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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to              

Commission file number 1-13926

 

DIAMOND OFFSHORE DRILLING, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

76-0321760

(State or other jurisdiction of incorporation

or organization)

 

(I.R.S. Employer

Identification No.)

 

15415 Katy Freeway

Houston, Texas  

77094

(Address of principal executive offices)

(Zip Code)

(281) 492-5300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, $0.01 par value per share

 

DO

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes   No    

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No    

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No   

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of October 25, 2019 Common stock, $0.01 par value per share   137,694,313 shares

 

 

 


DIAMOND OFFSHORE DRILLING, INC.

 

TABLE OF CONTENTS FOR FORM 10-Q

 

QUARTER ENDED SEPTEMBER 30, 2019

 

 

 

 

 

PAGE NO.

 

 

 

 

 

COVER PAGE

 

1

 

 

 

TABLE OF CONTENTS

 

2

 

 

 

PART I. FINANCIAL INFORMATION

 

3

 

 

 

 

ITEM 1.

Financial Statements (Unaudited)

 

3

 

 

Condensed Consolidated Balance Sheets

 

3

 

 

Condensed Consolidated Statements of Operations

 

4

 

 

Condensed Consolidated Statements of Comprehensive Income or Loss

 

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

6

 

 

Condensed Consolidated Statements of Cash Flows

 

8

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

9

 

 

 

 

 

 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

21

 

 

 

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

 

30

 

 

 

 

 

 

ITEM 4.

Controls and Procedures

 

30

 

 

 

 

 

PART II. OTHER INFORMATION

 

31

 

 

 

 

 

 

ITEM 1.

Legal Proceedings

 

31

 

 

 

 

 

 

ITEM 1A.

Risk Factors

 

31

 

 

 

 

 

 

ITEM 6.

Exhibits

 

32

 

 

 

 

 

SIGNATURES

 

33

 

 

 

 

2


PART I.  FINANCIAL INFORMATION

ITEM 1. Financial Statements.

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

209,132

 

 

$

154,073

 

Marketable securities

 

 

 

 

 

299,849

 

Accounts receivable, net of allowance for bad debts

 

 

237,621

 

 

 

168,620

 

Prepaid expenses and other current assets

 

 

66,669

 

 

 

163,396

 

Asset held for sale

 

 

1,000

 

 

 

 

Total current assets

 

 

514,422

 

 

 

785,938

 

Drilling and other property and equipment, net of

 

 

 

 

 

 

 

 

accumulated depreciation

 

 

5,150,876

 

 

 

5,184,222

 

Other assets

 

 

205,736

 

 

 

65,534

 

Total assets

 

$

5,871,034

 

 

$

6,035,694

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

68,760

 

 

$

43,933

 

Accrued liabilities

 

 

190,204

 

 

 

172,228

 

Taxes payable

 

 

20,242

 

 

 

20,685

 

Total current liabilities

 

 

279,206

 

 

 

236,846

 

Long-term debt

 

 

1,975,275

 

 

 

1,973,922

 

Deferred tax liability

 

 

54,119

 

 

 

104,380

 

Other liabilities

 

 

257,110

 

 

 

135,893

 

Total liabilities

 

 

2,565,710

 

 

 

2,451,041

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock (par value $0.01, 25,000,000 shares authorized, none

   issued and outstanding)

 

 

 

 

 

 

Common stock (par value $0.01, 500,000,000 shares authorized;

   144,769,078 shares issued and 137,694,313 shares outstanding

   at September 30, 2019; 144,383,662 shares issued and 137,438,353

   shares outstanding at December 31, 2018)

 

 

1,448

 

 

 

1,444

 

Additional paid-in capital

 

 

2,022,672

 

 

 

2,018,143

 

Retained earnings

 

 

1,486,971

 

 

 

1,769,415

 

Accumulated other comprehensive (loss) gain

 

 

(16

)

 

 

21

 

Treasury stock, at cost (7,074,765 and 6,945,309 shares of common stock

   at September 30, 2019 and December 31, 2018, respectively)

 

 

(205,751

)

 

 

(204,370

)

Total stockholders’ equity

 

 

3,305,324

 

 

 

3,584,653

 

Total liabilities and stockholders’ equity

 

$

5,871,034

 

 

$

6,035,694

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

3


DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract drilling

 

$

242,315

 

 

$

280,691

 

 

$

676,284

 

 

$

833,970

 

Revenues related to reimbursable expenses

 

 

11,705

 

 

 

5,631

 

 

 

27,984

 

 

 

16,723

 

Total revenues

 

 

254,020

 

 

 

286,322

 

 

 

704,268

 

 

 

850,693

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract drilling, excluding depreciation

 

 

201,568

 

 

 

188,456

 

 

 

593,779

 

 

 

562,466

 

Reimbursable expenses

 

 

11,423

 

 

 

5,574

 

 

 

27,479

 

 

 

16,458

 

Depreciation

 

 

88,693

 

 

 

81,884

 

 

 

263,844

 

 

 

245,534

 

General and administrative

 

 

18,830

 

 

 

33,308

 

 

 

51,436

 

 

 

70,057

 

Impairment of assets

 

 

 

 

 

 

 

 

 

 

 

27,225

 

Restructuring and separation costs

 

 

 

 

 

649

 

 

 

 

 

 

4,925

 

Loss (gain) on disposition of assets

 

 

6,340

 

 

 

(506

)

 

 

1,191

 

 

 

(1,066

)

Total operating expenses

 

 

326,854

 

 

 

309,365

 

 

 

937,729

 

 

 

925,599

 

Operating loss

 

 

(72,834

)

 

 

(23,043

)

 

 

(233,461

)

 

 

(74,906

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,317

 

 

 

2,364

 

 

 

5,664

 

 

 

6,001

 

Interest expense, net of amounts capitalized

 

 

(31,098

)

 

 

(34,293

)

 

 

(92,182

)

 

 

(92,196

)

Foreign currency transaction (loss) gain

 

 

(77

)

 

 

(743

)

 

 

(1,883

)

 

 

115

 

Other, net

 

 

82

 

 

 

(179

)

 

 

520

 

 

 

664

 

Loss before income tax benefit

 

 

(102,610

)

 

 

(55,894

)

 

 

(321,342

)

 

 

(160,322

)

Income tax benefit

 

 

7,482

 

 

 

4,782

 

 

 

38,898

 

 

 

59,257

 

Net loss

 

$

(95,128

)

 

$

(51,112

)

 

$

(282,444

)

 

$

(101,065

)

Loss per share, Basic and Diluted

 

$

(0.69

)

 

$

(0.37

)

 

$

(2.05

)

 

$

(0.74

)

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares of common stock

 

 

137,694

 

 

 

137,434

 

 

 

137,636

 

 

 

137,386

 

Dilutive potential shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

Total weighted-average shares outstanding

 

 

137,694

 

 

 

137,434

 

 

 

137,636

 

 

 

137,386

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 


4


DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(95,128

)

 

$

(51,112

)

 

$

(282,444

)

 

$

(101,065

)

Other comprehensive gains (losses), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for gain included in net loss

 

 

(2

)

 

 

(2

)

 

 

(5

)

 

 

(5

)

Investments in marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain

 

 

-

 

 

 

6

 

 

 

23

 

 

 

37

 

Reclassification adjustment for gain included in net loss

 

 

(8

)

 

 

(31

)

 

 

(55

)

 

 

(31

)

Total other comprehensive (loss) gain

 

 

(10

)

 

 

(27

)

 

 

(37

)

 

 

1

 

Comprehensive loss

 

$

(95,138

)

 

$

(51,139

)

 

$

(282,481

)

 

$

(101,064

)

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

 

5


DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except number of shares)

 

 

 

Three Months Ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury Stock

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Gains (Losses)

 

 

Shares

 

 

Amount

 

 

Equity

 

July 1, 2019

 

 

144,764,125

 

 

$

1,448

 

 

$

2,021,095

 

 

$

1,582,099

 

 

$

(6

)

 

 

7,073,498

 

 

$

(205,739

)

 

$

3,398,897

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(95,128

)

 

 

 

 

 

 

 

 

 

 

 

(95,128

)

Stock-based compensation, net of tax

 

 

4,953

 

 

 

 

 

 

1,577

 

 

 

 

 

 

 

 

 

1,267

 

 

 

(12

)

 

 

1,565

 

Net loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

 

 

 

(8

)

Net loss on derivative financial

   instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

(2

)

September 30, 2019

 

 

144,769,078

 

 

$

1,448

 

 

$

2,022,672

 

 

$

1,486,971

 

 

$

(16

)

 

 

7,074,765

 

 

$

(205,751

)

 

$

3,305,324

 

 

 

 

Nine Months Ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury Stock

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Gains (Losses)

 

 

Shares

 

 

Amount

 

 

Equity

 

January 1, 2019

 

 

144,383,662

 

 

$

1,444

 

 

$

2,018,143

 

 

$

1,769,415

 

 

$

21

 

 

 

6,945,309

 

 

$

(204,370

)

 

$

3,584,653

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(282,444

)

 

 

 

 

 

 

 

 

 

 

 

(282,444

)

Stock-based compensation, net of tax

 

 

385,416

 

 

 

4

 

 

 

4,529

 

 

 

 

 

 

 

 

 

129,456

 

 

 

(1,381

)

 

 

3,152

 

Net loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32

)

 

 

 

 

 

 

 

 

(32

)

Net loss on derivative financial

   instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

September 30, 2019

 

 

144,769,078

 

 

$

1,448

 

 

$

2,022,672

 

 

$

1,486,971

 

 

$

(16

)

 

 

7,074,765

 

 

$

(205,751

)

 

$

3,305,324

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

 

6


DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY – Continued

(Unaudited)

(In thousands, except number of shares)

 

 

 

Three Months Ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury Stock

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Gains (Losses)

 

 

Shares

 

 

Amount

 

 

Equity

 

July 1, 2018

 

 

144,374,006

 

 

$

1,444

 

 

$

2,013,862

 

 

$

1,899,735

 

 

$

23

 

 

 

6,943,090

 

 

$

(204,334

)

 

$

3,710,730

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(51,112

)

 

 

 

 

 

 

 

 

 

 

 

(51,112

)

Stock-based compensation, net of tax

 

 

4,506

 

 

 

 

 

 

1,568

 

 

 

 

 

 

 

 

 

964

 

 

 

(20

)

 

 

1,548

 

Net loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25

)

 

 

 

 

 

 

 

 

(25

)

Net loss on derivative financial instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

(2

)

September 30, 2018

 

 

144,378,512

 

 

$

1,444

 

 

$

2,015,430

 

 

$

1,848,623

 

 

$

(4

)

 

 

6,944,054

 

 

$

(204,354

)

 

$

3,661,139

 

 

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury Stock

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Gains (Losses)

 

 

Shares

 

 

Amount

 

 

Equity

 

December 31, 2017

 

 

144,085,292

 

 

$

1,441

 

 

$

2,011,397

 

 

$

1,964,497

 

 

$

(5

)

 

 

6,857,510

 

 

$

(203,069

)

 

$

3,774,261

 

Impact of change in accounting principle

 

 

 

 

 

 

 

 

 

 

 

(14,812

)

 

 

 

 

 

 

 

 

 

 

 

(14,812

)

Adjusted balance at January 1, 2018

 

 

144,085,292

 

 

$

1,441

 

 

$

2,011,397

 

 

$

1,949,685

 

 

$

(5

)

 

 

6,857,510

 

 

$

(203,069

)

 

$

3,759,449

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(101,065

)

 

 

 

 

 

 

 

 

 

 

 

(101,065

)

Anti-dilution payments

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

3

 

Stock options exercised

 

 

3,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation, net of tax

 

 

289,447

 

 

 

3

 

 

 

4,033

 

 

 

 

 

 

 

 

 

86,544

 

 

 

(1,285

)

 

 

2,751

 

Net gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Net loss on derivative financial instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)