Diamond Offshore Beats on Earnings, Down Y/Y - Analyst Blog
April 24 2014 - 12:00PM
Zacks
Diamond Offshore Drilling
Inc. (DO) reported first quarter 2014 earnings of 93 cents
per share, comfortably surpassing the Zacks Consensus Estimate of
67 cents. The outperformance was mainly backed by higher dayrates
and lower contract drilling expenses. However, the quarterly
results decreased 26.8% from the year-earlier earnings of $1.27 per
share.
Total revenue in the quarter, decreased 2.8% year over year to
$709.4 million but beat the Zacks Consensus Estimate of $704.0
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 are payable on Jun 2,
2014 to shareholders of record on May 7.
Operational Performance
In the first quarter, revenues from the Contract Drilling segment
fell 2.1% year over year to $685.3 million, mainly due to a 3.9%
decrease in total floaters revenue. These floaters accounted for
93.1% of the total contract drilling revenue, while jackups
contributed 6.9%.
Ultra-Deepwater floaters recorded an average dayrate of $387,000,
up from $360,000 in the year-earlier quarter. Deepwater floaters
realized an average dayrate of $418,000 versus $389,000 in the
year-ago quarter. Mid-water floaters recorded an average dayrate of
$276,000, up from $262,000 in the year-earlier quarter. Jackup
rigs’ dayrates averaged $93,000, up from $85,000 in the first
quarter of 2013.
Rig utilization for Ultra-Deepwater floaters decreased to 66% from
73% in the year-ago quarter. Utilization of Deepwater floaters
decreased to 64% from 88% in the year-ago quarter. Mid-water
category rig utilization was 64%, unchanged from the comparable
quarter last year while jackup rig utilization increased to 79%
from 71%.
Financials
As of Mar 31, 2014, Diamond Offshore had approximately $420.1
million in cash and cash equivalents, while long-term debt was
$2,244.3 million. Debt-to-capitalization ratio at the end of the
quarter was 32.9% (up from about 24.4% in the preceding
quarter).
Outlook
Houston, TX-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 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 (Hold rating) on Diamond
Offshore.
However, there are better-ranked stocks in the oil and gas
industry, like Range Resources Corp. (RRC),
Unit Corp. (UNT) and Helmerich &
Payne, Inc. (HP), which appear more promising. All these
stocks sport a Zacks Rank #1 (Strong Buy).
DIAMOND OFFSHOR (DO): Free Stock Analysis Report
HELMERICH&PAYNE (HP): Free Stock Analysis Report
RANGE RESOURCES (RRC): Free Stock Analysis Report
UNIT CORP (UNT): Free Stock Analysis Report
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