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Released August 04, 2015 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Drilling services provider Diamond Offshore Drilling Incorporated (NYSE:DO) (Houston, Texas) reported a narrow uptick in profits for second-quarter 2015. The small increase likely was envied by other companies related to the oil & gas exploration and production market, where last year's plunge in prices continues to pummel bottom lines. Diamond's growing role in the Gulf of Mexico, where two of its ships began work this quarter, is among the factors keeping its earnings afloat. Industrial Info is tracking about $9 billion in projects involving Diamond.
The company is part of one of the largest offshore plans in Europe: Exxon Mobil Corporation's (NYSE:XOM) (Irving, Texas) $2 billion development of the Neptun Offshore Natural Gas Production Field in the western Black Sea, offshore southern Romania. Diamond's U.K. subsidiary (Aberdeen, Scotland) is serving as contractor. The field has an estimated natural gas production of 630 million cubic feet per day. A proposed pipeline will transport the natural gas extracted from the field over to the planned gas terminal; high-temperature, high-pressure wells are expected to be drilled and tied back to Neptun platform. If approved, the project is expected to kick off in the third quarter of 2016.
Diamond Offshore also is serving as a contractor on Hess Corporation's (NYSE:HES) (New York, New York) Stampede project in the Gulf of Mexico, which includes a $4 billion production platform and a separate, $2 billion subsea installation. For more information on the Stampede project, see July 30, 2015, article - Hess Corporation Turns to Bakken Shale as Production Booms, Expects to Cut Capex through 2016.
Net income for the quarter was reported to be $90.39 million, an increase of less than 1% from second-quarter 2014, while total revenues stood at $634.03 million, an 8.41% decrease. Still, revenues exceed expectations, likely because Diamond stepped up its presence in the Gulf of Mexico during the quarter; the company started operations at its second and third newbuild drill ships, the Ocean BlackHornet and the Ocean BlackRhino, and taking delivery of its fourth and final newbuild drill ship, the Ocean BlackLion.
A decrease in unplanned downtime also helped to offset the effects of low commodity prices, as did a series of major cost cuts since the beginning of the year.
Capital Expenditures Remain Unchanged
Capital expenditures for 2015 are expected to total $630 million for newbuild projects and $290 million for maintenance. The newbuild amount includes a final, 70% shipyard payment for the Ocean BlackLion, and final costs on the BlackHornet and BlackRhino drillships. Executives noted that the estimate is unchanged from the first quarter's estimate.
"Although our industry is cyclical in nature, we believe that any green shoots of a market recovery remain well over the horizon with industry fundamentals that today continue to look very challenging," said Marc Edwards, the president, director and chief executive officer of Diamond Offshore, in a conference call. "The ultra-deepwater market will remain weak due to the substantial number of rigs available for contracting, the high sublet availability, and the significant reduction in contracting opportunities."
Nonetheless, Diamond's first newbuild drill ship, the Ocean Apex, was awarded an 18-month contract for a project offshore Australia, at a rate of $285,000 per day, beginning in second-quarter 2016.
"There is nothing to suggest otherwise to the thesis that there will be a significant oversupply of drilling capacity well into 2017. In reaction to the lack of tendering activity, our competitors have delayed delivery of many newbuild drill ships; in some cases by two years or more," Edwards said in the conference call. But he added: "Our market research suggests the deepwater production will remain to be a critical and growing component of total global energy supply. We are in a cyclical business; and in the due course of time, our clients priorities will shift back towards deepwater production and reserve replacement."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The company is part of one of the largest offshore plans in Europe: Exxon Mobil Corporation's (NYSE:XOM) (Irving, Texas) $2 billion development of the Neptun Offshore Natural Gas Production Field in the western Black Sea, offshore southern Romania. Diamond's U.K. subsidiary (Aberdeen, Scotland) is serving as contractor. The field has an estimated natural gas production of 630 million cubic feet per day. A proposed pipeline will transport the natural gas extracted from the field over to the planned gas terminal; high-temperature, high-pressure wells are expected to be drilled and tied back to Neptun platform. If approved, the project is expected to kick off in the third quarter of 2016.
Diamond Offshore also is serving as a contractor on Hess Corporation's (NYSE:HES) (New York, New York) Stampede project in the Gulf of Mexico, which includes a $4 billion production platform and a separate, $2 billion subsea installation. For more information on the Stampede project, see July 30, 2015, article - Hess Corporation Turns to Bakken Shale as Production Booms, Expects to Cut Capex through 2016.
Net income for the quarter was reported to be $90.39 million, an increase of less than 1% from second-quarter 2014, while total revenues stood at $634.03 million, an 8.41% decrease. Still, revenues exceed expectations, likely because Diamond stepped up its presence in the Gulf of Mexico during the quarter; the company started operations at its second and third newbuild drill ships, the Ocean BlackHornet and the Ocean BlackRhino, and taking delivery of its fourth and final newbuild drill ship, the Ocean BlackLion.
A decrease in unplanned downtime also helped to offset the effects of low commodity prices, as did a series of major cost cuts since the beginning of the year.
Capital Expenditures Remain Unchanged
Capital expenditures for 2015 are expected to total $630 million for newbuild projects and $290 million for maintenance. The newbuild amount includes a final, 70% shipyard payment for the Ocean BlackLion, and final costs on the BlackHornet and BlackRhino drillships. Executives noted that the estimate is unchanged from the first quarter's estimate.
"Although our industry is cyclical in nature, we believe that any green shoots of a market recovery remain well over the horizon with industry fundamentals that today continue to look very challenging," said Marc Edwards, the president, director and chief executive officer of Diamond Offshore, in a conference call. "The ultra-deepwater market will remain weak due to the substantial number of rigs available for contracting, the high sublet availability, and the significant reduction in contracting opportunities."
Nonetheless, Diamond's first newbuild drill ship, the Ocean Apex, was awarded an 18-month contract for a project offshore Australia, at a rate of $285,000 per day, beginning in second-quarter 2016.
"There is nothing to suggest otherwise to the thesis that there will be a significant oversupply of drilling capacity well into 2017. In reaction to the lack of tendering activity, our competitors have delayed delivery of many newbuild drill ships; in some cases by two years or more," Edwards said in the conference call. But he added: "Our market research suggests the deepwater production will remain to be a critical and growing component of total global energy supply. We are in a cyclical business; and in the due course of time, our clients priorities will shift back towards deepwater production and reserve replacement."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
