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.

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 by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. 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 ~~May 6,~~November 7, 2022 Common stock, $0.0001 par value per share ~~100,074,948~~101,524,384 shares


	Successor						Successor
	March 31,			December 31,			September 30,			December 31,
	2022			2021			2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	53,771		$	38,388		$	22,650		$	38,388
Restricted cash		19,202			24,341			38,592			24,341
Accounts receivable		124,998			151,917			185,539			151,917
Less: allowance for credit losses		(5,572	)		(5,582	)		(5,629	)		(5,582	)
Accounts receivable, net		119,426			146,335			179,910			146,335
Prepaid expenses and other current assets		62,275			61,440			59,585			61,440
Asset held for sale		0			1,000			—			1,000
Total current assets		254,674			271,504			300,737			271,504
Drilling and other property and equipment, net of
accumulated depreciation		1,175,357			1,175,895			1,143,268			1,175,895
Other assets		82,705			84,041			79,714			84,041
Total assets	$	1,512,736		$	1,531,440		$	1,523,719		$	1,531,440
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	46,365		$	38,661		$	39,521		$	38,661
Accrued liabilities		137,513			143,736			150,153			143,736
Taxes payable		33,942			34,500			25,115			34,500
Current finance lease liabilities		16,130			15,865			16,681			15,865
Total current liabilities		233,950			232,762			231,470			232,762
Long-term debt		286,338			266,241			335,540			266,241
Noncurrent finance lease liabilities		144,280			148,358			135,777			148,358
Deferred tax liability		2,462			1,626			1,838			1,626
Other liabilities		107,883			114,748			88,905			114,748
Commitments and contingencies (Note 8)
Total liabilities		774,913			763,735			793,530			763,735
Stockholders’ equity:
Preferred stock (par value $0.0001, 50,000 shares authorized, NaN issued and outstanding at March 31, 2022 and December 31, 2021)		0			0
Common stock (par value $0.0001, 750,000 shares authorized; 100,075 shares issued and outstanding at March 31, 2022 and December 31, 2021)		10			10
Preferred stock (par value $0.0001, 50,000 shares authorized, none issued and outstanding at September 30, 2022 and December 31, 2021)								—			—
Common stock (par value $0.0001, 750,000 shares authorized; 101,630 shares issued and 101,166 shares outstanding at September 30, 2022 and 100,075 shares issued and outstanding at December 31, 2021)								10			10
Additional paid-in capital		949,511			945,039			961,510			945,039
Treasury stock								(3,214	)		—
Accumulated deficit		(211,698	)		(177,344	)		(228,117	)		(177,344	)
Total stockholders’ equity		737,823			767,705			730,189			767,705
Total liabilities and stockholders’ equity	$	1,512,736		$	1,531,440		$	1,523,719		$	1,531,440

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


	Successor			Predecessor			Successor
	Three Months			Three Months			Three Months			Three Months
	Ended			Ended			Ended			Ended
	March 31, 2022			March 31, 2021			September 30, 2022			September 30, 2021
Revenues:
Contract drilling	$	150,252		$	122,553		$	189,861		$	183,156
Revenues related to reimbursable expenses		35,987			12,264			36,212			30,721
Total revenues		186,239			134,817			226,073			213,877
Operating expenses:
Contract drilling, excluding depreciation		144,902			141,573			155,567			135,181
Reimbursable expenses		35,613			11,837			35,765			30,073
Depreciation		26,952			74,626			26,069			25,150
General and administrative		16,732			12,366			16,320			20,976
Impairment of assets		0			197,027
Gain on disposition of assets		(4,044	)		(5,401	)		(73	)		(767	)
Total operating expenses		220,155			432,028			233,648			210,613
Operating loss		(33,916	)		(297,211	)
Operating (loss) income								(7,575	)		3,264
Other income (expense):
Interest income		1			30			11			2
Interest expense, net of amounts capitalized (excludes $28,266 of contractual interest expense on debt subject to compromise for the Predecessor three-month period ended March 31, 2021)		(8,325	)		(32,562	)
Foreign currency transaction (loss) gain		(2,129	)		625
Interest expense, net of amounts capitalized								(10,364	)		(9,777	)
Foreign currency transaction gain								237			1,173
Reorganization items, net		0			(35,252	)		—			(1,916	)
Other, net		1,362			489			172			(14	)
Loss before income tax benefit		(43,007	)		(363,881	)		(17,519	)		(7,268	)
Income tax benefit		8,653			2,200			23,029			2,086
Net loss	$	(34,354	)	$	(361,681	)
Loss per share, Basic and Diluted	$	(0.34	)	$	(2.62	)
Weighted-average shares outstanding, Basic and Diluted		100,075			138,054
Net income (loss)							$	5,510		$	(5,182	)
Income (loss) per share, Basic and Diluted							$	0.05		$	(0.05	)
Weighted-average shares outstanding, Basic								100,875			100,075
Weighted-average shares outstanding, Diluted								102,273			100,075

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

1. General Information

The unaudited condensed consolidated financial statements of Diamond Offshore Drilling, Inc. and subsidiaries, which we refer to as “Diamond Offshore,” “Company,” “we,” “us” or “our,” should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, as amended by Amendment No. 1 on Form 10-K/A (File No. 1-13926). To facilitate our financial statement presentations, we refer to the post-emergence reorganized company in these unaudited condensed consolidated financial statements and footnotes as the “Successor” for periods subsequent to April 23, 2021 and to the pre-emergence company as the “Predecessor” for periods on or prior to April 23, 2021. This delineation between Predecessor periods and Successor periods is shown in the unaudited condensed consolidated financial statements, certain tables within the footnotes to the unaudited condensed consolidated financial statements and other parts of this Quarterly Report on Form 10-Q through the use of a black line, calling out the lack of comparability between periods.

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with ~~GAAP~~generally accepted accounting principles (or GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, pursuant to such rules and regulations, they do not include all disclosures required by GAAP for annual financial statements. The condensed consolidated financial information has not been audited but, in the opinion of management, includes all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of Diamond Offshore’s condensed consolidated balance sheets, statements of operations, statements of stockholders’ equity and statements of cash flows at the dates and for the periods indicated. Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years.

Fresh Start Accounting

Upon our emergence from bankruptcy on April 23, 2021 (or the Effective Date), we met the criteria for and were required to adopt fresh start accounting in accordance with the Financial Accounting Standards Board (or FASB) Accounting Standards Codification ~~(or ASC)~~ Topic No. 852 – Reorganizations~~(or ASC 852)~~, which on the Effective Date resulted in a new entity, the Successor, for financial reporting purposes, with no beginning retained earnings or deficit as of the fresh start reporting date.

Fresh start accounting requires that new fair values be established for the Company’s assets, liabilities, and equity as of the Effective Date. The Effective Date fair values of the Successor’s assets and liabilities differ materially from their recorded values as reflected on the historical balance sheets of the Predecessor. In addition, as a result of the application of fresh start accounting and the effects of the implementation of our restructuring plan, the financial statements for periods after April 23, 2021 will not be comparable with the financial statements prior to and including April 23, 2021. References to “Successor” refer to the Company and its financial position and results of operations after the Effective Date (including December 31, 2021, ~~March 31,~~September 30, 2022, the three-month and nine-month periods ended September 30, 2022 and the ~~three-month~~ period ~~ended March 31, 2022)~~from April 24, 2021 through September 30, 2021). References to “Predecessor” refer to the Company and its financial position and results of operations on or before the Effective Date (including the ~~three-month~~ period ~~ended March 31,~~from January 1, 2021 through April 23, 2021 and the period from April 1, 2021 through April 23, 2021).

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with ~~generally accepted accounting principles (or GAAP)~~GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated.

Restricted Cash

We maintain a restricted cash bank account which is subject to restrictions pursuant to a management and marketing services agreement with an offshore drilling company. See Note 2 “Revenue from Contracts with Customers.”

We classify such restricted cash accounts in current assets if the restrictions are expected to expire or otherwise be resolved within one year or if such funds are considered to offset current liabilities. At ~~March 31,~~September 30, 2022 and December 31, 2021, our restricted cash was considered to be current and was recorded in “Restricted cash” in our unaudited Condensed Consolidated Balance Sheets.

2. Revenue from Contracts with Customers

The activities that primarily drive the revenue earned from our contract drilling services include (i) providing a drilling rig and the crew and supplies necessary to operate the rig, (ii) mobilizing and demobilizing the rig to and from the drill site and (iii) performing rig preparation activities and/or modifications required for the contract. Consideration received for performing these activities may consist of dayrate drilling revenue, mobilization and demobilization revenue, contract preparation revenue and reimbursement revenue. We account for these integrated services provided within our drilling contracts as a single performance obligation satisfied over time and comprised of a series of distinct time increments in which we provide drilling services.

Consideration for activities that are not distinct within the context of our contracts and do not correspond to a distinct time increment within the contract term are allocated across the single performance obligation and recognized ratably over the initial term of the contract (which is the period we estimate to be benefited from the corresponding activities and generally ranges from two to 60 months). Such consideration may include mobilization, demobilization, contract preparation and capital modification revenue that is stipulated in our drilling contracts. Consideration for activities that correspond to a distinct time increment within the contract term is recognized in the period when the services are performed. The total transaction price is determined for each individual contract by estimating both fixed and variable consideration expected to be earned over the term of the contract.

Revenues Related to Managed Rigs

In May 2021, we entered into an arrangement with Aquadrill LLC, an offshore drilling company, ~~whereby we~~for us to provide management and marketing services (or the MMSA) for 3three of its rigs. In July 2022, we received notice of termination of the MMSA for one of these rigs, the Capricorn and no longer perform management services for that rig.

Per the MMSA, for stacked rigs we earn a daily service fee and are entitled to reimbursement of direct costs incurred in accordance with the agreement. For rigs operating under a drilling contract, in addition to the service fee and reimbursement of direct costs, we are entitled to a gross margin bonus, as adjusted pursuant to the MMSA, and a commission. The daily service fee revenue is recognized in line with the contractual rate billed for the services provided and is reported in “Contract ~~Drilling Revenue”~~drilling” in our unaudited Condensed Consolidated Statements of Operations. We record the revenue relating to reimbursed expenses at the gross amount incurred and billed to the rig owner, as “Revenues related to reimbursable expenses” in our unaudited Condensed Consolidated Statements of Operations. ~~Two of the managed rigs were considered stacked rigs at March 31, 2022.~~

In March 2022, the managed rig, ~~West~~ Auriga,~~, one of the three managed rigs,~~ began a one-year contract in the U.S. Gulf of ~~Mexico (or GOM).~~Mexico. Upon commencement of drilling operations, ~~of the~~ ~~West Auriga~~, the MMSA for ~~this rig~~the Auriga was suspended and replaced by a charter agreement for the duration of the drilling contract. We ~~have~~ entered into the drilling contract directly with the customer and ~~will~~ receive and recognize revenue under the terms of the ~~contract and have reported the~~contract. We report such revenue ~~earned~~ as “Contract ~~Drilling Revenue”~~drilling” in our unaudited Condensed Consolidated Statements of Operations. WeIn addition, we have determined that the charter arrangement is an operating lease, and the related charter fee has been reported as lease expense within “Contract drilling, excluding depreciation” in our unaudited Condensed Consolidated Statements of Operations.

810

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities ~~from~~related to our contracts with customers (in thousands):


	Successor						Successor
	March 31,			December 31,			September 30,			December 31,
	2022			2021			2022			2021
Trade receivables	$	107,824		$	130,021		$	167,570		$	130,021
Current contract assets (1)		2,169			1,835			505			1,835
Current contract liabilities (deferred revenue) (1)		(27,682	)		(38,506	)		(25,833	)		(38,506	)
Noncurrent contract liabilities (deferred revenue) (1)		(7,202	)		(9,787	)		(2,734	)		(9,787	)

(1)

Contract assets and contract liabilities may reflect balances which have been netted together on a contract basis. Net current contract asset and liability balances are included in “Prepaid expenses and other current assets” and “Accrued liabilities,” respectively, and net noncurrent contract liability balances are included in “Other liabilities” in our unaudited Condensed Consolidated Balance Sheets.

~~Significant changes~~Changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands):


	Successor			Successor
	Net Contract			Net Contract
	Balances			Balances
Contract assets at January 1, 2022	$	1,835		$	1,835
Contract liabilities at January 1, 2022		(48,293	)		(48,293	)
Net balance at January 1, 2022		(46,458	)		(46,458	)
Decrease due to amortization of revenue included in the beginning contract liability balance		6,086			25,052
Increase due to cash received, excluding amounts recognized as revenue during the period		7,138			(5,326	)
Increase due to revenue recognized during the period but contingent on future performance		519			6,205
Net balance at March 31, 2022	$	(32,715	)
Contract assets at March 31, 2022	$	2,169
Contract liabilities at March 31, 2022		(34,884	)
Decrease due to transfer to receivables during the period					(7,535	)
Net balance at September 30, 2022				$	(28,062	)
Contract assets at September 30, 2022				$	505
Contract liabilities at September 30, 2022					(28,567	)

Transaction Price Allocated to Remaining Performance Obligations

The following table reflects the specified types of revenue expected to be recognized in the future related to unsatisfied performance obligations as of ~~March 31,~~September 30, 2022 (in thousands):


	For the Years Ending December 31,								For the Years Ending December 31,
	2022 (1)		2023		2024		Total		2022 (1)		2023			2024		Total
Mobilization and contract preparation revenue		2,973	$	3,947	$	162	$	7,082	$	2,280	$	6,344		$	225	$	8,849
Capital modification revenue		16,012		5,371		207		21,590		1,593		5,137			287		7,017
Demobilization and other deferred revenue		6,750		—		—		6,750		12,672		(79	)		—		12,593
Total	$	25,735	$	9,318	$	369	$	35,422	$	16,545	$	11,402		$	512	$	28,459

(1)

Represents the ~~nine-month~~three-month period beginning ~~April~~October 1, 2022.

911

The revenue included above consists of expected fixed mobilization and upgrade revenue for both wholly and partially unsatisfied performance obligations, as well as expected variable mobilization and upgrade revenue for partially unsatisfied performance obligations, which has been estimated for purposes of allocating across the entire corresponding performance obligations. The amounts are derived from the specific terms within drilling contracts that contain such provisions, and the expected timing for recognition of such revenue is based on the estimated start date and duration of each respective contract based on information known at ~~March 31,~~September 30, 2022. The actual timing of recognition of such amounts may vary due to factors outside of our control. We have applied the disclosure practical expedient in FASB Accounting Standards Update (or ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606)~~(Topic 606)~~ and its related amendments, and have not included estimated variable consideration related to wholly unsatisfied performance obligations or to distinct future time increments within our contracts, including dayrate revenue.

3. Impairment of Assets

2021 Impairment. During the first quarter of 2021, we identified indicators that the carrying amounts of certain of our assets may not be recoverable and evaluated 3three of our drilling rigs with indicators of impairment. Based on our assumptions and analysis at that time, we determined that the carrying value of 1one of these rigs, for which we had concerns regarding future opportunities, was impaired (or the 2021 Impaired Rig). We estimated the fair value of the 2021 Impaired Rig using an income approach, whereby the fair value of the rig was estimated based on a calculation of the rig’s future net cash flows. These calculations utilized significant unobservable inputs, including management’s assumptions related to estimated dayrate revenue, rig utilization, estimated capital expenditures, repair and regulatory survey costs, as well as estimated proceeds that may be received on ultimate disposition of the rig. Our fair value estimate was representative of a Level 3 fair value measurement due to the significant level of estimation involved and the lack of transparency as to the inputs used. We recorded asset impairments aggregating $197.0 million for the Predecessor period ~~for the three months ended March 31,~~from January 1, 2021 through April 23, 2021.

~~NaN~~No asset impairments were recorded in the Successor three-month or nine-month periods ended September 30, 2022 or the period ~~ended March 31, 2022.~~from April 24, 2021 through September 30, 2021.

4. Supplemental Financial Information

Unaudited Condensed Consolidated Balance Sheets Information

Accounts receivable, net of allowance for credit losses, consist of the following (in thousands):


	Successor						Successor
	March 31,			December 31,			September 30,			December 31,
	2022			2021			2022			2021
Trade receivables	$	107,824		$	130,021		$	167,570		$	130,021
Federal income tax receivables		9,288			9,278			9,374			9,278
Value added tax receivables		5,362			9,729			5,293			9,729
Related party receivables		81			66			69			66
Other		2,443			2,823			3,233			2,823
		124,998			151,917			185,539			151,917
Allowance for credit losses		(5,572	)		(5,582	)		(5,629	)		(5,582	)
Total	$	119,426		$	146,335		$	179,910		$	146,335

The allowance for credit losses at ~~March 31,~~September 30, 2022 and December 31, 2021 represents our estimate of credit losses associated with our “Trade receivables” and “Current contract assets.” See Note 5 “Financial Instruments and Fair Value Disclosures” for a discussion of our concentrations of credit risk and allowance for credit losses.

1012

Prepaid expenses and other current assets consist of the following (in thousands):


	Successor				Successor
	March 31,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
Collateral deposits	$	18,961	$	17,480
Prepaid taxes		17,339		16,163	$	23,526	$	16,163
Deferred contract costs		6,776		7,267		15,582		7,267
Prepaid rig costs		4,511		4,048
Rig spare parts and supplies		3,611		3,716		5,089		3,716
Prepaid insurance		2,180		3,436		5,025		3,436
Prepaid rig costs						4,102		4,048
Current contract assets		2,169		1,835		505		1,835
Prepaid legal retainers		730		746
Collateral deposits						—		17,480
Other		5,998		6,749		5,756		7,495
Total	$	62,275	$	61,440	$	59,585	$	61,440

Accrued liabilities consist of the following (in thousands):


	Successor				Successor
	March 31,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
Rig operating costs	$	43,536	$	42,532	$	39,479	$	42,532
Payroll and benefits		29,141		29,268		29,651		29,268
Deferred revenue		27,682		38,506		25,833		38,506
Contract advances						20,880		—
Current operating lease liability		13,417		15,998		15,991		15,998
Interest payable						4,331		2,986
Shorebase and administrative costs						4,265		5,776
Personal injury and other claims		6,466		5,598		3,960		5,598
Shorebase and administrative costs		6,262		5,776
Accrued capital project/upgrade costs		5,555		2,219		2,226		2,219
Interest payable		4,465		2,986
Other		989		853		3,537		853
Total	$	137,513	$	143,736	$	150,153	$	143,736

Unaudited Condensed Consolidated Statements of Cash Flows Information

Noncash operating, investing and financing activities excluded from the unaudited Condensed Consolidated Statements of Cash Flows and other supplemental cash flow information are as follows (in thousands):


						Successor				Predecessor
								Period from		Period from
						Nine Months		April 24, 2021		January 1, 2021
	Successor		Predecessor			Ended		through		through
	Three Months Ended March 31,		Three Months Ended March 31,			September 30,		September 30,		April 23,
	2022		2021			2022		2021		2021
Accrued but unpaid capital expenditures at period end	$	5,555	$	17,255		$	2,226	$	3,096	$	18,617
Accrued but unpaid debt issuance costs and arrangement fees (1)		—		10,140			—		—		7,588
Common stock withheld for payroll tax obligations (2)							3,214		—		—
Cash interest payments		3,258		—			17,718		5,431		37,593
Cash paid for reorganization items, net		—		20,584			—		35,398		37,566
Cash income taxes paid, net of (refunds):
Foreign		1,114		3,363			12,187		1,464		3,460
U.S. Federal							2,855		468		—
State		—		(34	)		—		—		(34	)

(1)

Represents unpaid debt issuance costs related to our exit financing that were incurred and capitalized during the Predecessor ~~three-month~~period from January 1, 2021 through April 23, 2021.

(2)

Represents the cost of 463,951 shares of common stock withheld to satisfy payroll tax obligations incurred as a result of the vesting of restricted stock in the Successor nine-month period ended ~~March 31, 2021.~~September 30, 2022. These costs for the Successor nine-month period ended September 30, 2022 are presented as a deduction from stockholders’ equity in “Treasury stock” in our unaudited Condensed Consolidated Balance Sheets at September 30, 2022.

5. Financial Instruments and Fair Value Disclosures

Concentrations of Credit Risk and Allowance for Credit Losses

Our credit risk corresponds primarily to trade receivables. Since the market for our services is the offshore oil and gas industry, our customer base consists primarily of major and independent oil and gas companies, as well as government-owned oil companies. At ~~March 31,~~September 30, 2022, we ~~believe~~believed that we ~~have~~had potentially significant concentrations of credit risk due to the number of rigs we ~~currently have~~had contracted and our limited number of customers, as some of our customers ~~have~~which had contracted for multiple rigs.

In general, before working for a customer with whom we have not had a prior business relationship and/or whose financial stability may be uncertain, we perform a credit review on that customer, including a review of its credit ratings and financial statements. Based on our credit review, we may require that the customer have a bank issue a letter of credit on its behalf, prepay for the services in advance or provide other credit enhancements. ~~We have~~At September 31, 2022, we had not required any credit enhancements by our customers or required any to pay for services in ~~advance at March 31, 2022.~~advance. We have historically used the specific identification method to identify and reserve for uncollectible accounts. The amounts reserved for uncollectible accounts in previous periods have not been significant, individually or in comparison to our total revenues. At ~~March 31,~~September 30, 2022, $~~7.8~~8.3 million in trade receivables were considered past due by 30 days or more, of which $7.5 million were fully reserved for in previous years and $0.1 million of the remaining $~~0.3~~0.8 million were ~~older~~more than 90 days past due.

Pursuant to FASB ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and its related amendments (or collectively, CECL), we have reviewed our historical credit loss experience over a look-back period of ten years, which we deem to be representative of both up-turns and down-cycles in the offshore drilling industry. Based on this review, we developed a credit loss factor using a weighted-average ratio of our actual credit losses to revenues during the look-back period. In addition, we also considered current and future anticipated economic conditions in determining our credit loss factor, including crude oil prices and liquidity of credit markets. In applying the requirements of CECL, we segregated our trade receivables into three credit loss risk pools based on customer credit ratings, each of which represents a tier of increasing credit risk. We calculated a credit loss factor based on historical loss rate information and then applied a multiple of our credit loss factor to each of these risk pools, considering the impact of current and future economic information and the level of risk associated with these pools, to calculate our current estimate of credit losses. Trade receivables that are fully covered by allowances for credit losses are excluded from these risk pools for purposes of calculating our current estimate of credit losses.

For purposes of calculating our current estimate of credit losses at ~~March 31,~~September 30, 2022 and December 31, 2021, all trade receivables were deemed to be in a single risk pool based on their credit ratings at each respective period. Our current estimate of credit losses under CECL was $0.1 million at both ~~March 31,~~September 30, 2022 and December 31, 2021. Our total allowance for credit losses was $5.6 million at both ~~March 31,~~September 30, 2022 and December 31, 2021. See Note 4 “Supplemental Financial Information.”

Fair Values

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

There are three levels of inputs that may be used to measure fair value:

1214


Level 1	Quoted prices for identical instruments in active markets.
Level 2	Quoted market prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3	Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Level 3 assets and liabilities generally include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation or for which there is a lack of transparency as to the inputs used.

Certain of our assets and liabilities are required to be measured at fair value on a recurring basis in accordance with GAAP. In addition, certain assets and liabilities may be recorded at fair value on a nonrecurring basis. Generally, we record assets at fair value on a nonrecurring basis as a result of impairment charges.

Assets and liabilities measured at fair value are summarized below (in thousands).


	Successor										Successor
	March 31, 2022										September 30, 2022
	Fair Value Measurements Using										Fair Value Measurements Using								Total (Loss) Gain
	Level 1		Level 2		Level 3		Assets at Fair Value		Total Gains for the Three Months Ended (1)		Level 1		Level 2		Level 3		Liabilities at Fair Value		Three Months Ended (1)			Nine Months Ended (1)
Recurring fair value measurements:
Liability-classified Director restricted stock units	$	587	$	—	$	—	$	587	$	133	$	719	$	—	$	—	$	719	$	(80	)	$	229

(1)

Represents aan (increase) reduction in stock compensation expense due to the ~~marking-to-market~~“marking-to-market” of liability-classified restricted stock units granted to our non-employee directors in April 2021.


	Successor
	December 31, 2021
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value
Nonrecurring fair value measurements:
Impaired assets (1)	$	—	$	—	$	77,900	$	77,900

(1)

Represents the total book value as of December 31, 2021 of two semisubmersible rigs, which were written down to estimated fair value.

We believe that the carrying amounts of our other financial assets and liabilities (excluding our Exit Term Loans and First Lien Notes (each as defined below in Note 7 “Successor Long-Term Debt”)), which are not measured at fair value in our unaudited Condensed Consolidated Balance Sheets, approximate fair value based on the following assumptions:

•

Cash and cash equivalents and restricted cash – The carrying amounts approximate fair value because of the short maturity of these instruments.

•

Accounts receivable and accounts payable – The carrying amounts approximate fair value based on the nature of the instruments.

•

Exit RCF borrowings- The carrying amount of borrowings under our Exit RCF (as defined below in Note 7 “Successor Long-Term Debt”) approximates fair value since the variable interest rates are tied to current market rates and the applicable margins represent market rates.

Our debt is not measured at fair value on a recurring basis; however, under the GAAP fair value hierarchy, our ~~long term~~long-term debt would be considered Level 2 liabilities. The fair value of these instruments was derived using valuation specialists at ~~March 31,~~September 30, 2022 and December 31, 2021.

Fair values and related carrying values of our long-term debt are shown below (in millions).


	Successor								Successor
	March 31, 2022				December 31, 2021				September 30, 2022				December 31, 2021
	Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value
Exit Term Loans	$	99.1	$	99.1	$	100.0	$	100.0	$	90.9	$	100.0	$	100.0	$	100.0
First Lien Notes		83.0		83.8		86.2		86.1		79.6		86.0		86.2		86.1

We have estimated the fair value amounts by using appropriate valuation methodologies and information available to management. Considerable judgment is required in developing these estimates, and accordingly, no assurance can be given that the estimated values are indicative of the amounts that would be realized in a free market exchange.

6. Drilling and Other Property and Equipment

Cost and accumulated depreciation of drilling and other property and equipment are summarized as follows (in thousands):


	Successor						Successor
	March 31,			December 31,			September 30,			December 31,
	2022			2021			2022			2021
Drilling rigs and equipment	$	1,084,053		$	1,057,739		$	1,103,454		$	1,057,739
Finance lease right of use asset		174,571			174,571			174,571			174,571
Land and buildings		9,902			9,823			10,001			9,823
Office equipment and other		2,285			2,264			2,452			2,264
Cost		1,270,811			1,244,397			1,290,478			1,244,397
Less: accumulated depreciation		(95,454	)		(68,502	)		(147,210	)		(68,502	)
Drilling and other property and equipment, net	$	1,175,357		$	1,175,895		$	1,143,268		$	1,175,895

7. Successor Long-Term Debt

Exit Revolving Credit Agreement

On the Effective Date, we entered into a senior secured revolving credit agreement (or the Exit Revolving Credit Agreement), which provides for a $400.0 million senior secured revolving credit facility ~~with~~and also originally provided for a $100.0 million sublimit for the issuance of letters of credit thereunder ~~which~~(or the Exit RCF). Effective September 30, 2022, the aggregate amount of the commitments of the Issuing Lenders (as defined in the Exit Revolving Credit Agreement) to issue letters of credit under the Exit RCF was reduced to $75.0 million due to the resignation of one of the Issuing Lenders. Our total capacity for borrowings under the Exit RCF was not impacted by the resignation of the Issuing Lender and remains at $400 million. The Exit RCF is scheduled to mature on April 22, 2026 ~~(or the Exit RCF)~~.

Borrowings under the Exit RCF may be used to finance capital expenditures, ~~pay fees, commissions and expenses in connection with the loan transactions and consummation of our restructuring plan, and~~ for working capital and other general corporate purposes. Availability of borrowings under the Exit RCF is subject to the satisfaction of certain conditions, including restrictions on borrowings, as provided in the Exit Revolving Credit Agreement. At ~~March 31,~~September 30, 2022, we had borrowings outstanding of $~~103.5~~152.5 million under the Exit RCF, including $3.5 million in payment-in-kind loans, and $~~6.1~~18.0 million had been utilized for the issuance of letters of credit. The weighted average interest rate on the combined borrowings outstanding under the Exit RCF at ~~March 31,~~September 30, 2022 was ~~5.47~~7.31%.

At ~~May 6,~~November 7, 2022, we had borrowings of $~~103.5~~152.5 million outstanding under the Exit RCF and had utilized $~~24.1~~37.3 million for the issuance of letters of ~~credit, including $18.0~~ ~~million issued in April 2022 to replace existing cash collateral.~~credit. As of ~~May 6,~~November 7, 2022, approximately $~~275.9~~213.7 million was available for borrowings or the issuance of letters of credit under the Exit RCF, subject to its terms and conditions.

On the Effective Date, we also entered into a senior secured term loan credit agreement (or the Exit Term Loan Credit Agreement), which provides for a $100.0 million senior secured term loan credit facility scheduled to mature

on April 22, 2027, under which $100.0 million was drawn on the Effective Date (or the Exit Term Loans). The interest rate applicable to borrowings outstanding under the Exit Term Loan Credit Agreement was 9.11% at September 30, 2022.

Exit Debt

At ~~March 31,~~September 30, 2022, the carrying value of the Successor long-term debt (or Exit Debt), net of unamortized discount, premium and debt issuance costs, was comprised as follows (in thousands):


	Successor		Successor
	March 31,		September 30,
	2022		2022
Borrowings under Exit RCF	$	103,478	$	152,478
Exit Term Loans		99,072		99,151
First Lien Notes		83,788		83,911
Total Exit Debt, net	$	286,338	$	335,540

The borrower under the Exit RCF and Exit Term Loan Credit Agreement (or, collectively, the Credit Facilities) is Diamond Foreign Asset Company (or DFAC) (or the Borrower) and the co-issuers of the 9.00%/11.00%/13.00% Senior Secured First Lien PIK Toggle Notes due 2027 (or the First Lien Notes) are DFAC and Diamond Finance, LLC, a wholly-owned subsidiary of DFAC that was newly formed in connection with our emergence from ~~bankruptcy (or, together, the Issuers).~~bankruptcy. The Credit Facilities and the First Lien Notes are unconditionally guaranteed, on a joint and several basis, by the Borrower and certain of its direct and indirect subsidiaries (or, collectively with the Borrower, the Credit Parties and each, a Credit Party) and secured by senior priority liens on substantially all of the assets of, and the equity interests in, each Credit Party, including all rigs owned by the Company as of the Effective Date or acquired thereafter and certain assets related thereto, in each case, subject to certain exceptions and limitations described in the Credit Facilities and the indenture governing the First Lien Notes.

The Exit Revolving Credit Agreement obligates the Borrower and its restricted subsidiaries to comply with certain financial maintenance covenants as defined in the Exit Revolving Credit Agreement. The Exit Revolving Credit Agreement, Exit Term Loan Credit Agreement and the indenture governing the First Lien Notes contain negative covenants that limit, among other things, the Borrower’s ability and the ability of its restricted subsidiaries to: (i) incur, assume or guarantee additional indebtedness; (ii) create, incur or assume liens; (iii) make investments; (iv) merge or consolidate with or into any other person or undergo certain other fundamental changes; (v) transfer or sell assets; (vi) pay dividends or distributions on capital stock or redeem or repurchase capital stock; (vii) enter into transactions with certain affiliates; (viii) repay, redeem or amend certain indebtedness; (ix) sell stock of its subsidiaries; or (x) enter into certain burdensome agreements. These negative covenants are subject to a number of important limitations and exceptions.

Additionally, these agreements contain other covenants, representations and warranties and events of default that are customary for a financing of this type. At ~~March 31,~~September 30, 2022, we were in compliance with all covenants under the Exit Revolving Credit Agreement.

8. Commitments and Contingencies

Various claims have been filed against us in the ordinary course of business, including claims by offshore workers alleging personal injuries. With respect to each claim or exposure, we have made an assessment, in accordance with GAAP, of the probability that the resolution of the matter would ultimately result in a loss. When we determine that an unfavorable resolution of a matter is probable and such amount of loss can be determined, we record a liability for the amount of the estimated loss at the time that both of these criteria are met. Our management believes that we have recorded adequate accruals for any liabilities that may reasonably be expected to result from these claims.

Non-Income Tax and Related Claims. We have received assessments related to, or otherwise have exposure to, non-income tax items such as sales and-use tax, value-added tax, ad valorem tax, custom duties, and other similar taxes in various taxing jurisdictions. We have determined that wewe have a probable loss for certain of these taxes and the related penalties and interest and, accordingly, have recorded a $~~15.1~~13.9 m~~illion~~million and $13.7 million liability at ~~March~~

~~31,~~September 30, 2022 and December 31, 2021, respectively, in ~~"Other liabilities"~~“Other liabilities” in our unaudited Condensed

Consolidated Balance Sheets. We intend to defend these matters vigorously; however, the ultimate outcome of these assessments and exposures could result in additional taxes, interest and penalties for which the fully assessed amounts would have a material adverse effect on our financial condition, results of operations or cash flows.

Other Litigation. We have been named in various other claims, lawsuits or threatened actions that are incidental to the ordinary course of our business, including a claim by one of our customers in Brazil, Petróleo Brasileiro S.A. (or Petrobras), that it will seek to recover from its contractors, including us, any taxes, penalties, interest and fees that it must pay to the Brazilian tax authorities for our applicable portion of withholding taxes related to Petrobras’ charter agreements with its contractors. We intend to defend these matters vigorously; however, litigation is inherently unpredictable, and the ultimate outcome or effect of any claim, lawsuit or action cannot be predicted with certainty. As a result, there can be no assurance as to the ultimate outcome of any litigation matter. Any claims against us, whether meritorious or not, could cause us to incur significant costs and expenses and require significant amounts of management and operational time and resources. In the opinion of our management, no such pending or known threatened claims, actions or proceedings against us are expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Personal Injury Claims. Under our current insurance policies, we self-insure $1.0 million to $5.0 million per occurrence, depending on jurisdiction, with respect to personal injury claims not related to named windstorms in the U.S. Gulf of Mexico, which primarily result from Jones Act liability in the U.S. Gulf of Mexico. Depending on the nature, severity and frequency of claims that might arise during a policy year, if the aggregate level of claims exceed certain thresholds, we may self-insure up to $100.0 million for each subsequent occurrence. For personal injury claims arising due to named windstorms in the U.S. Gulf of Mexico, we self-insure $10.0 million for the first occurrence and, if the aggregate level of claims exceed certain thresholds, we self-insure up to $100.0 million for each subsequent occurrence, depending on the nature, severity and frequency of claims that might arise during the policy year.

The Jones Act is a federal law that permits seamen to seek compensation for certain injuries during the course of their employment on a vessel and governs the liability of vessel operators and marine employers for the work-related injury or death of an employee. We engage outside consultants to assist us in estimating our aggregate liability for personal injury claims based on our historical losses and utilizing various actuarial models. We allocate a portion of the aggregate liability to “Accrued liabilities” based on an estimate of claims expected to be paid within the next twelve months with the residual recorded as “Other liabilities.” At ~~March 31,~~September 30, 2022, our estimated liability for personal injury claims was $~~13.8~~17.0 million, of which $~~6.5~~4.0 million and $~~7.4~~13.0 m~~illion~~million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Successor unaudited Condensed Consolidated Balance Sheets. At December 31, 2021, our estimated liability for personal injury claims was $13.5 million, of which $5.4 million and $8.1 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our unaudited Condensed Consolidated Balance Sheets. The eventual settlement or adjudication of these claims could differ materially from our estimated amounts due to uncertainties such as:

•

the severity and volume of personal injuries claimed;

•

the unpredictability of legal jurisdictions where the claims will ultimately be litigated;

•

inconsistent court decisions; and

•

the risks and lack of predictability inherent in personal injury litigation.

Purchase Obligations. At ~~March 31,~~September 30, 2022, we had 0no purchase obligations for major rig upgrades or any other significant obligations, except for those related to our direct rig operations, which arise during the normal course of business.

Services Agreement. In February 2016, we entered into a ten-year agreement with a subsidiary of Baker Hughes Company (formerly named Baker Hughes, a GE company) ~~(or Baker~~ ~~Hughes)~~ to provide services with respect to certain blowout preventer and related well control equipment (or Well Control Equipment) on our drillships. Such services include management of maintenance, certification and reliability with respect to such equipment. Future commitments under the contractual services agreements are estimated to be approximately $24.0 million per year or an estimated $~~137.2~~118.7 million in the aggregate over the remaining term of the agreements.

In addition, we lease Well Control Equipment for our drillships under ten-year finance leases.

Letters of Credit and Other. WeWe were contingently liable as of ~~March 31,~~September 30, 2022 in ~~the amount of~~connection with approximately $~~26.3~~18.0 million ~~under~~in certain tax, ~~performance,~~ supersedeas, VAT and customs bonds ~~and letters~~that have been issued on our behalf.

The letter of ~~credit. Agreements relating to approximately $20.2~~ ~~million of customs, tax, VAT~~credit collateralizing these bonds was issued under the Exit RCF and ~~supersedeas bonds can require collateral at any time, while the remaining agreements, aggregating $6.1~~ ~~million,~~ cannot require collateral except in events of default. ~~At March~~

9. Income Taxes

We currently claim benefits provided under an existing tax treaty between the United Kingdom and the Republic of Senegal that allows us to claim a reduced rate of income tax withholding with respect to certain bareboat charter revenue from Senegalese sources. On May 10, 2022, The Republic of Senegal deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (or the MLI), which will alter certain provisions of the existing United Kingdom-Senegal Tax Treaty, effective for periods beginning on or after January 1, 2023. We are currently analyzing the impact that the Republic of Senegal’s ratification of the MLI will have on our tax position and, consequently, our consolidated financial position, results of operations and cash flows.

On August 16, 2022, the United States (or U.S.) enacted the Inflation Reduction Act (or IRA). Among other provisions, IRA (i) imposes a 15% corporate alternative minimum tax (or Corporate AMT) for tax years beginning after December 31, 2022, (ii) imposes a 1% excise tax on corporate stock repurchases after December 31, 2022, and (iii) provides tax incentives to promote various energy efficient initiatives. We are evaluating the potential impact of the Corporate AMT on our current income tax expense and income taxes payable; however, we do not currently believe that this will have a material impact on our income taxes payable in the 2023 tax year.

10. Earnings (Loss) Per Share

We compute basic earnings (loss) per share by dividing net income (loss) available to holders of our common stock by the weighted-average number of shares of our common stock outstanding during the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue our common stock (common stock equivalents) were exercised or converted into common stock. Basic and diluted earnings per share (or EPS) for the Successor periods including the three-month and nine-month periods ended September 30, 2022 and the period from April 24, 2021 through September 30, 2021 and the Predecessor period from January 1, 2021 through April 23 2021 was calculated in accordance with the treasury stock method, and includes all potentially dilutive stock equivalents, including warrants, restricted stock awards, restricted stock unit awards and performance stock unit awards.

For periods in which a net loss available to holders of our common stock exists, no amounts are allocated to non-vested share awards, as the inclusion of such amounts would be antidilutive.

A reconciliation of the numerators and denominators of our basic and diluted EPS computations are summarized as follows (in thousands).


	Successor
	Three Months Ended September 30,
	2022		2021
Net income (loss) – basic and diluted numerator	$	5,510	$	(5,182	)
Weighted average shares – basic (denominator):		100,875		100,075
Dilutive effect of stock-based awards		1,398		—
Weighted average shares including conversions – diluted (denominator)		102,273		100,075


	Successor						Predecessor
				Period from			Period from
	Nine Months			April 24, 2021			January 1, 2021
	Ended			through			through
	September 30, 2022			September 30, 2021			April 23, 2021
Net loss – basic and diluted numerator	$	(50,773	)	$	(52,475	)	$	(1,961,989	)
Weighted average shares – basic (denominator):		100,356			100,068			138,054
Dilutive effect of stock-based awards		—			—			—
Weighted average shares including conversions – diluted (denominator)		100,356			100,068			138,054

As of September 30 2022, we had ~~made aggregate collateral deposits~~7,530,233 warrants outstanding (or Warrants) to purchase shares of our common stock that were exercisable for one share of common stock per Warrant at an exercise price of $~~19.0~~29.22. The Warrants are exercisable until they expire on April 23, 2026. The presumed exercise of these Warrants into shares of our common stock would have an antidilutive effect and have been excluded from the computation of EPS for all Successor periods presented.

The computation of EPS for the Successor nine-month period ended September 30, 2022 and the period from April 24, 2021 through September 30, 2021, excludes non-vested stock-based awards of 3,768,207 ~~mil~~shares and ~~lion with respect to other bonds and letters~~2,222,116 shares, respectively, as the inclusion of ~~credit. These deposits are recorded in “Prepaid expenses and other current assets” in our Successor unaudited Condensed Consolidated Balance Sheet at March 31, 2022.~~such would have been antidilutive for the periods.

9.11. Segments and Geographic Area Analysis

We provide contract drilling services with different types of offshore drilling rigs and also provide such services in many geographic locations. However, we have aggregated these operations into 1one reportable segment based on the similarity of economic characteristics due to the nature of the revenue-earning process as it relates to the offshore drilling industry over the operating lives of our drilling rigs and other qualitative factors such as (i) the nature of services provided (contract drilling), (ii) similarity in operations (interchangeable rig crews and shared management and marketing, engineering, marine and maintenance support), (iii) similar regulatory environment (depending on customer and/or location), and (iv) similar contractual arrangements with customers.

Our drilling rigs are highly mobile and may be moved to other markets throughout the world in response to market conditions or customer needs. At ~~March 31,~~September 30, 2022, our active drilling rigs were located offshore four countries in addition to the ~~United States.~~U.S. Revenues by geographic area are presented by attributing revenues to the individual country where the services were ~~performed.~~performed during the periods presented, which may not be indicative of where the rigs are currently located.

The following tables provide information about disaggregated revenue by country (in thousands):

Successor

Three Months Ended March 31, 2022

Total
Contract
Drilling
Revenues

Revenues
Related to
Reimbursable
Expenses

Total

United States

$
76,283

$
26,239

$
102,522

Senegal

27,116

1,746

28,862

Brazil

19,266

—

19,266

Australia

15,697

2,604

18,301

Myanmar

9,584

3,970

13,554

United Kingdom

2,306

1,428

3,734

Total

$
150,252

$
35,987

$
186,239


	Successor
	Three Months Ended September 30, 2022
	Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total
United States	$	70,970	$	26,917	$	97,887
Senegal		46,274		2,603		48,877
Australia		24,616		4,049		28,665
United Kingdom		26,111		2,520		28,631
Brazil		21,564		—		21,564
Myanmar		326		123		449
Total	$	189,861	$	36,212	$	226,073


	Successor
	Nine Months Ended September 30, 2022
	Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total
United States	$	226,425	$	69,121	$	295,546
Senegal		100,094		8,451		108,545
Australia		72,475		10,095		82,570
United Kingdom		47,506		6,407		53,913
Brazil		60,583		—		60,583
Myanmar		9,909		6,948		16,857
Total	$	516,992	$	101,022	$	618,014


	Predecessor						Successor
	Three Months Ended March 31, 2021						Three Months Ended September 30, 2021
	Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total		Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total
United States	$	74,046	$	5,993	$	80,039	$	71,954	$	17,075	$	89,029
Senegal								23,223		6,679		29,902
Australia								34,671		3,530		38,201
United Kingdom								22,271		1,576		23,847
Brazil		3,421		—		3,421		20,511		—		20,511
Australia		11,673		3,154		14,827
Myanmar		9,322		1,167		10,489		10,526		1,861		12,387
United Kingdom		24,091		1,950		26,041
Total	$	122,553	$	12,264	$	134,817	$	183,156	$	30,721	$	213,877


	Successor
	Period from April 24, 2021 through September 30, 2021
	Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total
United States	$	122,732	$	25,806	$	148,538
Senegal		23,223		6,671		29,894
Australia		58,620		8,810		67,430
United Kingdom		35,186		2,529		37,715
Brazil		23,735		—		23,735
Myanmar		17,693		3,783		21,476
Total	$	281,189	$	47,599	$	328,788


	Predecessor
	Period from January 1, 2021 through April 23, 2021
	Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total
United States	$	93,215	$	7,048	$	100,263
Australia		17,031		4,697		21,728
United Kingdom		27,967		2,300		30,267
Brazil		3,421		—		3,421
Myanmar		11,730		1,970		13,700
Total	$	153,364	$	16,015	$	169,379

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements (including the notes thereto) included in Item 1 of Part I of this report, Item 1A, “Risk Factors” included in Part II of this report and Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, as amended by Amendment No. 1 on Form 10-K/A. References to “Diamond Offshore,” “Company,” “we,” “us” or “our” mean Diamond Offshore Drilling, Inc., a Delaware corporation, and its subsidiaries.

We provide contract drilling services to the energy industry around the globe with a fleet of 1514 floater rigs (four owned drillships, eight semisubmersibles and ~~three~~two managed rigs). See “– Market Overview.”

Upon emergence from bankruptcy on April 23, 2021 (or the Effective Date), we met the criteria for and were required to adopt fresh start accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic No. 852 – Reorganizations. As a result of the application of fresh start accounting and the effects of the implementation of our restructuring plan, the financial statements for the period after April 23, 2021 will not be comparable with the financial statements prior to and including April 23, 2021. References to “Successor” refer to the Company and its financial position and results of operations after the Effective Date (including December 31, 2021, ~~March 31,~~September 30, 2022, the three-month and nine-month periods ended September 30, 2022, and the ~~three-month~~ period ~~ended March 31, 2022)~~from April 24, 2021 through September 30, 2021). References to “Predecessor” refer to the Company and its financial position and results of operations on or before the Effective Date (including the ~~three-month~~ period ~~ended March 31,~~from January 1, 2021 through April 23, 2021). See Note 1 “General Information” to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report.

We received approval in the first quarter of 2022 to relist our unrestricted common stock on the New York Stock Exchange (or NYSE) under the ticker symbol "DO." Our common stock commenced trading on the NYSE on March 30, 2022.

InEnergy industry fundamentals continue to support the ~~first quarter~~evolution of ~~2022,~~a global growth cycle in our business. The strong commodity ~~prices continued~~price environment continues to ~~improve, supporting global~~positively impact the demand for offshore drilling ~~services.~~services as the focus on energy security and recent OPEC+ actions interact with tightening commodity supply. Brent oil prices ~~in the first quarter of 2022~~ averaged approximately ~~$100 per barrel compared to approximately $80~~$96 per barrel in the ~~fourth~~third quarter of ~~2021. Some third-party experts have predicted~~2022, down slightly from the previous quarter. Full year 2022 Brent oil prices are anticipated to average approximately $102 per barrel, which is approximately 44% higher compared to the 2021 average according to the October 2022 Short Term Energy Outlook report by the U.S. Energy Information Administration (or EIA). In addition, the EIA expects full year 2022 natural gas prices in the U.S. to be approximately 76% higher than the 2021 average. These elevated commodity prices continue to generate significant cash flow for many of our potential customers, and we anticipate that ~~improvement~~further capital investments by oil and gas companies will be required to mitigate the cumulative impact from the prolonged period of underinvestment in ~~commodity pricing will bolster capital~~the oil and gas industry.

Demand for floating offshore drilling rigs remains strong, with utilization averaging over 80% for the fourth consecutive quarter and exceeding pre-pandemic levels, based on industry reports. The number of tendering opportunities and forecasts from certain industry analysts indicate that spending ~~by over 35%~~for offshore drilling services is likely to continue to increase in 2023 as compared to 2022. These analysts predict that the total offshore greenfield project commitments will be approximately $138 billion in 2023 compared to $72 billion in 2022, ~~although there can~~representing a 92% increase year over year. Much of this demand growth is projected to be ~~no assurance~~driven by growth in South America and the United States, where we currently have operations. Additional activity is expected in the North Sea sector as energy security concerns and supportive regulatory action may encourage additional spending by our potential customers. As dayrates continue to ~~whether~~improve, however, it may become economic for drillers to reactivate idle rig capacity or deliver newbuilds, limiting market upside or potentially placing downward pressure on utilization and ~~such~~dayrates.

Despite the upward trends in our general market, supply chain constraints and inflationary pressures persist, driving some increases in our operating expense; however, these same forces may ~~occur. In addition~~constrain rig supply in the near term as they could delay the timing and increase the cost of idle capacity returning to ~~commodity prices,~~the market.

Customer capital allocation decisions will continue to affect demand for our services. Investment mixes over time, coupled with energy demand and regulatory measures, could lead to reduced demand for offshore drilling appears to be supported by geopolitical events, such as Russia’s invasion of Ukraine, the related economic sanctions imposed on Russia and a renewed interest in energy security across Europe and the United States.

Coupled with increased demand for floating drilling rigs, supply has continued to wane from historical highs, albeit at a slower pace than previously experienced. Offshore drilling contractors continue to remove less capable, less efficient, rigs from the market while at the same time reactivating certain stacked rigs that are awarded contracts. In addition, as dayrates continue to improve, the likelihood that idle capacity stranded in shipyards around the world may enter the market increases materially.

Although it appears that demand for floaters continues to grow, we remain cautious as headwinds to a recovery continue to loom. Costs to operate our business have continued to see upward inflationary pressure. From raw materials such as steel to both offshore and onshore labor, the industry continues to grapple with higher than previously experienced cost inflation. The majority of these costs cannot be passed on to our clients as we are in fixed dayrate contracts that have little to no room for adjustment with regard to cost inflation. Headwinds are also present from client capital allocation choices which continue to focus on renewable energy sources. These investments could lead to a degradation in the demand profile for our services in the long ~~term as offshore hydrocarbons are replaced with alternative forms of energy.~~term. Notwithstanding ~~these challenges,~~this possibility, global energy demand continues to ~~improve,~~grow while energy supply remains constrained, and we expect increased investment in both traditional and renewable sources of energy to be ~~needed~~required for years to ~~meet the world’s energy needs,~~come, much of which we expect to be ~~produced offshore.~~invested in finding and producing hydrocarbons in the offshore segment.

See “– Contract Drilling Backlog” for future commitments of our rigs during the remainder of 2022 through ~~2024.~~2025.

We believe that our contract drilling backlog provides a useful indicator of our future revenue-earning opportunities. Our contract drilling backlog, as presented below, includes only firm commitments (typically represented by signed contracts) and is calculated by multiplying the contracted operating dayrate by the firm contract period. The contract period is based on the number of stated days for fixed-term contracts or an estimated duration (in days) for contracts based on a fixed number of wells. Our calculation also assumes full utilization of our drilling equipment for the contract period (excluding scheduled shipyard and survey days); however, the amount of actual revenue earned and the actual periods during which revenues are earned may be different than the amounts and periods shown in the tables below due to various factors. Our utilization rates, which generally have ~~approached~~been in the range of 92-98% during contracted periods, can be adversely impacted ~~by downtime~~ due to various operating factors including unscheduled repairs and maintenance, weather conditions, ~~and~~the effects of COVID-19 and ~~related delays.~~other factors. Contract drilling backlog excludes revenues for mobilization, demobilization, contract preparation and customer reimbursables. ~~No revenue~~Revenue is generally not earned during periods of downtime for regulatory ~~surveys.~~surveys; however, certain contracts may provide for reduced revenue during the survey period. Changes in our contract drilling backlog between periods are generally a function of the performance of work on term contracts, as well as the extension or modification of existing term contracts and the execution of additional contracts. In addition, under certain circumstances, our customers may seek to terminate or renegotiate our contracts, which could adversely affect our reported backlog.

The backlog information presented below does not, nor is it intended to, align with the disclosures ~~related to~~regarding revenue expected to be recognized in the future related to unsatisfied performance obligations, which are presented in Note 2 “Revenue from Contracts with Customers” to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report. Contract drilling backlog includes only future dayrate revenue as described above, while the disclosure in Note 2 “Revenue from Contracts with Customers” excludes dayrate revenue and reflects expected future revenue for mobilization, demobilization and capital modifications to our rigs, which are related to non-distinct promises within our signed contracts. See “– Important Factors That May Impact Our Operating Results, Financial Condition or Cash Flows.”

The following table reflects our contract drilling backlog as of ~~April~~October 1, 2022 (and does not include any contracts signed after ~~April~~October 1, 2022 but prior to the date of this report), January 1, 2022 (the date reported in our Annual Report on Form 10-K for the year ended December 31, 2021), and ~~April~~October 1, 2021 (the date reported in our Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2021) (in millions).

The following table reflects the amount of revenue related to our contract drilling backlog by year as of ~~April~~October 1, 2022 (in millions).

The following table reflects the percentage of rig days per year committed as of ~~April~~October 1, 2022. The percentage of rig days committed is calculated as the ratio of total days committed under contracts, as well as scheduled shipyard, survey and mobilization days for all rigs in our fleet, to total available days (number of rigs, including cold-stacked rigs, multiplied by the number of days in a particular year).

Important Factors That May Impact Our Operating Results, Financial Condition or Cash Flows

COVID-19 Pandemic. The COVID-19 outbreak and efforts to mitigate the spread of the virus continue to adversely impact our business as a result of risks to the safety of our personnel, as well as travel restrictions that may continue to arise, challenging the ability to move personnel, equipment, supplies and service personnel ~~to-and-from~~to and from our drilling rigs. In response, we have adopted COVID-19 vaccination and testing requirements, as well as other health protocols designed to ensure the safety of our offshore personnel based on the regions in which our rigs are operating. In the current environment, we have been able to modify and/or eliminate ~~some~~many of our initial protocols implemented ~~early~~ after the onset of the pandemic. We incurred incremental costs of approximately ~~$2.4~~$0.4 million and ~~$3.2~~$1.6 million related to the COVID-19 pandemic during the Successor quarters ended ~~March 31,~~September 30, 2022 and ~~December 31, 2021~~,June 30, 2022, respectively. We expect to incur similar types of costs during the remainder of 2022 but cannot predict the future financial impact of our response to the COVID-19 pandemic ~~nor~~or its duration or potential effects in this fluid environment. As such, costs realized in the future may be more than projected, perhaps by a material amount.

Regulatory Surveys and Planned Downtime. We perform certain regulatory inspections, which we refer to as a special survey, that are due every five years for most of our rigs and an intermediate survey, which is performed every two-and-one-half years, for our North Sea rigs. Our operating income is negatively impacted when we perform these required regulatory surveys due to planned downtime during the inspection period. Our operating income is also reduced by planned downtime for upgrades, contract preparation and mobilization of rigs; however, in some cases, we may be compensated for all or a portion of this downtime. During the ~~remainder~~last quarter of 2022, we expect to ~~spend~~incur approximately ~~146~~154 days of planned downtime, i~~ncluding~~including approximately 6462 days for ~~mobilization~~shipyard repairs and ~~contract preparation activities~~enhancements for the Ocean ~~BlackHawk~~Endeavor ,and approximately 3992 days ~~for an intermediate survey and anchor winch repairs for~~in connection with the ~~Ocean Patriot,~~ ~~approximately 30 days for the demobilization~~reactivation of the Ocean ~~Onyx~~GreatWhite ~~and~~. During 2023, we expect to incur approximately 13177 days of planned downtime, including approximately 109 days for ~~mobilizations between contracts~~a maintenance project to meet regulatory requirements for the Ocean Apex., approximately 45 days for the ~~Subject to ongoing assessments,~~Ocean GreatWhite reactivation and contract preparation activities and approximately 23 days for the completion of the Ocean Endeavor ~~may require an additional out-of-service period~~shipyard work that commenced in ~~the latter part of 2022 for further repairs and enhancements.~~2022. We can provide no assurance as to the exact timing and/or duration of downtime associated with regulatory inspections, repairs, contract preparation, rig mobilizations and other shipyard projects. See “ – Contract Drilling Backlog.”

Physical Damage and Marine Liability Insurance. We are self-insured for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico, as defined by the relevant insurance policy. If a named windstorm in the U.S. Gulf of Mexico causes significant damage to our rigs or equipment, it could have a material adverse effect on our financial condition, results of operations and cash flows. Under our current insurance policy, we carry physical damage insurance for certain losses other than those caused by named windstorms in the U.S. Gulf of Mexico for which our deductible for physical damage is $10.0 million per occurrence. In addition, we currently carry loss-of-hire insurance on certain rigs to cover lost cash flow when a rig is damaged (other than when caused by named windstorms in the U.S. Gulf of Mexico) but have not purchased loss-of-hire insurance for our entire fleet.

In addition, we carry marine liability insurance covering certain legal liabilities, including coverage for certain personal injury claims, collisions, and wreck removals, and generally covering liabilities arising out of or relating to

pollution and/or environmental risk. We believe that the policy limit for our marine liability insurance is within the range that is customary for companies of our size in the offshore drilling industry and is appropriate for our business. Under these marine liability policies, we self-insure $1.0 million to $5.0 million per occurrence, depending on jurisdiction, but up to $25.0 million for liabilities arising out of named windstorms in the U.S. Gulf of Mexico. Depending on the nature, severity, and frequency of claims that might arise during the policy year, if the aggregate level of claims ~~exceed~~exceeds certain thresholds, we may self-insure up to $100.0 million for each subsequent occurrence.

Our significant accounting policies are discussed in Note 1 “General Information” of our notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

We have elected to present a comparison of our results of operations for the current quarter with that of the immediately preceding quarter, as permitted under Item 303(c)(2)(ii) of Regulation ~~S-K~~.S-K. We believe this comparison is more useful in identifying business trends and provides a more meaningful analysis of our business as our results are largely driven by market changes rather than seasonal business activity. We continue to present the required comparison of current year-to-date results with the same period of the prior year.

Our operating results for contract drilling services are dependent on three primary metrics or key performance indicators: revenue-earning (or R-E) days, rig utilization and average daily revenue. We believe that R-E days provide a comparative measurement of the activity level of our fleet, rig utilization is an indicator of our ability to secure work for and the operational efficiency of our fleet and average daily revenue provides a comparative measure for our revenue-earning performance. We utilize these performance indicators in the review of our business and operating results and believe these are useful metrics for investors to utilize in evaluating our performance. The tables presented below include these three key performance indicators and other comparative data relating to our revenues and operating expenses for the respective periods (in thousands, except days, daily amounts and percentages) for the Successor nine-month period ended September 30, 2022, three-month periods ended ~~March 31,~~September 30, 2022 and ~~December 31,~~June 30, 2022 and the period from April 24, 2021 through September 30, 2021 and the Predecessor ~~three-month~~ period ~~ended March 31,~~from January 1, 2021 through April 23, 2021.

Results for the ~~three-month periods ended March 31,~~Three-Month Periods Ended September 30, 2022 ~~December 31, 2021~~ and ~~March 31, 2021.~~June 30, 2022


	Successor						Predecessor			Successor
	Three Months Ended March 31,			Three Months Ended December 31,			Three Months Ended March 31,			Three Months Ended September 30,			Three Months Ended June 30,
	2022			2021			2021			2022			2022
REVENUE-EARNING DAYS (1)		668			878			580			809			776
UTILIZATION (2)		53	%		68	%		54	%		68	%		57	%
AVERAGE DAILY REVENUE (3)	$	224,900		$	209,700		$	211,300		$	234,800		$	227,800

CONTRACT DRILLING REVENUE	$	150,252		$	184,139		$	122,553		$	189,861		$	176,879
REVENUE RELATED TO REIMBURSABLE EXPENSES		35,987			43,139			12,264			36,212			28,823
TOTAL REVENUES	$	186,239		$	227,278		$	134,817		$	226,073		$	205,702
CONTRACT DRILLING EXPENSE, EXCLUDING DEPRECIATION	$	144,902		$	138,647		$	141,573		$	155,567		$	142,150
REIMBURSABLE EXPENSES	$	35,613		$	42,640		$	11,837		$	35,765		$	28,554
OPERATING INCOME (LOSS)
Contract drilling services, net	$	5,350		$	45,492		$	(19,020	)	$	34,294		$	34,729
Reimbursable expenses, net		374			499			427			447			269
Depreciation		(26,952	)		(24,618	)		(74,626	)		(26,069	)		(25,693	)
General and administrative expense		(16,732	)		(16,301	)		(12,366	)		(16,320	)		(19,753	)
Impairment of assets		—			(132,449	)		(197,027	)
Gain on disposition of assets		4,044			81			5,401			73			685
Total Operating Loss	$	(33,916	)	$	(127,296	)	$	(297,211	)	$	(7,575	)	$	(9,763	)
Other income (expense):
Interest income		1			1			30			11			—
Interest expense, net of amounts capitalized		(8,325	)		(9,306	)		(32,562	)		(10,364	)		(10,103	)
Foreign currency transaction gain (loss)		(2,129	)		(1,256	)		625
Reorganization items, net		—			(635	)		(35,252	)
Foreign currency transaction gain											237			1,607
Other, net		1,362			60			489			172			(47	)
Loss before income tax benefit		(43,007	)		(138,432	)		(363,881	)		(17,519	)		(18,306	)
Income tax benefit		8,653			13,564			2,200
NET LOSS	$	(34,354	)	$	(124,868	)	$	(361,681	)
Income tax benefit (expense)											23,029			(3,623	)
NET INCOME (LOSS)										$	5,510		$	(21,929	)

Three Months Ended ~~March 31,~~September 30, 2022 Compared to Three Months Ended ~~December 31, 2021~~June 30, 2022

Contract Drilling Revenue. ~~Comparing the two quarters, contract~~Contract drilling revenue ~~decreased $33.9~~increased $13.0 million during the three months ended September 30, 2022 compared to the three months ended June 30, 2022, primarily due to ~~210 fewer~~a 33-day increase in R-E days ($~~44.1~~7.4 million), ~~partially offset by~~combined with the effect of higher average daily revenue earned ($~~10.2~~5.6 million). The ~~reduction~~increase in R-E days ~~is a result of~~reflected incremental ~~downtime for shipyard projects~~operating days for the Ocean ~~Endeavor~~BlackHawk, Ocean Apex and Ocean Patriot (~~138 fewer~~99 R-E days), all of which ~~were both out of service~~operated under contract for ~~repairs, including a special survey for the~~ ~~Ocean Patriot~~,~~during the first quarter of 2022. R-E days for the 2022 period also reflect incremental non-productive time for the~~ ~~Ocean Apex~~ ~~(88 fewer R-E days), which was warm stacked, awaiting contract commencement, and other net incremental non-productive time (14 days). The~~ ~~West Auriga, one~~most of the ~~rigs managed under the MMSA, commenced a one-year contract in the GOM in March 2022 (30 R-E days). Higher average daily revenue earned in the first~~third quarter of 2022, compared to being warm stacked, in shipyard or mobilizing between contracts during the ~~fourth~~second quarter and fewer downtime days for repairs (14 incremental R-E days), primarily for the Auriga. The third quarter 2022 increase in R-E days was partially offset by fewer operating days for the Ocean Onyx, which completed its contract in mid-July 2022 and is warm stacked in Australia as of the day of this report (80 fewer days).

Average daily revenue earned during the third quarter of ~~2021, is~~2022 increased primarily due to ~~the operation of the managed rig, combined with~~ a ~~performance bonus~~higher dayrate earned by ~~one~~the Ocean BlackHawk operating in Senegal, compared to a lower dayrate earned while contracted in the Gulf of ~~our owned drillships~~Mexico during the second quarter of 2022. In addition, average daily revenue was favorably impacted by a higher dayrate earned by the Ocean Patriot as a result of a contract extension that commenced in the third quarter of 2022.

Revenue Related to Reimbursable Expenses. During the ~~first~~third quarter of 2022, ~~and fourth quarter of 2021,~~ we recognized gross reimbursable revenue and expenses of ~~$23.2~~$36.2 million, including $23.4 million earned under the MMSA. Gross reimbursable revenue and expenses for the second quarter of 2022 were $28.8 million and ~~$25.1~~included $11.6 million ~~respectively, pursuant to~~earned under the MMSA.

Contract Drilling Expense, Excluding Depreciation. Contract drilling expense, excluding depreciation increased ~~$6.3~~$13.4 million during the three months ended September 30, 2022, compared to the three months ended June 30, 2022. The increase in contract drilling expense in the third quarter of 2022 was primarily attributable to higher costs associated with operation of the Ocean BlackHawk in Senegal ($9.5 million), incremental reactivation and mobilization costs for the Ocean GreatWhite in connection with its upcoming contract in 2023 ($2.3 million) and other costs ($1.6 million).

General and Administrative Expense. General and administrative expense for the third quarter of 2022 decreased $3.4 million compared to the second quarter of 2022, primarily due to the recognition of compensation expense in the second quarter of 2022 associated with the vesting of certain performance-based restricted stock awards granted in May 2021. Vesting of these awards was contingent upon the occurrence of certain events that were not deemed probable at the time of the award, and, consequently, no expense related to these awards was recognized until the second quarter of 2022 when certain of the market conditions were satisfied.

Income Tax Benefit. We estimate our annual effective tax rate (or AETR) for continuing operations in recording our interim quarterly income tax provision considering the various jurisdictions in which we operate. Discrete tax adjustments are excluded from the computation of the AETR and recorded in the quarter in which they occur.

We recorded a net income tax benefit of $23.0 million (131.45% effective tax rate) for the three months ended September 30, 2022. For the three months ended June 30, 2022, we recorded net income tax expense of $3.6 million (negative 19.8% effective tax rate). The higher effective tax rate for the third quarter of 2022 reflects changes in our domestic and international jurisdictional mix of estimated pre-tax income and losses for the period and the fact that we have not recognized an income tax benefit for losses in certain jurisdictions due to a valuation allowance, while recognizing income tax expense for jurisdictions with forecasted pre-tax income. Additionally, the variance in the effective tax rate reflects a $4.1 million benefit recognized in the third quarter of 2022 for remeasurement of unrecognized tax benefits due to expiring statutes of limitation and a $3.4 million benefit recognized in the third quarter in respect to both current taxes and the release of a valuation allowance on losses related to our U.S. operations.

Results for the Successor Nine-Month Period Ended September 30, 2022 and the Period from April 24, 2021 through September 30, 2021 and for the Predecessor Period from January 1, 2021 through April 23, 2021

Nine Months Ended September30, 2022 (Successor) Compared to the Period from April 24, 2021 through September 30, 2021 (Successor) and the Period from January 1, 2021 through April 23, 2021 (Predecessor)

Contract Drilling Revenue. During the Successor nine-month period ended September 30, 2022,we earned contract drilling revenue of $517.0 million attributable to 2,253 R-E days and average daily revenue of $229,400. Total utilization for the period was 65%, reflecting downtime for the Ocean Endeavor and Ocean Patriot for repairs and inspections (200 days), planned downtime related to contract preparation activities for the Ocean Apex and Ocean BlackHawk (176 days) and non-productive time associated with four warm- or cold- stacked rigs (818 days).

The increase in average daily revenue for the Successor nine-month period ended September 30, 2022, compared to the Successor period from April 24, 2021 to September 30, 2021, was primarily due to higher recognition of capital upgrade revenue related to managed pressure drilling equipment for the Ocean BlackLion and the impact of the Ocean Onyx, Ocean Patriot and Ocean BlackHawk operating at higher dayrates during the first ~~quarter~~nine months of 2022 compared to rates earned during the ~~fourth~~Successor period in 2021. The Ocean BlackRhino completed pre-contract commencement work in June 2021 and began drilling operations in Senegal during the third quarter of 2021.

During the Successor period from April 24, 2021 to September 30, 2021, we earned contract drilling revenue of $281.2 million attributable to 1,372 R-E days and average daily revenue of $205,000. Total utilization for the period

was 71%, reflecting ~~higher repair, maintenance and mobilization costs ($9.0 million), primarily~~downtime for the Ocean ~~Endeavor~~BlackRhino and Ocean ~~Patriot~~Courage for contract preparation work (132 days) and the Ocean Endeavor, Ocean Patriot and Ocean Onyx for repairs, inspection and mobilization (65 days), ~~and costs~~in addition to the non-productive time associated with warm- or cold- stacked rigs (320 days). The decline in average daily revenue reflects reduced amortization of deferred revenue due to the ~~operations~~write off of such balances at the Effective Date in connection with fresh start accounting. Prior to fresh start accounting, such amounts were amortized into income over the respective contract terms.

During the Predecessor period from January 1, 2021 through April 23, 2021, we earned contract drilling revenue of $153.4 million attributable to 724 R-E days and average daily revenue of $211,800. Total utilization for the period was 53%. Six of our then contracted rigs operated at nearly full utilization for the period, while three rigs were preparing for upcoming contracts throughout most of the period. The ~~West Auriga~~Ocean Onyx commenced a new contract in February 2021 after its reactivation and contributed 61 R-E days to the period.

Contract Drilling Expense, Excluding Depreciation. During the Successor nine-month period ended September 30, 2022 (a 273-day period), contract drilling expense, excluding depreciation totaled $442.6 million, primarily comprised of payroll and benefits cost ($~~6.7~~199.7 million)~~. The increased expense was~~, repairs, maintenance and inspection ($126.9 million), equipment rentals ($41.1 million), shorebase cost, insurance and overhead ($60.0 million), moving cost ($11.3 million) and catering ($15.2 million), partially offset by ~~lower~~a reduction in other costs ($11.6 million). Increased payroll and benefits costs are partially attributable to a rig retention bonus implemented for certain of our drilling rigs in early 2022.

During the Successor period from April 24, 2021 through September 30, 2021 (a 160-day period), contract drilling expense, excluding depreciation totaled $225.9 million, comprised primarily of payroll and employees cost ($100.2 million), repairs, maintenance and inspection ($64.5 million), equipment ~~rental~~rentals ($17.3 million), shorebase cost, insurance and overhead ($28.4 million), catering ($7.6 million), moving cost ($2.9 million) and other ($5.0 million).

During the Predecessor period from January 1, 2021 through April 23, 2021 (a 113-day period), contract drilling expense, excluding depreciation totaled $181.6 million and was primarily comprised of payroll and employees cost ($73.5 million), repairs, maintenance and inspection ($39.6 million), equipment rentals ($24.4 million), shorebase cost and overhead ($20.8 million), moving cost ($12.8 million) and other ($10.5 million).

Depreciation Expense. Depreciation expense for the Successor nine-month period ended September 30, 2022 and the period from April 24, 2021 through September 30, 2021 and the Predecessor period from January 1, 2021 through April 23, 2021 was $78.7 million, $43.9 million and $92.8 million, respectively. The decline in depreciation expense since the Effective Date was primarily due to the reduction in depreciable value of our ~~owned drillships~~rigs and equipment as a result of the fair value remeasurement of rigs and equipment in connection with the application of fresh start accounting and asset impairments recognized in the fourth quarter of 2021.

General and Administrative Expense. General and administrative expense for the Successor nine-month period ended September 30, 2022 and the period from April 24, 2021 through September 30, 2021 and Predecessor period from January 1, 2021 through April 23, 2021 was $52.8 million, $37.2 million and $15.0 million, respectively. Expenses incurred during the Successor nine months ended September 30, 2022 included payroll and benefits ($~~6.8~~29.4 million), legal and professional fees ($16.5 million), office expenses ($6.0 million) and ~~a net reduction in shorebase support~~other ($0.8 million). For the Successor period from April 24, 2021 through September 30, 2021, general and administrative expense included payroll and benefits ($21.7 million), professional and legal fees ($11.8 million), office expenses ($3.4 million) and other ($0.3 million). Expenses incurred during the Predecessor period from January 1, 2021 through April 23, 2021 included payroll and benefits costs ($~~2.6~~9.9 million), professional and legal fees ($3.6 million) and other ($1.5 million). Payroll and benefits costs for the Successor nine-month period ended September 30, 2022 included $5.4 million in incremental compensation expense associated with certain performance-based restricted stock awards granted in 2021.

Impairment of Assets.During the ~~fourth quarter of~~Predecessor period from January 1, 2021 through April 23, 2021, we recognized an impairment charge of ~~$132.4~~$197.0 million to write down the carrying value of ~~two semisubmersible~~one of our rigs with indicators of impairment due to ~~their estimated fair value. No impairment charge was recognized~~concerns at that time over future opportunities for the rig. See Note 3 “Impairment of Assets” to our unaudited condensed consolidated financial statements included in ~~the first quarter~~Item 1 of ~~2022.~~Part I of this report.

Gain on Disposition of Assets. During the first quarter of 2022, we sold the Ocean Valor for aggregate proceeds of approximately $6.6 million and recognized a net gain on the transaction of $4.2 million.

~~Income Tax Benefit~~. We estimate our annual effective tax rate (or AETR) for continuing operations in recording our interim quarterly income tax provision taking into account the various jurisdictions in which we operate. Discrete tax adjustments are excluded from the computation of the AETR and recorded in the quarter in which they occur.

We recorded a net income tax benefit of $8.7 million (20.1% effective tax rate) for the quarter ended March 31, 2022, inclusive of a $3.6 million benefit reflecting remeasurement of unrecognized tax benefits due to strengthening of the U.S. dollar relative to foreign currencies. For the three months ended December 31, 2021, we recorded a net income tax benefit of $13.6 million (9.8% effective tax rate). The higher effective tax rate for the quarter ended March 31, 2022 reflects our domestic and international jurisdictional mix of estimated pre-tax income and losses for the period.

~~Three Months Ended March 31, 2022 (Successor) Compared to Three Months Ended March 31, 2021 (Predecessor)~~

~~Contract Drilling Revenue.~~ Contract drilling revenue increased $27.7 million during the first quarter of 2022 compared to the first quarter of 2021, primarily due to 88 incremental R-E days ($18.6 million), combined with an increase in average daily revenue ($9.1 million). The increase in R-E days in 2022 was primarily as a result of rigs commencing contracts subsequent to the first quarter of 2021 in Senegal (~~Ocean BlackRhino), Brazil (Ocean Courage) and the GOM (West Auriga) (203 days) and incremental R-E days for the~~ ~~Ocean Onyx~~, which had commenced its contract during the first quarter of 2021 (52 days). R-E days during the first quarter of 2022, compared to the first quarter of 2021, were reduced by incremental downtime for repairs (167 fewer days), primarily associated with shipyard projects for the ~~Ocean Endeavor~~ ~~and~~ ~~Ocean Patriot. Average daily revenue increased in the first quarter of 2022 compared to the first quarter of 2021, primarily due to contracts renegotiated after the first quarter of 2021.~~

~~Contract Drilling Expense, Excluding Depreciation. During the first quarter of 2022, contract drilling expense, exclud~~ing depreciation, was $144.9 million compared to $141.6 million for the first quarter of 2021. The $3.3 million increase in costs in the first quarter of 2022, compared to the same period of 2021, is primarily attributable to incremental contract drilling expense for the managed rigs ($6.7 million) and higher labor and related costs ($4.7 million), integrated services costs associated with the current contract for the ~~Ocean Courage~~ ~~($2.4 million) and other net cost ($0.4 million). The increase in contract drilling expense was partially offset by reduced equipment rental costs ($10.9 million), reflecting~~ ~~the impact of a lease modification for our blowout preventer and related well control equipment leases on our drillships.~~

~~Depreciation Expense.~~ ~~Depreciation expense for the first quarter of 2022 and 2021 was $2~~6.9 million and $74.6 million, respectively. The decline in depreciation expense in the 2022 quarter was primarily due to the reduction in depreciable value of our rigs and equipment as a result of the fair value remeasurement of such assets from the application of fresh start accounting on the Effective Date and asset impairments recognized in the fourth quarter of 2021.

~~General and Administrative Expense. During the first quarter of 2022~~, we incurred general and administrative costs of $16.7 million compared to $12.4 million in the first quarter of 2021. The increase in expense in the first quarter of 2022 is primarily attributable to higher legal and other professional costs, combined with incremental compensation expense associated with stock-based compensation awards subsequent to the first quarter of 2021.

~~Impairment of Assets.~~ During the first quarter of 2021, we recognized an aggregate impairment charge of $197.0 million to write down the carrying value of one of our rigs with indicators of impairment. No impairment charges were recognized during first quarter of 2022.

Interest Expense. Interest expense for the ~~first quarter of~~Successor nine-month period ended September 30, 2022 included interest cost related to our exit financing ($~~5.7~~19.2 million) ~~and~~, imputed interest expense related to our equipment finance leases ($~~2.7~~7.9 million), amortization of deferred arrangement fees associated with our exit credit facility ($1.5 million) and other ($0.2 million). Interest expense for the Successor period from April 24, 2021 through September 30, 2021 included interest on exit financing ($11.0 million), imputed interest on equipment finance leases ($5.0 million) and amortization of deferred debt arrangement fees ($0.9 million) .

Upon filing for bankruptcy protection on April 26, 2020, we ceased accruing interest expense on our then outstanding long-term indebtedness and borrowings outstanding under our previous credit facility. However, due to provisions in our plan of reorganization, we resumed recognizing interest on our outstanding borrowings under the previous credit facility and accrued interest expense of ~~$32.6~~$34.8 million for the Predecessor ~~three months ended March 31,~~period from January 1, 2021 to April 23, 2021, inclusive of a $23.4 million catch-up adjustment for the period from April 26, 2020 to December 31, 2020.

Income Tax Benefit. We recorded a net income tax benefit of ~~$8.7~~$28.1 million ~~(20.1%~~(35.6% effective tax rate) for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2022, as compared ~~with the Predecessor's~~to a net income tax ~~expense~~benefit of ~~$2.2~~$15.2 million ~~(0.6%~~(negative 40.8% effective tax rate) for the ~~first quarter of~~Successor period from April 23, 2021 to September 30, 2021. The higher effective tax rate for the ~~first quarter~~nine months ended September 30, 2022 reflects changes in the domestic and international jurisdictional mix of our pre-tax income and losses. Additionally, the variance reflects a $5.4 million benefit recognized during the nine months ended September 30, 2022 for remeasurement of unrecognized tax benefits and other tax balances due to strengthening of the U.S. dollar relative to foreign currencies and a $3.4 million benefit recognized in September 2022 in respect to taxation of our U.S. operations.

For the Predecessor period from January 1, 2021 to April 23, 2021, we recorded an income tax benefit of $39.4 million (1.9% effective tax rate), which reflects certain consequences of the ~~Predecessor's~~Predecessor’s bankruptcy filing. The ~~relatively larger income~~higher effective tax ~~benefit~~rate for the ~~first quarter of~~period for the nine months ended September 30, 2022 also reflects changes in the domestic and international jurisdictional mix of our pre-tax income and loss, which are consequences, in part, of realigning substantially all of our assets and operations under a foreign subsidiary in ~~the second quarter of~~April 2021.

We have available a senior secured revolving credit agreement (or the Exit Revolving Credit Agreement) ~~that~~, which provides for a $400.0 million senior secured revolving credit facility ~~with~~and also originally provided for a $100.0 million sublimit for the issuance of letters of credit thereunder (or the Exit RCF). Effective September 30, 2022, as discussed below, the aggregate amount of the commitments of the Issuing Lenders (as defined in the Exit Revolving Credit Agreement) to issue letters of credit under the Exit RCF decreased to $75.0 million. Our total capacity for borrowings under the Exit RCF was not impacted by the resignation of the Issuing Lender and remains at $400 million. The Exit RCF is scheduled to mature on April 22, 2026.

On August 31, 2022, one of the Issuing Lenders in our Exit RCF (or the Resigning Lender) notified us that it was resigning as an Issuing Lender as of September 30, 2022. The Resigning Lender had provided a commitment to issue up to $25.0 million in letters of credit under the Exit RCF. The Resigning Lender will continue to have all the rights and obligations of an Issuing Lender under the Exit RCF with respect to letters of credit issued by it prior to its resignation but will not be required to issue additional letters of credit or extend, renew or increase the outstanding letters of credit. As a result, the aggregate amount of the commitments of the Issuing Lenders to issue letters of credit under the Exit RCF was reduced from $100.0 million to $75.0 million.

At ~~May 6,~~November 7, 2022, we had borrowings of ~~$103.5~~$152.5 million outstanding under the Exit RCF and had utilized ~~$24.1~~$37.3 million for the issuance of letters of credit. As of ~~May 6,~~November 7, 2022, approximately ~~$275.9~~$213.7 million was available for borrowings or the issuance of letters of credit under the Exit RCF. However, the availability of borrowings and letters of credit under the Exit RCF is subject to the satisfaction of certain conditions ~~(as~~as specified in the Exit Revolving Credit ~~Agreement),~~Agreement, including restrictions on borrowings.

~~In addition, we~~We also have approximately $39.7 million in the form of delayed draw note commitments that may be issued as additional 9.00%/11.00%/13.00% Senior Secured First Lien PIK Toggle Notes due 2027 (or First Lien Notes), none which had been issued as of ~~May 6,~~November 7, 2022.

WeHistorically, we have ~~also historically~~ relied on our cash flows from operations and cash reserves to meet our liquidity needs, which primarily include funding of our working capital requirements and capital expenditures, as well as the servicing of our debt repayments and interest payments. As of ~~May 6,~~November 7, 2022, all of our rigs, excluding managed rigs, are owned and operated, directly or indirectly, by ~~DFAC.~~Diamond Foreign Asset Company (or DFAC). Our management has determined that we will permanently reinvest foreign earnings, which restricts the ability to utilize cash flows of DFAC on a company-wide basis. To the extent possible, we expect to utilize the operating cash flows and cash reserves of DFAC and the operating cash flows available to and cash reserves of Diamond Offshore Drilling, Inc. to meet each respective entity's working capital requirements and capital commitments.

As of ~~April~~October 1, 2022, our contractual backlog was ~~$1.2~~approximately $1.6 billion. At ~~March 31,~~September 30, 2022, we had cash available for current operations of ~~$73.0~~$61.2 million, including ~~$19.2~~$38.6 million that is subject to restrictions pursuant to the MMSA.

For the Successor ~~three-month~~nine-month period ended ~~March 31,~~September 30, 2022, our operating activities ~~generated~~used cash ~~flows~~ of ~~$9.1~~$21.9 million. Cash expenditures for contract drilling, shorebase support, and general and administrative costs ($590.4 million) and cash income taxes paid, net of refunds ($15.0 million), were partially offset by cash receipts from contract drilling services ($~~199.4~~566.0 million) during the nine-month period. In addition, collateral deposits aggregating $17.5 million were ~~partially offset by~~exchanged for letters of credit drawn under the Exit RCF, positively impacting cash ~~expenditures for contract drilling, shorebase support, general and administrative costs, cash collateral requirements and cash income taxes paid ($190.3 million).~~flow but with a neutral effect on total liquidity.

Cash outlays for capital expenditures ~~and finance lease obligations~~ during the first ~~three~~nine months of 2022 aggregated ~~$20.0~~$42.7 million (including capital outlays for the Ocean Endeavorand ~~$3.8~~Ocean Patriot shipyard work earlier in the period). We also paid $11.8 million ~~respectively. Asset~~in finance lease obligations related to well control equipment on our owned drillships during the period. During

the first nine months of 2022, asset sales, including the sale of the Ocean Valor, generated cash proceeds of ~~$5.0~~$5.9 million, ~~during the same period. We~~and $69.0 million was borrowed ~~$20.0 million~~ under the Exit ~~RCF during the first three months of 2022.~~RCF.

For the ~~Predecessor three-month~~Successor period ~~ended March 31,~~from April 24, 2021 ~~cash outlays~~through September 30, 2021, our operating activities used $41.0 million. Cash expenditures for contract drilling, shorebase support and general and administrative costs ($~~137.1~~348.9 million), and payments to professionals in connection with our bankruptcy ~~filing~~cases ($~~35.3 million) and cash income taxes, net ($3.3~~35.4 million) more than offset cash receipts ~~from~~for contract drilling services ($~~126.5~~338.4 million) for the period and funds from the return of certain collateral deposits ($4.9 million). Cash outlays for capital expenditures and finance lease obligations during the period aggregated $37.8 million and $6.0 million, respectively, and we had incremental borrowings of $20.0 million, net of repayments, under the Exit RCF.

For the Predecessor period from January 1, 2021 through April 23, 2021, our operating activities used $100.1 million. Cash expenditures for contract drilling, shorebase support and general and administrative costs ($243.9 million), payments to professionals in connection with our bankruptcy cases ($37.6 million), and net cash income taxes paid ($3.4 million) offset cash receipts for contract drilling services ($181.4 million) for the period. Cash outlays for capital expenditures aggregated ~~$40.6~~$49.1 million for the ~~first three months of 2021, while proceeds from asset sales, including the sales of the~~ ~~Ocean America~~ ~~and~~ ~~Ocean Rover, were $7.4 million during the same~~ period.

~~Upgrades~~As set forth in our plan of reorganization, on the Effective Date, we settled $242.0 million outstanding under our previous credit facility in cash and issued $75.0 million of First Lien Notes.

Capital Expenditures, Rig Reactivation and Other ~~Capital Expenditures~~Projects

As of the date of this report, we expect total cash capital expenditures for 2022 to be approximately ~~$54~~$75.0 million to ~~$60~~$80.0 million pursuant to our capital maintenance ~~programs.~~programs, including approximately $25.0 million in current year capital spending associated with reactivation of the Ocean GreatWhite and additional structural work for the Ocean Endeavor in the fourth quarter.

In total, we expect to incur approximately $35.0 million to $40.0 million in connection with reactivation and contract preparation activities for the Ocean GreatWhite, including both capital and non-capital work scopes. Approximately $18.0 million to $20.0 million of total work scopes is attributable to the reactivation portion of the project (including approximately $13 million in capital spending in the remainder of 2022 reported above), and approximately $17.0 million to $20.0 million is attributable to pre-commencement operating expenses, emissions reduction equipment, mobilization of the rig and customer-requested equipment and enhancements. In order to meet an accelerated commencement window, a significant portion of the preparation activities are scheduled to occur in the fourth quarter of 2022.

As of ~~March 31,~~September 30, 2022, the total net unrecognized tax benefits related to uncertain tax positions that could result in a future cash payment was ~~$42.7~~$32.3 million. Due to the high degree of uncertainty regarding the timing of future cash outflows associated with the liabilities recognized in these balances, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

See Note 8 “Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of certain of our other commercial commitments.

We or our representatives may, from time to time, either in this report, in periodic press releases or otherwise, make or incorporate by reference certain written or oral statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (or the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (or the Exchange Act). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain

or be identified by the words “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” “believe,” “should,” “could,” “would,” “may,” “might,” “will,” “will be,” “will continue,” “will likely result,” “project,” “forecast,” “budget” and similar expressions. In addition, any statement concerning future financial performance (including, without limitation, future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions taken by or against us, which may be provided by management, are also forward-looking statements as so defined. Statements made by us in this report that contain forward-looking statements may include, but are not limited to, information concerning our possible or assumed future results of operations and statements about the following subjects:

These types of statements are based on current expectations about future events and inherently are subject to a variety of assumptions, risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those expected, projected or expressed in forward-looking statements. These risks and uncertainties include, among others, those described or referenced in Item 1A, “Risk Factors” in Part II of this report and Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as amended by Amendment No. 1 on Form 10-K/A.

The risks and uncertainties referenced above are not exhaustive. Other sections of this report and our other filings with the Securities and Exchange Commission include additional factors that could adversely affect our business, results of operations and financial performance. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Forward-looking statements included in this report speak only as of the date of this report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations or beliefs with regard to the statement or any change in events, conditions or circumstances on which any forward-looking statement is based. In addition, in certain places in this report, we may refer to reports published by third parties that purport to describe trends or developments in energy production or drilling and exploration activity. While we believe that these reports are reliable, we have not independently verified the information included in such reports. We specifically disclaim any responsibility for the accuracy and completeness of such information and undertake no obligation to update such information.

The information included in this Item 3 constitutes “forward-looking statements” for purposes of the statutory safe harbor provided in Section 27A of the Securities Act and Section 21E of the Exchange Act. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements” in Item 2 of Part I of this report.

Interest Rate Risk. We have exposure to interest rate risk on our debt instruments arising from changes in the level or volatility of interest rates. As of ~~March 31,~~September 30, 2022, our variable interest rate debt included ~~$103.5~~$152.5 million of outstanding borrowings under the Exit RCF, ~~$6.1~~$18.0 million for the issuance of letters of credit under the Exit RCF

and $100.0 million outstanding under our senior secured term loan agreement we entered into on the Effective Date. At this level of variable-rate debt, the impact of a 100-basis point increase in market interest rates would not have a material effect (estimated ~~$2.1~~$2.7 million increase in interest expense on an annualized basis). Our ~~9.00%/11.00%/13.00% Senior Secured~~ First Lien ~~PIK Toggle~~ Notes ~~due 2027~~ have been issued at fixed rates, and as such, interest expense would not be impacted by interest rate shifts.

There were no other material changes in our market risk components for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. See “Quantitative and Qualitative Disclosures About Market Risk” included in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021, as amended by Amendment No. 1 on Form 10-K/A, for further information.

We maintain a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the federal securities laws, including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us under the federal securities laws is accumulated and communicated to our management on a timely basis to allow decisions regarding required disclosure.

Our Chief Executive Officer (or CEO) and Chief Financial Officer (or CFO) participated in an evaluation by our management of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~March 31,~~September 30, 2022. Based on their participation in that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2022.

There were no changes in our internal control over financial reporting identified in connection with the foregoing evaluation that occurred during our ~~first~~third fiscal quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Information related to certain legal proceedings is included in Note 8 “Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report, which is incorporated herein by reference.

Our Annual Report on Form 10-K for the year ended December 31, 2021, as amended by Amendment No. 1 on Form 10-K/A, includes a detailed discussion of certain material risk factors facing the Company. The additional risk factors ~~included under~~presented below describe additional risks and should be read in conjunction with Item 1A, of“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as amended by Amendment No. 1 on Form 10-K/A, which are incorporated herein by reference. ~~No material changes have been made to such risk factors as of March 31, 2022.~~

Inflation may adversely affect our operating results and increase working capital investments required to operate our business.

Inflationary factors such as increases in labor costs, material costs and overhead costs may adversely affect our operating results. Inflationary pressures may also increase other costs to operate or reactivate our drilling rigs. Our contracts for our drilling rigs generally provide for the payment of an agreed dayrate per rig operating day. Although some contracts do provide for a limited escalation in dayrate due to increased operating costs we incur on the project, we may not be able to fully recover increased costs due to inflation from our customers. If we are unable to recoup such increased costs, our operating margins will decline. Continuing or worsening inflation could significantly increase our operating expenses and capital expenditures, which could in turn have a material adverse effect on our business, financial condition, results of operations or cash flows.

(c) During the three months ended September 30, 2022, in connection with the vesting of shares of restricted stock held by our Chief Executive Officer, which were awarded under an equity incentive compensation plan, we acquired shares of our common stock in satisfaction of tax withholding obligations that were incurred in connection with such vesting. The date of acquisition, number of shares and average effective acquisition price per share were as follows:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	DO	New York Stock Exchange


			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 Stockholders’ Equity	56
		Condensed Consolidated Statements of Cash Flows	68
		Notes to Unaudited Condensed Consolidated Financial Statements	79

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1822

	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2835

	ITEM 4.	Controls and Procedures	2836

PART II. OTHER INFORMATION			2937

	ITEM 1.	Legal Proceedings	2937
			37
	ITEM 1A.	Risk Factors	29

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

	ITEM 6.	Exhibits	3038

SIGNATURES			3139


	Three Months Ended March 31, 2021
					Additional		Retained Earnings								Total
	Common Stock				Paid-In		(Accumulated			Treasury Stock					Stockholders’
	Shares		Amount		Capital		Deficit)			Shares		Amount			Equity
January 1, 2021 (Predecessor)		145,264	$	1,453	$	2,029,979	$	157,297			7,210	$	(206,163	)	$	1,982,566
Net loss		—		—		—		(361,681	)		—		—			(361,681	)
March 31, 2021 (Predecessor)		145,264	$	1,453	$	2,029,979	$	(204,384	)		7,210	$	(206,163	)	$	1,620,885


	Successor			Predecessor
	Three Months Ended			Three Months Ended
	March 31,			March 31,
	2022			2021
Operating activities:
Net loss	$	(34,354	)	$	(361,681	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		26,952			74,626
Loss on impairment of assets		—			197,027
Gain on disposition of assets		(4,044	)		(5,401	)
Deferred tax provision		(5,217	)		(5,565	)
Stock-based compensation expense		4,531			—
Contract liabilities, net		(13,411	)		6,974
Contract assets, net		(334	)		(326	)
Deferred contract costs, net		1,850			(9,176	)
Collateral deposits		(1,482	)		—
Other assets, noncurrent		(302	)		1,279
Other liabilities, noncurrent		2,992			(110	)
Other		418			282
Changes in operating assets and liabilities:
Accounts receivable		26,909			(14,993	)
Prepaid expenses and other current assets		1,378			(1,340	)
Accounts payable and accrued liabilities		11,129			68,274
Taxes payable		(7,957	)		922
Net cash provided by (used in) operating activities		9,058			(49,208	)
Investing activities:
Capital expenditures		(20,046	)		(40,617	)
Proceeds from disposition of assets, net of disposal costs		5,045			7,400
Net cash used in investing activities		(15,001	)		(33,217	)
Financing activities:
Borrowings under revolving credit facility		20,000			—
Principal payments of finance lease liabilities		(3,813	)		—
Debt issuance costs and arrangement fees		—			(2,290	)
Net cash provided by financing activities		16,187			(2,290	)
Net change in cash, cash equivalents and restricted cash		10,244			(84,715	)
Cash, cash equivalents and restricted cash, beginning of period		62,729			430,380
Cash, cash equivalents and restricted cash, end of period	$	72,973		$	345,665


	Successor						Predecessor
				Period from			Period from
	Nine Months Ended			April 24, 2021			January 1, 2021
	September 30,			through			through
	2022			September 30, 2021			April 23, 2021
Operating activities:
Net loss	$	(50,773	)	$	(52,475	)	$	(1,961,989	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		78,714			43,885			92,758
Loss on impairment of assets		—			—			197,027
Reorganization items, net		—			—			1,587,392
Gain on disposition of assets		(4,802	)		(943	)		(5,486	)
Deferred tax provision		(7,961	)		9,122			(35,894	)
Stock-based compensation expense		16,471			5,822			—
Contract liabilities, net		(19,725	)		51,275			10,617
Contract assets, net		1,330			(974	)		(742	)
Deferred contract costs, net		(4,193	)		(14,971	)		(12,034	)
Collateral deposits		17,479			4,939			—
Other assets, noncurrent		(547	)		(72	)		2,685
Other liabilities, noncurrent		(160	)		(1,354	)		(371	)
Other		1,275			1,129			3,158
Changes in operating assets and liabilities:
Accounts receivable		(33,575	)		(40,668	)		2,108
Prepaid expenses and other current assets		(979	)		2			(2,791	)
Accounts payable and accrued liabilities		20,884			(54,447	)		29,302
Taxes payable		(35,368	)		8,759			(5,804	)
Net cash used in operating activities		(21,930	)		(40,971	)		(100,064	)
Investing activities:
Capital expenditures		(42,653	)		(37,845	)		(49,119	)
Proceeds from disposition of assets, net of disposal costs		5,861			960			7,484
Net cash used in investing activities		(36,792	)		(36,885	)		(41,635	)
Financing activities:
Repayment of borrowings under revolving credit facility		—			—			(442,034	)
Borrowings on exit facilities		69,000			50,000			200,000
Repayments on exit facilities		—			(30,000	)		—
Issuance of exit notes		—			—			75,000
Principal payments of finance lease liabilities		(11,765	)		(6,011	)		—
Debt issuance costs and arrangement fees		—			—			(6,218	)
Net cash provided by (used in) financing activities		57,235			13,989			(173,252	)
Net change in cash, cash equivalents and restricted cash		(1,487	)		(63,867	)		(314,951	)
Cash, cash equivalents and restricted cash, beginning of period		62,729			115,429			430,380
Cash, cash equivalents and restricted cash, end of period	$	61,242		$	51,562		$	115,429


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


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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐


	Three Months Ended March 31, 2022
					Additional					Total
	Common Stock				Paid-In		(Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit)			Equity
January 1, 2022 (Successor)		100,075		10		945,039		(177,344	)		767,705
Net loss		—		—		—		(34,354	)		(34,354	)
Stock-based compensation, net of tax		—		—		4,472		—			4,472
March 31, 2022 (Successor)		100,075	$	10	$	949,511	$	(211,698	)	$	737,823


	Nine Months Ended September 30, 2021
							Additional			Retained Earnings									Total
	Common Stock						Paid-In			(Accumulated			Treasury Stock						Stockholders’
	Shares			Amount			Capital			Deficit)			Shares			Amount			Equity
January 1, 2021 (Predecessor)		145,264		$	1,453		$	2,029,979		$	157,297			7,210		$	(206,163	)	$	1,982,566
Net loss		—			—			—			(1,961,989	)		—			—			(1,961,989	)
Cancellation of Predecessor equity		(145,264	)		(1,453	)		(2,029,979	)		1,804,692			(7,210	)		206,163			(20,577	)
April 23, 2021 (Predecessor)		—		$	—		$	—		$	—			—		$	—		$	—


Issuance of Successor equity		100,000			10			934,800												934,810
April 24, 2021 (Successor)		100,000		$	10		$	934,800		$	—			—		$	—		$	934,810
Net loss		—			—			—			(52,475	)		—			—			(52,475	)
Stock-based compensation, net of tax		75			—			5,486			—			—			—			5,486
September 30, 2021 (Successor)		100,075		$	10		$	940,286		$	(52,475	)		—		$	—		$	887,821


	April 1, 2022 (1)		January 1, 2022 (1)		April 1, 2021 (2)
Contract Drilling Backlog	$	1,152	$	1,191	$	1,092


	October 1, 2022 (1)		January 1, 2022 (1)		October 1, 2021 (2)
Contract Drilling Backlog	$	1,596	$	1,191	$	1,034


Period	Total Number of Shares Acquired		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2022 through July 31, 2022		144,845	$	6.09	N/A	N/A
August 1, 2022 through August 31, 2022		301,300		7.28	N/A	N/A
September 1, 2022 through September 30, 2022		—		—	N/A	N/A
Total		446,145	$	6.89	N/A	N/A


Exhibit No.		Description of Exhibit

3.1		Third Amended and Restated Certificate of Incorporation of Diamond Offshore Drilling, Inc. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on April 29, 2021).

3.2		Second Amended and Restated Bylaws of Diamond Offshore Drilling, Inc. (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on April 29, 2021).

10.1*		Amendment No. 1, dated as of February 10, 2022, to Restricted Stock Award Agreement, dated as of May 8, 2021, between Diamond Offshore Drilling, Inc. and Bernie Wolford, Jr. with respect to the performance-vesting award.

31.1*		Rule 13a-14(a) Certification of the Chief Executive Officer.

31.2*		Rule 13a-14(a) Certification of the Chief Financial Officer.

32.1*		Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.

101.INS*		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Calculation Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Label Linkbase Document.

101.PRE*		Inline XBRL Presentation Linkbase Document.

101.DEF*		Inline XBRL Definition Linkbase Document.

104*		The cover page of our Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2022, formatted in Inline XBRL (included with the Exhibit 101 attachments).


	DIAMOND OFFSHORE DRILLING, INC.
	(Registrant)

Date ~~May 10,~~November 8, 2022	By:	/s/ Dominic A. Savarino
		Dominic A. Savarino
		Senior Vice President and Chief Financial Officer