtime year-to-date.

This is differentiated and class-leading performance, pushing Diamond Offshore's assets to the front of the deli line of desirability, which provides a segue into recent contracting activity here at Diamond Offshore.

Read the rest of this transcript on seekingalpha.com