*The registrant’s Common Stock began trading on the OTC Pink Open Market on April 28, 2020 under the symbol “DOFSQ.”

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

As of ~~July 31, 2019~~April 29, 2020 Common stock, $0.01 par value per share ~~137,694,313~~138,050,347 shares

	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	147,509		$	154,073		$	499,138		$	156,281
Marketable securities		149,945			299,849
Accounts receivable, net of allowance for bad debts		163,086			168,620
Accounts receivable								273,923			256,315
Less: allowance for credit losses								(5,760	)		(5,459	)
Accounts receivable, net								268,163			250,856
Prepaid expenses and other current assets		130,124			163,396			76,769			68,658
Asset held for sale								—			1,000
Total current assets		590,664			785,938			844,070			476,795
Drilling and other property and equipment, net of
accumulated depreciation		5,163,696			5,184,222			4,329,983			5,152,828
Other assets		222,876			65,534			204,280			204,421
Total assets	$	5,977,236		$	6,035,694		$	5,378,333		$	5,834,044
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	60,533		$	43,933		$	59,564		$	68,586
Accrued liabilities		192,194			172,228			196,031			210,780
Taxes payable		16,722			20,685			16,437			23,228
Current maturities of long-term debt								2,412,215			—
Total current liabilities		269,449			236,846			2,684,247			302,594
Long-term debt		1,974,816			1,973,922			—			1,975,741
Deferred tax liability		74,281			104,380			37,825			47,528
Other liabilities		259,793			135,893			284,773			275,971
Total liabilities		2,578,339			2,451,041			3,006,845			2,601,834
Commitments and contingencies (Note 9)
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock (par value $0.01, 25,000,000 shares authorized, none issued and outstanding)		—			—
Common stock (par value $0.01, 500,000,000 shares authorized; 144,764,125 shares issued and 137,690,627 shares outstanding at June 30, 2019; 144,383,662 shares issued and 137,438,353 shares outstanding at December 31, 2018)		1,448			1,444
Preferred stock (par value $0.01, 25,000,000 shares authorized, NaN issued and outstanding)								—			—
Common stock (par value $0.01, 500,000,000 shares authorized; 145,107,046 shares issued and 137,944,059 shares outstanding at March 31, 2020; 144,781,766 shares issued and 137,703,910 shares outstanding at December 31, 2019)								1,451			1,448
Additional paid-in capital		2,021,095			2,018,143			2,025,887			2,024,347
Retained earnings		1,582,099			1,769,415			550,261			1,412,201
Accumulated other comprehensive (loss) gain		(6	)		21
Treasury stock, at cost (7,073,498 and 6,945,309 shares of common stock at June 30, 2019 and December 31, 2018, respectively)		(205,739	)		(204,370	)
Accumulated other comprehensive loss								(19	)		(18	)
Treasury stock, at cost (7,162,987 and 7,077,856 shares of common stock at March 31, 2020 and December 31, 2019, respectively)								(206,092	)		(205,768	)
Total stockholders’ equity		3,398,897			3,584,653			2,371,488			3,232,210
Total liabilities and stockholders’ equity	$	5,977,236		$	6,035,694		$	5,378,333		$	5,834,044

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Revenues:
Contract drilling	$	207,273		$	265,353		$	433,970		$	553,279		$	217,866		$	226,697
Revenues related to reimbursable expenses		9,433			3,508			16,278			11,092			11,304			6,845
Total revenues		216,706			268,861			450,248			564,371			229,170			233,542
Operating expenses:
Contract drilling, excluding depreciation		224,782			189,321			392,210			374,010			184,511			167,429
Reimbursable expenses		9,313			3,414			16,057			10,884			11,113			6,743
Depreciation		88,253			81,825			175,151			163,650			93,043			86,898
General and administrative		15,294			18,236			32,605			36,749			16,345			17,312
Impairment of assets		—			27,225			—			27,225			774,028			—
Restructuring and separation costs		—			1,265			—			4,276
Gain on disposition of assets		(9,436	)		(50	)		(5,149	)		(560	)
(Gain) loss on disposition of assets														(3,433	)		4,287
Total operating expenses		328,206			321,236			610,874			616,234			1,075,607			282,669
Operating loss		(111,500	)		(52,375	)		(160,626	)		(51,863	)		(846,437	)		(49,127	)
Other income (expense):
Interest income		1,933			2,001			4,346			3,638			389			2,414
Interest expense, net of amounts capitalized		(31,159	)		(29,585	)		(61,084	)		(57,903	)		(32,321	)		(29,925	)
Foreign currency transaction (loss) gain		(721	)		411			(1,806	)		858
Foreign currency transaction gain (loss)														207			(1,085	)
Other, net		105			262			438			842			323			333
Loss before income tax benefit		(141,342	)		(79,286	)		(218,732	)		(104,428	)		(877,839	)		(77,390	)
Income tax benefit		27,354			10,012			31,416			54,475			15,899			4,062
Net loss	$	(113,988	)	$	(69,274	)	$	(187,316	)	$	(49,953	)	$	(861,940	)	$	(73,328	)
Loss per share, Basic and Diluted	$	(0.83	)	$	(0.50	)	$	(1.36	)	$	(0.36	)	$	(6.25	)	$	(0.53	)
Weighted-average shares outstanding:
Shares of common stock		137,691			137,429			137,607			137,362			137,831			137,522
Dilutive potential shares of common stock		—			—			—			—			—			—
Total weighted-average shares outstanding		137,691			137,429			137,607			137,362			137,831			137,522

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Net loss	$	(113,988	)	$	(69,274	)	$	(187,316	)	$	(49,953	)	$	(861,940	)	$	(73,328	)
Other comprehensive gains (losses), net of tax:
Derivative financial instruments:
Reclassification adjustment for gain included in net loss		(2	)		(1	)		(3	)		(3	)		(1	)		(1	)
Investments in marketable securities:
Unrealized holding gain		9			31			23			31			—			14
Reclassification adjustment for gain included in net loss		(15	)		-			(47	)		-			—			(32	)
Total other comprehensive (loss) gain		(8	)		30			(27	)		28
Total other comprehensive loss														(1	)		(19	)
Comprehensive loss	$	(113,996	)	$	(69,244	)	$	(187,343	)	$	(49,925	)	$	(861,941	)	$	(73,347	)

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

Three Months Ended June 30, 2019

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Retained

Comprehensive

Treasury Stock

Stockholders’

Shares

Amount

Capital

Earnings

Gains (Losses)

Shares

Amount

Equity

April 1, 2019

144,606,992

$
1,446

$
2,019,555

$
1,696,087

$
2

7,026,789

$
(205,214
)

$
3,511,876

Net loss

—

—

—

(113,988
)

—

—

—

(113,988
)
Stock-based compensation, net of tax

157,133

2

1,540

—

—

46,709

(525
)

1,017

Net loss on investments

—

—

—

—

(6
)

—

—

(6
)
Net loss on derivative financial
instruments

—

—

—

—

(2
)

—

—

(2
)
June 30, 2019

144,764,125

$
1,448

$
2,021,095

$
1,582,099

$
(6
)

7,073,498

$
(205,739
)

$
3,398,897

	Three Months Ended March 31, 2020
										Accumulated
					Additional					Other								Total
	Common Stock				Paid-In		Retained			Comprehensive			Treasury Stock					Stockholders’
	Shares		Amount		Capital		Earnings			Losses			Shares		Amount			Equity
January 1, 2020		144,781,766	$	1,448	$	2,024,347	$	1,412,201		$	(18	)		7,077,856	$	(205,768	)	$	3,232,210
Net loss		—		—		—		(861,940	)		—			—		—			(861,940	)
Stock-based compensation, net of tax		325,280		3		1,540		—			—			85,131		(324	)		1,219
Net loss on derivative financial instruments		—		—		—		—			(1	)		—		—			(1	)
March 31, 2020		145,107,046	$	1,451	$	2,025,887	$	550,261		$	(19	)		7,162,987	$	(206,092	)	$	2,371,488

	Six Months Ended June 30, 2019																				Three Months Ended March 31, 2019
										Accumulated																				Accumulated
					Additional					Other								Total							Additional					Other								Total
	Common Stock				Paid-In		Retained			Comprehensive			Treasury Stock					Stockholders’			Common Stock				Paid-In		Retained			Comprehensive			Treasury Stock					Stockholders’
	Shares		Amount		Capital		Earnings			Gains (Losses)			Shares		Amount			Equity			Shares		Amount		Capital		Earnings			Gains (Losses)			Shares		Amount			Equity
January 1, 2019		144,383,662	$	1,444	$	2,018,143	$	1,769,415		$	21			6,945,309	$	(204,370	)	$	3,584,653			144,383,662	$	1,444	$	2,018,143	$	1,769,415		$	21			6,945,309	$	(204,370	)	$	3,584,653
Net loss		—		—		—		(187,316	)		—			—		—			(187,316	)		—		—		—		(73,328	)		—			—		—			(73,328	)
Stock-based compensation, net of tax		380,463		4		2,952		—			—			128,189		(1,369	)		1,587			223,330		2		1,412		—			—			81,480		(844	)		570
Net loss on investments		—		—		—		—			(24	)		—		—			(24	)		—		—		—		—			(18	)		—		—			(18	)
Net loss on derivative financial instruments		—		—		—		—			(3	)		—		—			(3	)		—		—		—		—			(1	)		—		—			(1	)
June 30, 2019		144,764,125	$	1,448	$	2,021,095	$	1,582,099		$	(6	)		7,073,498	$	(205,739	)	$	3,398,897
March 31, 2019																						144,606,992	$	1,446	$	2,019,555	$	1,696,087		$	2			7,026,789	$	(205,214	)	$	3,511,876

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

Three Months Ended June 30, 2018

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Retained

Comprehensive

Treasury Stock

Stockholders’

Shares

Amount

Capital

Earnings

Gains (Losses)

Shares

Amount

Equity

April 1, 2018

144,249,563

$
1,442

$
2,012,993

$
1,969,006

$
(7
)

6,906,592

$
(203,802
)

$
3,779,632

Net loss

—

—

—

(69,274
)

—

—

—

(69,274
)
Anti-dilution adjustment

—

—

—

3

—

—

—

3

Stock options exercised

3,773

—

—

—

—

—

—

—

Stock-based compensation, net of tax

120,670

2

869

—

—

36,498

(532
)

339

Net gain on investments

—

—

—

—

31

—

—

31

Net loss on derivative financial instruments

—

—

—

—

(1
)

—

—

(1
)
June 30, 2018

144,374,006

$
1,444

$
2,013,862

$
1,899,735

$
23

6,943,090

$
(204,334
)

$
3,710,730

Six Months Ended June 30, 2018

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Retained

Comprehensive

Treasury Stock

Stockholders’

Shares

Amount

Capital

Earnings

Gains (Losses)

Shares

Amount

Equity

December 31, 2017

144,085,292

$
1,441

$
2,011,397

$
1,964,497

$
(5
)

6,857,510

$
(203,069
)

$
3,774,261

Impact of change in accounting principle

—

—

—

(14,812
)

—

—

—

(14,812
)
Adjusted balance at January 1, 2018

144,085,292

$
1,441

$
2,011,397

$
1,949,685

$
(5
)

6,857,510

$
(203,069
)

$
3,759,449

Net loss

—

—

—

(49,953
)

—

—

—

(49,953
)
Anti-dilution payments

—

—

—

3

—

—

—

3

Stock options exercised

3,773

—

—

—

—

—

—

—

Stock-based compensation, net of tax

284,941

3

2,465

—

—

85,580

(1,265
)

1,203

Net gain on investments

—

—

—

—

31

—

—

31

Net loss on derivative financial instruments

—

—

—

—

(3
)

—

—

(3
)
June 30, 2018

144,374,006

$
1,444

$
2,013,862

$
1,899,735

$
23

6,943,090

$
(204,334
)

$
3,710,730

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

	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2019			2018			2020			2019
Operating activities:
Net loss	$	(187,316	)	$	(49,953	)	$	(861,940	)	$	(73,328	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation		175,151			163,650			93,043			86,898
Loss on impairment of assets		—			27,225			774,028			-
Gain on disposition of assets		(5,149	)		(560	)
(Gain) loss on disposition of assets								(3,433	)		4,287
Deferred tax provision		(31,125	)		(61,160	)		(13,797	)		(7,769	)
Stock-based compensation expense		2,956			2,468			1,543			1,414
Contract liabilities, net		14,017			(3,255	)		34,285			11,980
Contract assets, net		(566	)		(956	)		3,092			(1,922	)
Deferred contract costs, net		26,879			24,703			(14,576	)		(6,244	)
Other assets, noncurrent		(118	)		742			(393	)		98
Other liabilities, noncurrent		3			(3,849	)		(3,346	)		(570	)
Other		(1,300	)		2,577			451			(1,517	)
Changes in operating assets and liabilities:
Accounts receivable		5,534			53,451			(17,307	)		(20,761	)
Prepaid expenses and other current assets		(2,002	)		28			131			604
Accounts payable and accrued liabilities		9,961			(21,466	)		(9,586	)		13,329
Taxes payable		(9,608	)		(2,878	)		(5,036	)		(3,637	)
Net cash (used in) provided by operating activities		(2,683	)		130,767			(22,841	)		2,862
Investing activities:
Capital expenditures		(172,335	)		(90,432	)		(74,850	)		(85,890	)
Proceeds from maturities of marketable securities		2,025,000			300,000			—			1,000,000
Purchase of marketable securities		(1,872,107	)		(573,837	)		—			(948,298	)
Proceeds from disposition of assets, net of disposal costs		15,573			1,723			4,548			95
Net cash used in investing activities		(3,869	)		(362,546	)		(70,302	)		(34,093	)
Financing activities:
Borrowings under Credit Facility								436,000			—
Other		(12	)		(90	)		—			(2	)
Net cash used in financing activities		(12	)		(90	)
Net cash provided by (used in) financing activities								436,000			(2	)
Net change in cash and cash equivalents		(6,564	)		(231,869	)		342,857			(31,233	)
Cash and cash equivalents, beginning of period		154,073			376,037			156,281			154,073
Cash and cash equivalents, end of period	$	147,509		$	144,168		$	499,138		$	122,840

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

The unaudited condensed consolidated financial statements of Diamond Offshore Drilling, Inc. and subsidiaries, which we refer to as “Diamond Offshore,” “we,” “us” or “our,” should be read in conjunction with our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2018~~2019 (File No. 1-13926).

As of ~~July 26, 2019,~~May 1, 2020, Loews Corporation owned approximately 53% of the outstanding shares of our common stock.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.”) (“GAAP”), ~~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 comprehensive ~~income or~~ loss, 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.

The preparation of financial statements in conformity with 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.

In ~~February~~June 2016, the Financial Accounting Standards Board ~~or FASB,~~ issued Accounting Standards Update, or ~~ASU, No. 2016-02,~~ ~~Leases~~ (Topic 842), or ASU 2016-02, which (i) requires lessees to recognize a right of use asset and a lease liability on the balance sheet for most leases, (ii) updates previous accounting standards for lessors to align certain requirements with the updates to lessee accounting standards and the revenue recognition accounting standards and (iii) requires enhanced disclosure of qualitative and quantitative information about an entity's leasing arrangements.

We adopted ASU 2016-02 effective January 1, 2019 using an optional transition method requiring leases existing at, or entered into after, January 1, 2019 to be recognized and measured under the new accounting standard. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting for leases. In our adoption of ASU 2016-02, we also utilized a transition practical expedient package whereby we did not reassess (i) whether any of our expired or existing contracts contain a lease, (ii) the classification for any expired or existing leases and (iii) initial direct costs for any existing leases. The adoption of this standard resulted in the recording of operating lease assets and offsetting operating lease liabilities of $146.8 million as of January 1, 2019, with no related impact on our unaudited Condensed Consolidated Statements of Stockholders’ Equity. See Note 10.

Upon adoption of ASU 2016-02, we concluded that our drilling contracts contain a lease component for the use of our drilling rigs based on the updated definition of a lease. However, ASU 2016-02 provides for a practical expedient for lessors whereby, under certain circumstances, the lessor may combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. We have determined that our current drilling contracts qualify for this practical expedient and have combined the lease and service components of our standard drilling contracts. We continue to account for the combined component under ASU No. 2014-09, ~~Revenue from Contracts with Customers (Topic 606) and its related amendments, or collectively Topic 606~~.

~~In June 2016, the FASB issued~~ ASU, No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, or~~ (“ASU ~~2016-13.~~2016-13”). ASU 2016-13 ~~requires changes~~replaces the incurred loss impairment methodology under previous GAAP by requiring entities to ~~the recognition of~~measure credit losses onof certain financial ~~instruments not accounted for at fair value through net income,~~assets, including ~~loans, debt securities,~~ trade receivables, ~~net investments in leases and available-for-sale debt securities. The amended standard broadens the information~~utilizing a methodology that ~~an entity must consider in developing its estimate of~~reflects expected credit losses ~~requiring an entity to estimate credit losses over the life~~and requires consideration of ~~an exposure based on historical information, current information and~~a broader range of reasonable and supportable ~~forecasts. The guidance is~~information to inform credit loss estimates.

We adopted ASU 2016-13 and its related amendments (collectively, “CECL”) effective ~~for interim and annual periods beginning after December 15, 2019 and will be applied using~~January 1, 2020, by recognizing a ~~modified retrospective method with a cumulative effect~~cumulative-effect adjustment which was not material to ~~beginning retained earnings. We are currently evaluating the effect the guidance will have on~~ our unaudited condensed consolidated financial statements. CECL has been applied prospectively and therefore, prior periods have not been adjusted. See Notes 5 and 7.

We reported the $1.0 million net book value of the Ocean Confidence, a previously impaired semisubmersible rig that was cold stacked in 2015, as “Asset held for sale” in our Consolidated Balance Sheets at December 31, 2019. The rig was sold in February 2020 for a net pre-tax gain of $3.5 million.

As a result of the prolonged downturn in the offshore contract drilling industry, combined with the added economic uncertainty in the global energy markets resulting from a further decline in energy prices and the COVID-19 pandemic and efforts to mitigate the spread of the virus, we have reported a net loss of $861.9 million, inclusive of a $774.0 million impairment charge, for the three months ended March 31, 2020. As of March 31, 2020, we had an aggregate of approximately $2.4 billion in senior notes and borrowings under our revolving credit facility outstanding with stated maturities at various times from 2023 through 2043, of which an aggregate of $436.0 million was borrowed under our revolving credit facility. As described in Note 13 “Subsequent Events,” on April 26, 2020,

Diamond Offshore Drilling, Inc. (the “Company”) and certain of its direct and indirect subsidiaries (together with the Company, the “Debtors”) filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). As a result of the filing of the Chapter 11 Cases, the principal and interest due under our outstanding senior notes and revolving credit facility became immediately due and payable and have been presented as “Current maturities of long-term debt” in our unaudited Condensed Consolidated Balance Sheet at March 31, 2020. However, any efforts to enforce such payment obligations with respect to our senior notes and revolving credit facility are automatically stayed as a result of the filing of the Chapter 11 Cases. We have projected that we will not have sufficient cash on hand or available liquidity to repay such outstanding debt. These conditions and events raise substantial doubt over our ability to continue as a going concern for twelve months after the date our financial statements are issued.

2.Financial information in this report has been prepared on the basis that we will continue as a going concern, which presumes that we will be able to realize our assets and discharge our liabilities in the normal course of business as they come due. Financial information in this report does not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if we were unable to realize our assets and settle our liabilities as a going concern in the normal course of operations. Such adjustments could be material. Our long-term liquidity requirements, the adequacy of capital resources and ability to continue as a going concern are difficult to predict at this time. If our future sources of liquidity are insufficient, we could face substantial liquidity constraints and be unable to continue as a going concern and will likely be required to significantly reduce, delay or eliminate capital expenditures, implement further cost reductions, or seek other financing alternatives.

Although we anticipate that the Chapter 11 Cases will help address our liquidity concerns, the approval of a plan of reorganization is not within our control and uncertainty remains over the Bankruptcy Court's approval of a plan of reorganization. As such we have concluded that substantial doubt continues to exist about our ability to continue as a going concern.

The activities that primarily drive the revenue earned from our contract drilling ~~contracts~~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.

~~Dayrate and other revenue for activities that correspond to a distinct time increment within the contract term are recognized in the period in which the services are performed.~~ 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 isare allocated across the single performance obligation and recognized ratably ~~in proportion to the actual services performed~~ 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.

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

	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
Trade receivables	$	153,638		$	160,463		$	218,666		$	199,572
Current contract assets ⁽¹⁾		7,398			6,832			3,223			6,314
Noncurrent contract assets ⁽¹⁾		2,107			2,107
Current contract liabilities (deferred revenue) ⁽¹⁾		(9,521	)		(2,803	)		(23,662	)		(9,573	)
Noncurrent contract liabilities (deferred revenue) ⁽¹⁾		(25,023	)		(17,723	)		(58,728	)		(38,531	)

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

Net Contract

Balances

Contract assets at January 1, 2019

$
8,939

Contract liabilities at January 1, 2019

(20,526
)
Net balance at January 1, 2019

(11,587
)
Decrease due to amortization of revenue included in the beginning contract liability balance

3,681

Increase due to cash received, excluding amounts recognized as revenue during the period

(17,698
)
Increase due to revenue recognized during the period but contingent on future performance

2,535

Decrease due to transfer to receivables during the period

(926
)
Adjustments

(1,044
)
Net balance at June 30, 2019

$
(25,039
)
Contract assets at June 30, 2019

$
9,505

Contract liabilities at June 30, 2019

(34,544
)

	Net Contract
	Balances
Contract assets at January 1, 2020	$	6,314
Contract liabilities at January 1, 2020		(48,104	)
Net balance at January 1, 2020		(41,790	)
Decrease due to amortization of revenue included in the beginning contract liability balance		2,591
Increase due to cash received, excluding amounts recognized as revenue during the period		(36,876	)
Increase due to revenue recognized during the period but contingent on future performance		160
Decrease due to transfer to receivables during the period		(3,252	)
Net balance at March 31, 2020	$	(79,167	)
Contract assets at March 31, 2020	$	3,223
Contract liabilities at March 31, 2020		(82,390	)

The following table reflects the specified types of revenue expected to be recognized in the future related to unsatisfied performance obligations as of ~~June 30, 2019~~March 31, 2020 (in thousands):

	For the Years Ending December 31,										For the Years Ending December 31,
	2019 ⁽¹⁾		2020		2021		2022		Total		2020 ⁽¹⁾		2021		2022		Total
Mobilization and contract preparation revenue	$	3,071	$	571	$	632	$	124	$	4,398	$	3,135	$	2,683	$	352	$	6,170
Capital modification revenue		3,364		4,937		229		—		8,530		16,054		15,509		1,452		33,015
Blended rate revenue		—		16,933		5,542		—		22,475
Blended rate revenue and other												31,249		8,165		—		39,414
Total	$	6,435	$	22,441	$	6,403	$	124	$	35,403	$	50,438	$	26,357	$	1,804	$	78,599

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. Revenue expected to be recognized in the future related to the blending of rates when a contract has operating dayrates that decrease over the initial contract term is also included. 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 ~~June 30, 2019.~~March 31, 2020. 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 ASU No. 2014-09, Revenue from Contracts with Customers (Topic ~~606~~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.

~~2019~~2020 Evaluation. During the ~~second~~first quarter of ~~2019,~~2020, the business climate in which we operate experienced a significant adverse change, primarily as a result of the market impacts of the oil price war between Saudi Arabia and Russia and regulatory, market and commercial challenges arising as a result of the COVID-19 pandemic and efforts to mitigate the spread of the virus, both of which resulted in a dramatic decline in oil prices. At March 31, 2020, we evaluated ~~three~~5 of our drilling rigs ~~with~~that had indicators of impairment. Based on our assumptions and analysis at that time, we determined that the ~~undiscounted probability-weighted cash flow for~~carrying value of 4 of these rigs was impaired (we collectively refer to these four rigs as the 2020 Impaired Rigs).

We estimated the fair values of the 2020 Impaired Rigs using an income approach, whereby the fair value of each rig was ~~in excess~~estimated based on a calculation of ~~its respective carrying value. As a result, we concluded~~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 ~~no impairment~~may be received on ultimate disposition of ~~these rigs had occurred at June 30, 2019.~~each rig. Our fair value estimates were representative of Level 3 fair value measurements due to the significant level of estimation involved and the lack of transparency as to the inputs used.

We recorded aggregate impairments of $774.0 million for the three months ended March 31, 2020 related to our 2020 Impaired Rigs. See Note 7.

AsWe evaluate our property and equipment for impairment whenever changes in circumstances indicate that the carrying amount of ~~June 30, 2019, there were ten rigs in our drilling fleet not previously written down to scrap, for which there were no current indicators that their carrying amounts~~an asset may not be ~~recoverable and, thus, were not evaluated for impairment.~~recoverable. If market fundamentals in the offshore oil and gas industry deteriorate further or a ~~projected~~ market recovery is further delayed, we may be required to recognize additional impairment ~~losses~~charges in future periods.

~~2018 Impairment.~~ ~~During the second quarter of 2018, we recorded an impairment loss of $27.2 million to recognize a reduction in fair value of the~~ ~~Ocean Scepter~~, a jack-up rig that was marketed for sale at that time. We estimated the fair value of the impaired jack-up rig using a market approach based on a signed agreement to sell the rig, less estimated costs to sell. We considered this valuation approach to be a Level 3 fair value measurement due to the level of estimation involved as the sale had not yet been completed at the time of our analysis. The ~~Ocean Scepter~~ ~~was sold in July 2018.~~ See Note 13.

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

	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
Trade receivables	$	153,638		$	160,463		$	218,666		$	199,572
Federal income tax receivables								38,574			38,574
Value added tax receivables		14,314			13,237			16,111			17,716
Related party receivables		133			174			80			166
Other		460			205			492			287
		168,545			174,079			273,923			256,315
Allowance for bad debts		(5,459	)		(5,459	)
Allowance for credit losses								(5,760	)		(5,459	)
Total	$	163,086		$	168,620		$	268,163		$	250,856

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

	June 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Deferred contract costs	$	45,736	$	70,021	$	31,956	$	20,019
Rig spare parts and supplies						14,971		18,250
Prepaid taxes		45,621		54,412		13,877		12,475
Rig spare parts and supplies		17,873		20,256
Prepaid rig costs						3,897		2,990
Current contract assets		7,398		6,832		3,223		6,314
Prepaid insurance		4,490		2,742		1,940		2,892
Prepaid software costs						1,518		2,319
Other		9,006		9,133		5,387		3,399
Total	$	130,124	$	163,396	$	76,769	$	68,658

	June 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Rig operating expenses					$	45,231	$	37,969
Interest payable						36,813		28,234
Payroll and benefits	$	43,340	$	47,564		28,713		42,494
Rig operating expenses		39,980		42,323
Accrued capital project/upgrade costs		32,916		37,379		26,094		56,603
Interest payable		28,234		28,234
Deferred revenue						23,662		9,573
Current operating lease liability		19,697		—		20,482		20,030
Personal injury and other claims		5,408		5,544		6,484		7,074
Deferred revenue		9,521		2,803
Shorebase and administrative costs		5,190		6,217		4,374		5,275
Other		7,908		2,164		4,178		3,528
Total	$	192,194	$	172,228	$	196,031	$	210,780

~~We adopted ASU 2016-02 effective January 1, 2019, which required us to recognize a right of use asset and a lease liability on the balance sheet for most leases. See Note 10.~~

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

	Six Months Ended June 30,					Three Months Ended March 31,
	2019			2018		2020			2019
Accrued but unpaid capital expenditures at period end	$	32,916		$	12,714	$	26,094		$	29,902
Common stock withheld for payroll tax obligations ⁽¹⁾		1,369			1,265		324			844
Cash interest payments		56,531			56,531		19,785			19,688
Cash income taxes paid, net of (refunds):
Foreign		10,025			4,035		7,142			8,700
State		(15	)		2		(14	)		(15	)

We present basic and diluted net ~~income (loss)~~loss per share on our unaudited Condensed Consolidated Statements of Operations. Basic net ~~income (loss)~~loss per share excludes dilution and is computed by dividing net ~~income (loss)~~loss by the weighted-average number of shares of common ~~shares~~stock outstanding for the period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock (common share equivalents) were exercised or converted into common stock, unless the effect would be antidilutive. For all periods in which we experience a net loss, all shares of common stock issuable upon exercise of outstanding stock appreciation rights and vesting of outstanding restricted stock units have been excluded from the calculation of weighted-average shares because their inclusion would be antidilutive.

The following table sets forth the ~~share effects of~~ stock-based awards excluded from the computations of diluted loss per share (in thousands).

We report our investments as current assets in our unaudited Condensed Consolidated Balance Sheets in “Marketable securities,” representing the investment of cash available for current operations. See Note 7.

~~Our investments in marketable securities are classified as available for sale and are summarized as follows (in thousands):~~

Financial instruments that potentially subject us to significant concentrations of credit or market risk consist primarily of periodic temporary investments of excess cash, trade accounts receivable and investments in debt securities. We generally place our excess cash investments in U.S. Treasury bills and U.S. government-backed short-term money market instruments through several financial institutions. We periodically evaluate the relative credit standing of these financial institutions as part of our investment strategy.

Our credit risk ~~with respect~~corresponds primarily to ~~our~~ trade ~~accounts receivable are limited primarily due to the entities comprising our customer base.~~receivables. Since the market for our services is the offshore oil and gas industry, ~~this~~our customer base ~~has consisted~~consists primarily of major and independent oil and gas companies, ~~and~~as well as government-owned oil companies. ~~Based on our current customer base and the geographic areas in which~~At March 31, 2020, we ~~operate, we do not~~ believe that we have ~~any~~potentially significant concentrations of credit risk ~~at June 30, 2019.~~due to the number of rigs we currently have contracted and our limited number of customers, as some of our customers have 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, ~~to us,~~ we perform a credit review on that ~~customer.~~customer, including a review of credit ratings and financial statements. Based on that ~~analysis,~~credit review, we may require that the customer ~~present~~have a bank issue a letter of credit on their behalf, prepay for the services in advance or provide other credit enhancements. At March 31, 2020, we have not required customers to pay for services in advance, nor have we required credit enhancements from our customers. We ~~record~~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, 2020, $6.9 million in trade receivables were considered past due by 30 days or more, of which $5.5 million were fully reserved for in previous years and the remaining $1.4 million were less than 90 days past due and considered collectible.

Pursuant to ASU 2016-13, we have reviewed our historical credit loss experience over a ~~provision for bad debts~~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 ~~case-by-case basis when facts~~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 ~~circumstances indicate that a customer receivable may not be collectible~~future anticipated economic conditions in determining our credit loss factor, including crude oil prices and ~~historically, losses on~~liquidity of credit markets. In applying the requirements of CECL, we segregated our trade receivables ~~have been infrequent occurrences.~~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 January 1, 2020 and March 31, 2020, 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 $0.3 million for the three months ended March 31, 2020, all of which related to the cumulative adjustment recorded for the initial adoption of ASU 2016-13. Due to immateriality, the cumulative adjustment was recorded in “Contract drilling expense, excluding depreciation” in our unaudited

Condensed Consolidated Statements of Operations instead of in opening retained earnings as prescribed in ASU 2016-13. Our total allowance for credit losses was $5.8 million and $5.5 million at March 31, 2020 and December 31, 2019, respectively. See Notes 1 and 5.

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:

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. We recorded an impairment charge related to four of our drilling rigs, which were measured at fair value on a nonrecurring basis at March 31, 2020 and have presented the aggregate loss in “Impairment of assets” in our unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2020. Assets measured at fair value are summarized below (in thousands).

⁽¹⁾Represents the aggregate impairment charge recognized during the three months ended March 31, 2020 and corresponding book value as of March 31, 2020 of the 4 semisubmersible rigs, which were written down to their estimated fair values. See Note 4.

June 30, 2019

Fair Value Measurements Using

Level 1

Level 2

Level 3

Assets at
Fair Value

U.S. Treasury bills

$
149,945

$
—

$
—

$
149,945

Money market funds

134,319

—

—

134,319

Total short-term investments

$
284,264

$
—

$
—

$
284,264

	December 31, 2019
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value
Recurring fair value measurements:
Money market funds	$	135,300	$	—	$	—	$	135,300

~~We had no Level 2 or Level 3 assets or liabilities as of June 30, 2019 or December 31, 2018 that were required to be valued at fair value on a recurring basis.~~

We believe that the carrying amounts of our other financial assets and liabilities (excluding ~~long-term debt)~~our senior notes), which are not measured at fair value in our unaudited Condensed Consolidated Balance Sheets, approximate fair value based on the following assumptions:

Our senior notes are not measured at fair value; however, under the GAAP fair value hierarchy, our ~~long-term debt~~senior notes would be considered Level 2 liabilities. The fair value of our senior notes was derived using a third-party pricing service at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. We perform control procedures over information we obtain from pricing services and brokers to test whether prices received represent a reasonable estimate of fair value. These procedures include the review of pricing service or broker pricing methodologies and comparing fair value estimates to actual trade activity executed in the market for these instruments occurring generally within a 10-day period of the report date.

Fair values and related carrying values of our senior notes are shown below (in millions).

	June 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value
3.45% Senior Notes due 2023	$	210.0	$	249.5	$	185.0	$	249.5	$	73.7	$	249.6	$	212.5	$	249.6
7.875% Senior Notes due 2025		475.0		497.1		415.0		496.8		147.5		497.3		435.0		497.1
5.70% Senior Notes due 2039		335.0		497.3		305.0		497.2		77.5		497.3		292.5		497.3
4.875% Senior Notes due 2043		465.0		748.9		416.3		748.9		101.3		749.0		408.8		749.0

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.

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

	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
Drilling rigs and equipment	$	8,228,429		$	8,210,824		$	7,273,173		$	8,004,489
Land and buildings		63,795			63,757			64,342			64,267
Office equipment and other		91,887			91,819			92,965			92,289
Cost		8,384,111			8,366,400			7,430,480			8,161,045
Less: accumulated depreciation		(3,220,415	)		(3,182,178	)		(3,100,497	)		(3,008,217	)
Drilling and other property and equipment, net	$	5,163,696		$	5,184,222		$	4,329,983		$	5,152,828

During the three months ended March 31, 2020, we recorded an aggregate impairment charge of $774.0 million, to write down 4 of our drilling rigs with indicators of impairment to their estimated fair values. See Notes 4 and 7.

Effective March 17, 2020, we terminated our $225.0 million revolving credit agreement, which was scheduled to mature on October 22, 2020. At the time of termination, there were no borrowings outstanding under the facility. We did not incur any early termination penalties in connection with the termination and wrote off $0.5 million in deferred arrangement fees associated with the facility.

In ~~April 2019,~~March 2020, we ~~sold~~borrowed $436.0 million under our $950.0 million senior 5-year revolving credit agreement, or Credit Agreement, which was entered into on October 2, 2018. The weighted average interest rate on the combined borrowings at March 31, 2020 was 5.32%. Borrowings under the Credit Agreement mature at the earliest of the maturity of the Credit Agreement on October 2, 2023, termination of the commitments or acceleration upon an event of default. The filing of the Chapter 11 Cases constituted an event of default and ~~Ocean Guardian~~the principal and interest due under the Credit Agreement became immediately due and payable and therefore ,have been presented as “Current maturities of long-term debt” in our unaudited Condensed Consolidated Balance Sheet at March 31, 2020.,See Note 13 “Subsequent Events.”

In January 2020, a $6.0 million financial letter of credit was issued under the Credit Agreement in support of a previously ~~impaired semisubmersible rig, for a net pre-tax gain~~issued surety bond. See Note 13 “Subsequent Events.”

On March 9, 2020, Moody’s Investor Services (“Moody’s), downgraded our current corporate credit rating to Caa1 from B2 and our current senior unsecured notes credit rating to Caa2 from B3. On April 16, 2020, Moody’s further downgraded both our corporate credit rating and our current senior unsecured notes credit rating to Ca. And, on April 27, 2020, Moody’s downgraded our corporate credit rating to D. The rating outlook from Moody’s is negative.

Additionally, on April 16, 2020, S&P Global Ratings (“S&P”) downgraded our corporate and senior unsecured notes credit ratings to CC from CCC+ and our Credit Agreement rating to CC from B-. On April 24, 2020, S&P lowered our corporate credit rating and all issue-level credit ratings to D. Our rating outlook from S&P has been designated as not meaningful.

Our current credit ratings are below investment grade and could raise our cost of ~~$14.3 million. In addition, during the six months ended June 30, 2019,~~financing. Consequently, we ~~disposed of certain~~may not be able to issue additional debt in amounts and/or with terms that we consider to be reasonable. These ratings could limit our ability to pursue other ~~property and equipment and recognized an aggregate net pre-tax loss of $9.2 million.~~business opportunities.

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 ~~reasonably estimated,~~determined, we record a liability for the amount of the ~~reasonably~~ 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.

We are one of several unrelated defendants in lawsuits filed in Louisiana state courts alleging that defendants manufactured, distributed or utilized drilling mud containing asbestos and, in our case, allowed such drilling mud to have been utilized aboard our drilling rigs. The plaintiffs seek, among other things, an award of unspecified compensatory and punitive damages. The manufacture and use of asbestos-containing drilling mud had already ceased before we acquired any of the drilling rigs addressed in these lawsuits. We believe that we are not liable for the damages asserted in the lawsuits pursuant to the terms of our 1989 asset purchase agreement with Diamond M Corporation. We are unable to estimate our potential exposure, if any, to these lawsuits at this time but do not believe that our ultimate liability, if any, resulting from this litigation will have a material effect on our consolidated financial condition, results of operations or cash flows.

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 we have a probable loss for these taxes and the related penalties and interest and, accordingly, have recorded a $12.7 million and $16.1 million liability at March 31, 2020 and December 31, 2019, respectively. 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 consolidated financial condition, results of operations or cash flows.

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. Additionally, tax authorities in Brazil have issued tax assessments on intercompany revenue between our subsidiaries doing business in Brazil that, if upheld by the Brazilian courts, could result in additional taxes, interest and penalties for which the fully assessed amounts would be material to our financial statements. 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,~~condition, results of operations or cash flows.

Under our insurance policies, our deductibles for marine liability insurance coverage 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, are $5.0 million for the first occurrence and vary in amounts ranging between $5.0 million and, if aggregate claims exceed certain thresholds, 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. Our deductibles for personal injury claims arising due to named windstorms in the U.S. Gulf of Mexico are $25.0 million for the first occurrence and vary in amounts ranging between $25.0 million and, if aggregate claims exceed certain thresholds, 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 ~~June 30, 2019~~March 31, 2020 our estimated liability for personal injury claims was ~~$25.2~~$15.7 million, of which ~~$4.9~~$6.2 million and ~~$20.3~~$9.5 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our unaudited Condensed Consolidated Balance Sheets. At December 31, ~~2018~~2019 our estimated liability for personal injury claims was ~~$27.9~~$17.4 million, of which ~~$5.2~~$6.4 million and ~~$22.7~~$11.0 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Consolidated Balance Sheets. The eventual settlement or adjudication of these claims could differ materially from our estimated amounts due to uncertainties such as:

We were contingently liable as of ~~June 30, 2019~~March 31, 2020 in the aggregate amount of ~~$41.7~~$32.9 million under certain customs, performance, tax and VAT bonds and letters of credit. Agreements relating to approximately ~~$33.2~~$24.3 million

of these tax and customs bonds can require collateral at any ~~time. As of June 30, 2019, we had not been required to make any collateral deposits with respect to these agreements. The~~time, while the remaining agreements, aggregating $8.6 million, cannot require collateral except in events of default. ~~Banks have~~During the quarter ended March 31, 2020, we issued ~~letters~~a $6.0 million financial letter of credit onas collateral in support of our ~~behalf, securing certain~~outstanding surety bonds. In April 2020, we made cash collateral deposits of ~~these bonds.~~

Our leasing activities primarily consist of operating leases for shorebase offices, office and information technology equipment, employee housing, vehicles, onshore storage yards and certain rig equipment and tools. Our leases have terms ranging from one month to ten years, some of which include options to extend the lease for up to five years and/or to terminate the lease within one year.

Additionally, we are participants in four sale and leaseback arrangements with a subsidiary of General Electric Company, or GE, pursuant to the 2016 sale of certain blowout preventers and related well control equipment, or Well Control Equipment, on our drillships and corresponding agreements to lease back that equipment under ten-year operating leases for approximately $26$17.5 million per year in the aggregate with renewal options for two successive five-year periods. At the time of the transactions with GE, the carrying value of the Well Control Equipment exceeded the aggregate proceeds received from the sale, resulting in the recognition of prepaid rent, which was being amortized over the respective terms of the leases. On January 1, 2019, as a result of the adoption of ASU 2016-02, the aggregate remaining prepaid rent balances of $3.9 million and $10.6 million, previously recorded as “Prepaid expenses and other current assets” and “Other assets,” respectively, were reclassified to a right-of-use lease asset within “Other assets” in our unaudited Condensed Consolidated Balance Sheets and continue to be amortized over the remaining terms of the leases. In connection with the sale and leaseback transactions, we also entered into a ten-year service agreement with a subsidiary of Baker Hughes, a GE company, or BHGE, another GE affiliate, pertaining to the Well Control Equipment. Such services include management of maintenance, certification and reliability with respect to ~~such equipment.~~

~~In applying 2016-02, we utilize an exemption for short-term leases whereby we do not record leases with terms~~other bonds and letters of one year or less on the balance sheet. We have also made an accounting policy election not to separate lease components from non-lease components for each of our classes of underlying assets, except for subsea equipment, which includes the Well Control Equipment discussed above. At inception, the consideration for the overall Well Control Equipment arrangement was allocated between the lease and service components based on an estimation of

stand-alone selling price of each component, which maximized observable inputs. The costs associated with the service portion of the agreement are accounted for separately from the cost attributable to the equipment leases based on that allocation and thus, are not included in our right-of-use lease asset or lease liability balances. The non-lease components for each of our other classes of assets generally relate to maintenance, monitoring and security services and are not separated from their respective lease components.credit.

The lease term used for calculating our right-of-use assets and lease liabilities is determined by considering the noncancelable lease term, as well as any extension options that we are reasonably certain to exercise. The determination to include option periods is generally made by considering the activity in the region or for the rig corresponding to the respective lease, among other contract-based and market-based factors. We have used our incremental borrowing rate to discount future lease payments as the rate implicit in our leases is not readily determinable. To arrive at our incremental borrowing rate, we consider our unsecured borrowings and then adjust those rates to assume full collateralization and to factor in the individual lease term and payment structure.

Total operating lease expense for the three and six months ended June 30, 2019 was $9.5 million and $18.9 million, respectively, of which $0.8 million and $2.1 million, respectively, related to short-term leases. Total operating lease expense for the three and six months ended June 30, 2018 was $7.4 million and $15.0 million, respectively.

~~Supplemental information related to leases is as follows (in thousands, except weighted-average data):~~

~~Future minimum rental payments under noncancelable operating leases as of December 31, 2018 were as follows (in thousands):~~

~~Maturities of lease liabilities as of June 30, 2019 are as follows (in thousands):~~

Operating lease assets, including prepaid rent balances related to the GE transaction, totaling $171.0 million are included in “Other assets” in our unaudited Condensed Consolidated Balance Sheets as of June 30, 2019.

As of June 30, 2019, we had an additional operating lease for mooring equipment to be used on a rig that has not yet commenced. The agreement, which is expected to commence in September 2019, provides for fixed lease payments of approximately $12 million in the aggregate to be paid over a lease term of 9.5 years.

Although we provide contract drilling services with different types of offshore drilling rigs and also provide such services in many geographic locations, we have aggregated these operations into ~~one~~1 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.

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 ~~June 30, 2019,~~March 31, 2020, our active drilling rigs were located offshore ~~three~~3 countries in addition to the United States. Revenues by geographic area are presented by attributing revenues to the individual country ~~or areas~~ where the services were ~~performed and, unless otherwise noted, reflect earnings attributable to our floater rigs (drillships and semisubmersibles).~~performed.

The following tables provide information about disaggregated revenue by ~~primary geographical market~~country (in thousands):

	Six Months Ended June 30, 2019						Three Months Ended March 31, 2020
	Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total		Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total
United States	$	256,055	$	3,551	$	259,606	$	104,900	$	3,144	$	108,044
South America		82,423		6		82,429
Europe		64,022		4,836		68,858
Brazil								63,179		-		63,179
United Kingdom								32,599		3,245		35,844
Australia		31,470		7,885		39,355		17,188		4,915		22,103
Total	$	433,970	$	16,278	$	450,248	$	217,866	$	11,304	$	229,170

Three Months Ended June 30, 2018

Total
Contract
Drilling
Revenues

Revenues
Related to
Reimbursable
Expenses

Total

United States⁽¹⁾

$
162,202

$
1,172

$
163,374

South America

26,288

-

26,288

Europe

18,738

1,742

20,480

Australia/Asia

58,125

594

58,719

Total

$
265,353

$
3,508

$
268,861

	Three Months Ended March 31, 2019
	Total Contract Drilling Revenues		Revenues Related to Reimbursable Expenses		Total
United States	$	138,632	$	1,946	$	140,578
Brazil		53,284		30		53,314
United Kingdom		24,609		1,907		26,516
Australia		10,172		2,962		13,134
Total	$	226,697	$	6,845	$	233,542

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act allows a carryback of net operating losses generated in 2018, 2019 and 2020 to each of the five preceding taxable years. As a result of the carryback, we recognized a tax benefit of $9.7 million due to a partial release of a previously recognized valuation allowance and tax rate change.

On April 16, 2020, we announced that we elected not to make the semiannual interest payment due in respect of our 5.70% Senior Notes due 2039 (the “Notes”), which was due on April 15, 2020. Under the terms of the governing indenture, we have a 30-day grace period to make the payment. Non-payment of the interest due on the

due date was not an event of default but would become an event of default if the payment was not made within the 30-day grace period. During the grace period, we are not permitted to borrow additional amounts under our Credit Agreement.

An event of default under the indenture governing the Notes would result in a cross-default under the Credit Agreement, whereupon the Notes and our borrowings under the Credit Agreement may then be subject to acceleration. The acceleration of the Notes or our borrowings under the Credit Agreement would result in a cross-default under the indentures governing our 3.45% Senior Notes due 2023, 7.875% Senior Notes due 2025 and 4.875% Senior Notes due 2043, whereupon such notes may then be subject to acceleration, subject to a 10-day cure period.

We also announced on April 16, 2020 that we have retained the services of Lazard Frères & Co. LLC as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal advisor to assist our Board of Directors and management team in analyzing and evaluating the various alternatives with respect to our capital structure.

In April 2020, we initiated a plan to reduce the number of employees in our world-wide organization in an effort to lower operating costs and restructure our business. As a result, we announced and communicated a reduction in personnel in our corporate offices, warehouse facilities and certain of our international shorebase locations. As a result, we expect to incur incremental costs of approximately $7.0 million during the remainder of 2020, primarily in the second quarter, for severance and outplacement services related to our former employees.

In April 2020, we received a purported notice of termination by a subsidiary of Beach Energy Limited of its contract for the Ocean Onyx, which contract was scheduled to commence during the second quarter of 2020. We consider termination of the Ocean Onyx contract to be a triggering event for purposes of impairment testing, as the rig has no future contracts at this time, and we are currently preparing the rig for cold stacking. Based on our assumptions and analysis, we determined that the undiscounted probability-weighted cash flow for the Ocean Onyx was in excess of its carrying value. As a result, we concluded that the carrying value of the rig was not impaired.

On April 24, 2020, our services agreement with Loews Corporation was terminated by mutual agreement. Under the services agreement, Loews had previously provided certain administrative and technical services, such as internal auditing services and advice and assistance with respect to obtaining insurance. We are in the process of replacing certain of these functions with services obtained through other third-party providers.

On April 26, 2020, the Debtors commenced the Chapter 11 Cases. The Chapter 11 Cases are jointly administered under the caption In re Diamond Offshore Drilling, Inc., et al, Case No. 20-32307.

The Debtors filed motions with the Bankruptcy Court seeking authorization to continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the United States Bankruptcy Code (the “Code”) and orders of the Bankruptcy Court. To ensure their ability to continue operating in the ordinary course of business, the Debtors have also filed with the Bankruptcy Court a variety of motions seeking “first day” relief, including authority to continue using their cash management system, pay employee wages and benefits and pay certain vendors and suppliers in the ordinary course of business (the “First Day Motions”).

On April 27, 2020 the Bankruptcy Court approved the First Day Motions, certain of which were approved on an interim basis. A subsequent hearing to approve the First Day Motions granted on an interim basis is currently scheduled for May 27, 2020.

Pursuant to the First Day Motions, and subject to certain terms and dollar limits included therein, the Debtors were authorized to continue to use their unrestricted cash on hand, as well as all cash generated from daily operations, which is being used to continue the Debtors’ operations without interruption during the course of their

restructuring. Also pursuant to the First Day Motions, the Debtors received Bankruptcy Court authorization to, among other things and subject to the terms and conditions set forth in the applicable orders, pay certain pre-petition employee wages, salaries, health benefits and other employee obligations during their restructuring, pay certain claims relating to critical and other vendors, continue their cash management programs and insurance policies, as well as continue to honor their current customer programs. The Debtors are authorized under the Bankruptcy Code to pay post-petition expenses incurred in the ordinary course of business without seeking Bankruptcy Court approval. Until a plan of reorganization is approved and effective, the Debtors will continue to manage their properties and operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

The Debtors filed the Chapter 11 Cases with approximately $434.9 million of unrestricted cash, which they will use to fund operations in the ordinary course and administrative costs during the Chapter 11 Cases.

The filing of the Chapter 11 Cases constitutes an event of default that accelerated the Company’s obligations under the following debt instruments (collectively, the “Debt Instruments”):

~~In June 2019,~~The Debt Instruments provide that as a result of the ~~Internal Revenue Service issued final regulations with~~filing of the Chapter 11 Cases, the principal and accrued interest due thereunder shall be immediately due and payable and have been presented as ”Current maturities of long-term debt” in our unaudited Condensed Consolidated Balance Sheet at March 31, 2020. However, any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of the Debt Instruments are subject to the ~~calculation~~applicable provisions of the ~~toll charge associated with~~Bankruptcy Code.

As a result of the ~~deemed repatriation~~filing of ~~previously deferred earnings~~the Chapter 11 Cases, we received notification on April 28, 2020 that the commitment under our Credit Agreement had been reduced from $950 million to approximately $442.0 million, representing the amount of ~~our non-U.S. subsidiaries, or Transition Tax, in response to~~borrowings outstanding plus the ~~Tax Cuts and Jobs Act enacted in 2017. Based on~~value of the ~~new regulations, we recorded a net tax benefit~~letter of ~~$14.2 million in~~credit that had been issued under the ~~second quarter of 2019, primarily to reverse a previously recorded uncertain tax position related to the Transition Tax.~~

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 our audited consolidated financial statements (including the notes thereto), Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 1A, “Risk Factors” included in our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2018.~~2019. References to “Diamond Offshore,” “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 1615 floater rigs (four drillships and 1211 semisubmersibles), of which ~~three~~two rigs are currently cold-stacked. ~~The reactivation~~As of the date of this report, we are making plans to cold stack an additional two rigs, the Ocean GreatWhite and ~~upgrade of~~ the Ocean Onyx ~~is continuing, and we expect the rig to begin contract preparation activities in late 2019 for an early 2020 contract commencement.~~. The Ocean ~~Guardian~~Confidence was sold ~~during~~in February 2020. See “– Market Overview.”

On April 26, 2020, Diamond Offshore Drilling, Inc. (the “Company”) and certain of its direct and indirect subsidiaries (together with the ~~second quarter~~Company, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of ~~2019.~~the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

During the second quarter of 2019, the average price for Brent crude oil was in the high $60-per-barrel level, and overall floater demand and offshore utilization increased marginally, with industry-wide floater utilization averaging near 66% at the end of June 2019, based onThe protracted industry analyst reports. Within the floater rig class, the ultra-deepwater floaters remain the most distressed asset class, with industry-wide utilization reported at 63% at the end of the second quarter of 2019. In general, dayrates remain low compared to previous periods, as the increase in oil prices from earlier lows has not resulted in significantly higher dayrates. Industry analysts indicate that, based on historical data, utilization rates have had to increase to the 80%-range before pricing power has shifted to the drilling contractor from the customer. Some analysts believe thatdownturn affecting the offshore contract drilling ~~market will recover over~~industry sustained a further significant set-back, commencing in mid-March 2020. The COVID-19 outbreak and actions taken by businesses and governments in response to it have precipitated a lockdown in many parts of the ~~next two years, as additional offshore projects are expected~~world, leading to ~~be sanctioned~~a dramatic fall in oil demand and economic activity. In addition, amid the ongoing COVID-19 pandemic, the Organization of Petroleum Exporting Countries and other oil producing nations (“OPEC+”) were unable to ~~replace~~reach an agreement on oil production quotas, at which point Saudi Arabia and ~~gas reserves and~~Russia initiated efforts to ~~meet predicted growing energy demand. However, many~~aggressively increase production. The combination of these ~~are expected~~events created the unprecedented dual impact of a global oil demand decline coupled with the risk of a substantial increase in supply. While OPEC+ agreed in April to ~~be greenfield, or new~~cut production, downward pressure on oil prices has remained and ~~gas development, projects~~could continue for ~~which drilling does not typically commence until~~ the ~~second, third or fourth year~~foreseeable future. As a result of ~~development. Capital investments in offshore projects will also compete with onshore shale in the U.S.~~

~~During the first half of 2019, the number of contract tenders for 2020 and 2021 floater project commencements increased, primarily for work in the North Sea and Australia markets~~. ~~Industry analysts also predict that there will be additional opportunities in the West Africa market in the near term. Presently, many of these tenders~~this, crude oil prices have ~~been limited~~fallen to ~~single-well jobs, with options for future wells. Although some geographic areas appear to be improving, other markets show little or no sign of recovery at this time.~~

From a supply perspective, industry analysts have reported that despite a decrease in the global supply of floater rigs over the past four years, the offshore contract drilling market remains oversupplied. Rig attrition has slowed, with only five floaters having been retired during 2019approximately $15 per barrel as of the date of this report. ~~However, recent mergers~~Consequently, due to the low commodity price and ~~acquisitions~~uncertain global demand, many exploration and production companies, including some of our customers, have announced significant reductions in their 2020 capital spending programs.

Floater utilization, which was approximately 67% at the ~~offshore drilling~~end of the first quarter, is expected to decrease significantly as some industry ~~could result in additional rig retirements as drillers assess and optimize their fleets. Industry~~ analysts report that ~~there~~contracting activity has come to a halt as new rig tenders are ~~approximately 100 cold-stacked floaters,~~deferred or canceled. Additionally, some rigs are being released early from drilling programs or are having their contracts terminated, while other programs have been paused in response to the need for COVID-19 containment. Dayrates are also expected to decrease as customers seek lower rates on any new contracts awarded during these unprecedented times.

In April 2020, we received a purported notice of termination by a subsidiary of Beach Energy Limited (“Beach”) of its contract for the Ocean Onyx, which ~~could potentially be reactivated, but reactivation costs can be substantial and generally increase the longer a rig remains cold stacked.~~ ~~In addition, industry reports indicate that approximately 40 newbuild floaters remain on order with deliveries currently~~contract was scheduled ~~between 2019 and 2022, most of which have not yet been contracted for future work, and approximately 50 projected contracted floater rollovers are estimated~~ to ~~occur~~commence during the ~~remainder~~second quarter of ~~2019.~~2020 and represents approximately $66 million of contract drilling backlog expected to have been earned in 2020 through 2021. We do not believe that Beach has a valid or lawful right to terminate the contract or that the purported notice of termination is effective, and we intend to enforce our rights under the contract. ~~These factors provide for a continued, challenging offshore drilling market in the near term.~~

As a result of these challenges, we and other offshore drillers are actively seeking ways to drive efficiency, reduce non-productive time on rigs and provide technical innovation to customers. New rig technology, automation and other operating and supply chain efficiencies are resulting in the faster drilling and completion of wells, leading to lower well costs for customers.

See “– Contract Drilling Backlog” for future commitments of our rigs during ~~2019~~2020 through 2023.

Global rig attrition is projected by industry analysts to increase as a market recovery is not expected in the near term. During this time, drilling contractors may elect to forego upcoming special surveys of rigs rolling off contract

with no future work, resulting in the cold stacking or ultimate retirement of a rig. Historically, the longer a drilling rig remains cold stacked, the cost of reactivation increases and the likelihood of reactivation decreases.

During the first quarter of 2020, we recognized asset impairments aggregating $774.0 million to write down four of our semisubmersible rigs to their estimated fair values. If market fundamentals in the offshore oil and gas industry deteriorate further or a market recovery is further delayed, we may be required to recognize additional impairment charges in future periods. As of the date of this report, we have two cold-stacked semisubmersible rigs and are making plans to cold stack an additional two semisubmersible rigs.

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. 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 will be different than the amounts and periods shown in the tables below due to various factors. Our utilization rates, which generally approach 92-98% during contracted periods, can be adversely impacted by downtime due to various operating factors including ~~but not limited~~effects of COVID-19 and efforts to mitigate the spread of the virus, weather conditions and unscheduled repairs and maintenance. Contract drilling backlog excludes revenues for mobilization, demobilization, contract preparation and customer reimbursables. No revenue is generally earned during periods of downtime for regulatory surveys. 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 revenue expected to be recognized in the future related to unsatisfied performance obligations, which are presented in Note 23 “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 23 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 ~~July~~April 1, ~~2019~~2020 (based on information available at that time), January 1, ~~2019~~2020 (the date reported in our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2018)~~2019), and ~~July~~April 1, 2019~~2018~~ (the date reported in our Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2018~~March 31, 2019) (in ~~thousands)~~millions).

The following table reflects the amount of revenue related to our contract drilling backlog by year as of ~~July~~April 1, ~~2019 (in thousands)~~2020 (in millions).

The following table reflects the percentage of rig days committed by year as of ~~July~~April 1, ~~2019.~~2020. 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

Restructuring Costs. In April 2020, we initiated a plan to reduce the number of employees in our world-wide organization in an effort to lower operating costs and restructure our business. As a result, we expect to incur incremental costs of approximately $7.0 million during the remainder of 2020, primarily in the second quarter, for severance and outplacement services related to our former employees. In addition, we expect to incur incremental costs of approximately $55.0 million during the remainder of 2020 for attorneys, financial advisors and other professionals in connection with our Chapter 11 Cases.

Coronavirus Pandemic. The most immediate impacts and risks to our business as a result of the COVID-19 outbreak and efforts to mitigate the spread of the virus have been the safety of our personnel, as well as travel restrictions that have challenged the ability to move personnel, equipment and services to-and-from drilling rigs. In some instances, we have asked our rig crews to quarantine in-country before offshore rotations, as well as to remain in country after their offshore rotation, which has resulted in incremental costs for salaries and other employee-related expenses. In addition, we have incurred additional costs to deep-clean facilities, purchase medical supplies and personal protective equipment. To date such costs have not been significant, but we cannot predict the future financial impact of our response to the pandemic in this fluid environment.

Regulatory Surveys and Planned Downtime. Our operating income is negatively impacted when we perform certain regulatory inspections, which we refer to as a special survey, that are due every five years for most of our rigs. The inspection interval for our North Sea rigs is two-and-one-half years. In addition, our operating income is negatively impacted 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. WeDuring the remainder of 2020, we expect to spend approximately ~~380~~245 days ~~during the remainder of 2019~~ for upgrades, surveys, contract preparation and mobilization of rigs, which includes an aggregate of approximately ~~185~~200 days for ~~the completion of~~special surveys, upgrades ~~reactivation activities~~ and contract preparation for the Ocean ~~Onyx~~ ~~prior to its contract commencement and an aggregate of approximately 155 days for special surveys and rig upgrades for the~~ ~~Ocean BlackHawk~~, ~~Ocean BlackHornet~~BlackRhino and Ocean ~~BlackRhino.~~ ~~In 2020, we expect to spend an aggregate of approximately 240 days for upgrades for the~~ ~~Ocean BlackRhino~~BlackLion and ~~a special survey and upgrades for the~~ ~~Ocean BlackLion,~~approximately 7045 days for the mobilization of ~~and contract preparation for~~ the Ocean Monarch ~~prior~~and Ocean Onyx related to ~~its contract in Myanmar and approximately 50 days for mobilizations of other rigs.~~their upcoming contracts. We can provide no assurance as to the exact timing and/or duration of downtime associated with regulatory inspections, upgrades, contract preparation, rig mobilizations and other shipyard projects. See “ – Contract Drilling Backlog.”

~~Regulatory Compliance~~. In May 2019, the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement, which governs offshore drilling in the U.S. Outer Continental Shelf, or OCS, issued its final Well Control Rule on blowout preventer systems and well control regulations. The final Well Control Rule leaves 274 of the original 342 well control rule provisions unchanged, identified 68 provisions for revision and added 33 provisions to improve operations in the OCS. Based on our review of the final Well Control Rule, we do not believe that we will have any foreseeable material compliance issues and do not believe that any additional material equipment modifications will be required for our rigs currently working in the OCS.

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 $25.0 million per occurrence. We do not typically retain loss-of-hire insurance policies to cover our rigs.

In addition, we carry marine liability insurance covering certain legal liabilities, including coverage for certain personal injury claims, 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 policies our deductibles for marine liability coverage related to insurable events arising due to named windstorms in the U.S. Gulf of Mexico are $25.0 million for the first occurrence and vary in amounts ranging between $25.0 million and, if aggregate claims exceed certain thresholds, 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. Our deductibles for other marine liability coverage, including personal injury claims not related to named windstorms in the U.S. Gulf of Mexico, are $5.0 million for the first occurrence and vary in amounts ranging between $5.0 million and, if aggregate claims exceed certain thresholds, 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.

Our significant accounting policies are discussed in Note 1 of our notes to the audited consolidated financial statements included in our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2018. Effective January 1,~~2019.

~~2019, we adopted the Financial Accounting Standards Board Accounting Standards Update No. 2016-02,~~ ~~Leases~~ ~~(Topic 842), or ASU 2016-02, which, among other things, requires lessees to recognize a right of use asset and a lease liability for most leases. See Note 1 “General Information -~~ ~~Recently Adopted Accounting Pronouncements~~” and Note 10 “Leases and Lease Commitments” to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report. There were no other material changes to these policies during the six months ended June 30, 2019.

Our operating results for contract drilling services are dependent on three primary metrics or key performance indicators: revenue-earning days, rig utilization and average daily revenue. The following table presents these three key performance indicators and other comparative data relating to our revenues and operating expenses for the three-month ~~and six-month~~ periods ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~.

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
	(In thousands, except days, daily amounts and percentages)												(In thousands, except days, daily amounts and percentages)
REVENUE-EARNING DAYS ⁽¹⁾		758			825			1,492			1,633			795			734
UTILIZATION ⁽²⁾		51	%		53	%		49	%		53	%		56	%		48	%
AVERAGE DAILY REVENUE ⁽³⁾	$	273,400		$	317,200		$	290,900		$	333,700		$	273,900		$	309,000

REVENUE RELATED TO CONTRACT DRILLING SERVICES	$	207,273		$	265,353		$	433,970		$	553,279		$	217,866		$	226,697
REVENUE RELATED TO REIMBURSABLE EXPENSES		9,433			3,508			16,278			11,092			11,304			6,845
TOTAL REVENUES	$	216,706		$	268,861		$	450,248		$	564,371		$	229,170		$	233,542
CONTRACT DRILLING EXPENSE, EXCLUDING DEPRECIATION	$	224,782		$	189,321		$	392,210		$	374,010		$	184,511		$	167,429
REIMBURSABLE EXPENSES	$	9,313		$	3,414		$	16,057		$	10,884		$	11,113		$	6,743
OPERATING LOSS
Contract drilling services, net	$	(17,509	)	$	76,032		$	41,760		$	179,269		$	33,355		$	59,268
Reimbursable expenses, net		120			94			221			208			191			102
Depreciation		(88,253	)		(81,825	)		(175,151	)		(163,650	)		(93,043	)		(86,898	)
General and administrative expense		(15,294	)		(18,236	)		(32,605	)		(36,749	)		(16,345	)		(17,312	)
Impairment of assets		-			(27,225	)		-			(27,225	)		(774,028	)		-
Restructuring and separation costs		-			(1,265	)		-			(4,276	)
Gain on disposition of assets		9,436			50			5,149			560
Gain (loss) on disposition of assets														3,433			(4,287	)
Total Operating Loss	$	(111,500	)	$	(52,375	)	$	(160,626	)	$	(51,863	)	$	(846,437	)	$	(49,127	)
Other income (expense):
Interest income		1,933			2,001			4,346			3,638			389			2,414
Interest expense, net of amounts capitalized		(31,159	)		(29,585	)		(61,084	)		(57,903	)		(32,321	)		(29,925	)
Foreign currency transaction (loss) gain		(721	)		411			(1,806	)		858
Foreign currency transaction gain (loss)														207			(1,085	)
Other, net		105			262			438			842			323			333
Loss before income tax benefit		(141,342	)		(79,286	)		(218,732	)		(104,428	)		(877,839	)		(77,390	)
Income tax benefit		27,354			10,012			31,416			54,475			15,899			4,062
NET LOSS	$	(113,988	)	$	(69,274	)	$	(187,316	)	$	(49,953	)	$	(861,940	)	$	(73,328	)

Net results for the ~~second~~first quarter of ~~2019~~2020 decreased ~~$44.7~~$788.6 million compared to the ~~second~~first quarter of ~~2018, reflecting~~2019, primarily due to an impairment charge of $774.0 million recognized in the first quarter of 2020 combined with lower margins from our contract drilling ~~services, primarily driven by lower contract drilling revenue combined with an increase in contract drilling expenses.~~services. Contract drilling services contributed ~~a $17.5~~operating income of $33.4 million ~~operating loss~~ during the ~~second~~first quarter of ~~2019,~~2020 compared to operating income of ~~$76.0~~$59.3 million in the ~~second~~first quarter of ~~2018.~~2019. Our results for the ~~second~~first quarter of ~~2019~~2020 were also negatively impacted by higher depreciation expense of ~~$6.4~~$6.1 million, primarily due to capital

expenditures made ~~since the latter part of 2018 and the completion of software implementation projects.~~during 2019. These unfavorable impacts to our net results were partially offset by a ~~$9.4~~$3.5 million ~~net~~ gain on recognized for the ~~disposition~~sale of ~~assets~~ a drilling rig and an incremental tax benefit of ~~$17.3~~$11.8 million recognized during the ~~second~~first quarter of ~~2019, combined with the absence of an impairment charge and restructuring costs recorded in the second quarter of 2018.~~ 2020.

Operating Results. Contract drilling revenue decreased ~~$58.1~~$8.8 million during the ~~second~~first quarter of ~~2019~~2020 compared to the ~~second~~first quarter of ~~2018,~~2019, primarily due to lower average daily revenue earned ($~~33.2~~28.0 million), partially offset by the effect of ~~67 fewer~~61 incremental revenue-earning days ($~~21.3~~19.1 million) ~~and~~. The decrease in average daily revenue is primarily due to the ~~absence~~completion of ~~$3.6~~a long-term contract for the Ocean BlackHornet in July 2019, which was at a significantly higher dayrate than the rig’s current contract, partially offset by $8.8 million of revenue recognized during the first quarter of 2020 related to the reimbursement of withholding taxes related to one of our rigs in ~~loss-of-hire insurance proceeds recognized~~Brazil. Revenue-earning days increased, compared to the first quarter of 2019, primarily due to incremental revenue-earning days for the Ocean Endeavor (90 days), which was reactivated for a new contract that commenced during the second quarter of ~~2018 related to contract terminations for two jack-up rigs in a prior year. Comparing the two quarters, average daily revenue decreased primarily due to a lower dayrate earned by the~~ ~~Ocean GreatWhite, which commenced operations under a new contract in the U.K. during the first quarter of 2019. Revenue-earning days decreased, compared to the second quarter of 2018, due to incremental~~2019, and less downtime for planned shipyard projects and mobilization of rigs ~~(95 days) and fewer revenue-earning days for the~~ ~~Ocean Guardian, which operated throughout the second quarter of 2018 but was sold in 2019 (91~~(77 days), partially offset by the ~~favorable~~unfavorable impact of ~~fewer~~incremental non-productive days ~~(119~~(58 days). ~~Unplanned downtime for the~~ ~~Ocean Monarch~~ ~~for rig maintenance in the second quarter of 2019 was more than offset by lower unplanned downtime for the~~ ~~Ocean Courage, which was out-of-service for repairs during the second quarter of 2018, and incremental revenue-earning days for the~~ ~~Ocean Apex,~~ ~~which was warm stacked during the 2018 period.~~

Contract drilling expense, excluding depreciation, increased ~~$35.5~~$17.1 million during the ~~second~~first quarter of 2020 compared to the first quarter of 2019, ~~compared to the second quarter of 2018,~~ primarily due to ~~incremental amortization of previously deferred contract preparation and mobilization costs ($30.2 million) and increased~~higher costs for ~~our current floater fleet associated with~~repairs and maintenance ($7.6 million), labor and personnel ($~~6.7~~7.3 million), primarily related to the newly reactivated Ocean Endeavor and Ocean Onyx, equipment rental ($~~2.8~~2.2 million) and ~~overhead, shorebase support and~~inspections ($2.2 million), partially offset by a net reduction in other rig costs ($~~4.2~~2.2 million). ~~These increases were partially offset by reduced costs for the previously-owned~~ ~~Ocean Guardian~~ ~~($6.8 million).~~

Impairment of Assets. During the ~~second~~first quarter of ~~2018,~~ 2020, we ~~recorded an~~evaluated five of our drilling rigs that had indicators of impairment ~~loss~~ and determined that the carrying values of ~~$27.2 million to recognize a reduction in fair value (less costs to sell)~~four of the ~~Ocean Scepter~~,rigs were impaired. As a ~~jack-up rig that was subsequently sold in July 2018.~~ result, we recognized an aggregate impairment charge of $774.0 million during the quarter. See ~~Note 3 “Impairment of Assets”~~Notes 4 and 7 to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report.

Gain ~~(loss)~~(Loss) on ~~disposition~~Disposition of ~~assets.~~ Assets. During the ~~second~~first quarter of ~~2019,~~2020, we ~~recognized~~sold the Ocean Confidence, a previously impaired semisubmersible rig that was cold stacked in 2015, for a net pre-tax gain of ~~$14.3~~$3.5 million. In the first quarter of 2019, we recognized a $4.3 million loss on the sale of ~~the~~ ~~Ocean Guardian, a previously impaired rig. Additionally, we recognized an aggregate net pre-tax loss of $4.9 million on the disposal of~~ certain ~~other property and~~scrapped rig equipment ~~during the quarter.~~ .

Income Tax Benefit. On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act allows a carryback of net operating losses generated in 2018, 2019 and 2020 to each of the five preceding taxable years. As a result of the carryback, we recognized a tax benefit of $9.7 million due to a partial release of a previously recognized valuation allowance and tax rate change.

We recorded a net income tax benefit of ~~$27.4~~$15.9 million (1.8% effective tax rate) for the ~~second~~first quarter of ~~2019,~~2020, compared to an income tax benefit of ~~$10.0~~$4.1 million (5.3% effective tax rate) for the same quarter of 2018. In June 2019, the Internal Revenue Service, or IRS, issued final regulations with respect to the calculation of the toll charge associated with the deemed repatriation of previously deferred earnings of our non-U.S. subsidiaries, or Transition Tax, in response to the Tax Cuts and Jobs Act enacted in 2017, commonly referred to as the Tax Reform Act. Based on the new regulations, we recorded a net tax benefit of $14.2 million2019. The decrease in the ~~second quarter of 2019.~~

~~Other than the adjustment to the Transition Tax liability, the difference in the amount of~~effective tax ~~benefit recognized between the periods~~rate was ~~in large part~~primarily due to ~~the~~an increase in valuation allowance for tax attributes that are not likely to be realized and our mix of ~~our~~ domestic and international pre-tax ~~earnings~~profits and losses, ~~for the periods.~~

Net results for the first half of 2019 decreased $137.4 million compared to the first half of 2018, reflecting lower margins from our contract drilling services, primarily driven by lower contract drilling revenue. Contract drilling services contributed operating income of $41.8 million during the first half of 2019, compared to $179.3 million in the first half of 2018. Our results for the first six months of 2019 were also negatively impacted by higher depreciation expense of $11.5 million, primarily due to recent capital expenditures and the completion of software implementation projects, and a lower income tax benefit recognized, compared to the prior year period ($23.1 million). These unfavorable impacts to our net results were partially offset by a $5.2 million net gain on the disposition of assets during the first half of 2019 and the absence of impairment and restructuring charges recorded in the 2018 period.

~~Operating Results.~~ Contract drilling revenue decreased $119.3 million during the first half of 2019 compared to the same period of 2018, primarily due to lower average daily revenue earned ($63.9 million), the effect of 141 fewer revenue-earning days ($47.0 million) and the absence of $8.4 million in loss-of-hire insurance proceeds recognized during the 2018 period. Comparing the two periods, average daily revenue decreased primarily due to lower dayrates earned by some of our rigs as a result of renegotiating certain existing contracts during 2018 and a lower dayrate earned by the ~~Ocean GreatWhite~~, which commenced operations under a new contract in the U.K during the first quarter of 2019. Revenue-earning days decreased, compared to the prior year period, due to incremental downtime for planned shipyard projects (155 days) and fewer revenue-earning days for the ~~Ocean Guardian~~ ~~(120 days), which was sold in April 2019,~~ partially offset by the ~~favorable impact of fewer mobilization and non-productive days (135 days).~~

Contract drilling expense, excluding depreciation, increased $18.2 million during the first half of 2019 compared to the first half of 2018, primarily due to incremental amortization of previously deferred contract preparation and mobilization costs ($34.9 million), combined with increased costs for our current floater fleet for equipment rental ($2.8 million) and overhead, shorebase support and other rig costs ($3.6 million). These increases were partially offset by reduced costs for cold-stacked and previously-owned rigs, including the sold ~~Ocean Guardian~~ ~~($14.1 million), as well as lower costs for labor and personnel ($1.9 million) and fuel ($7.1 million) for our current fleet.~~

~~Restructuring and Separation Costs.~~ In late 2017, our management approved and initiated a plan to restructure our worldwide operations, which also included a reduction in workforce at our corporate facilities and onshore bases. During the first half of 2018, we recognized $4.3 million in restructuring and other employee separation related costs pursuant to this plan. Restructuring activities associated with the plan were substantially completed in 2018.

~~Gain (loss) on disposition of assets.~~ ~~In April 2019, we sold the previously-impaired~~ ~~Ocean Guardian~~ and recognized a pre-tax gain of $14.3 million. In addition, during the first six months ended June 30, 2019, we recognized an aggregate net pre-tax loss of $9.2 million on the disposal of certain other property and equipment.

~~Income Tax Benefit~~. We recorded a net income tax benefit of $31.4 million for the first six months of 2019, compared to an income tax benefit of $54.5 million for the same period of 2018. Income tax benefit for the 2018 period included a tax benefit of $43.3 million due to the reversal of an uncertain tax position related to the Transition Tax as a result of further guidance issued by the IRS that clarified certain of our tax positions taken and, consequently, allowed us to reverse the previously recognized liability. Pursuant to final regulations issued by the IRS in June 2019, we reduced our Transition Tax liability and recorded a net $14.2 million income tax benefit associated with the reduction in our estimate.

~~Other than these discrete tax adjustments, the difference in the amount of income tax~~ benefit recognized infrom the ~~2019 period, compared to the comparable period of 2018, was in large part due to the mix of our domestic and international pre-tax earnings and losses for the periods.~~CARES Act.

In April 2020, as a result of continued challenges in the offshore drilling industry and the current uncertainty in the global markets resulting from, among other things, the COVID-19 outbreak and a significant decline in oil prices, we commenced the Chapter 11 Cases described in Note 13 “Subsequent Events” to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report and “– Bankruptcy Filing”.

Although we anticipate that the Chapter 11 Cases will help address our liquidity concerns, uncertainty remains over the Bankruptcy Court's approval of a plan of reorganization, and therefore substantial doubt exists over our ability to continue as a going concern at this time. Financial information in this report has been prepared on the basis that we will continue as a going concern, which presumes that we will be able to realize our assets and discharge our liabilities in the normal course of business as they come due. Financial information in this report does not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if we were unable to realize our assets and settle our liabilities as a going concern in the normal course of operations. Such adjustments could be material. Our long-term liquidity requirements, the adequacy of capital resources and ability to continue as a going concern are difficult to predict at this time and ultimately cannot be determined until a Chapter 11 plan has been confirmed, if at all, by the

Bankruptcy Court. If our future sources of liquidity are insufficient, we could face substantial liquidity constraints and be unable to continue as a going concern and will likely be required to significantly reduce, delay or eliminate capital expenditures, implement further cost reductions, or seek other financing alternatives.

We ~~principally rely~~have historically relied on our cash flows from operations and cash reserves to meet our liquidity ~~needs. We may also utilize borrowings under~~needs, which primarily include the servicing of our ~~credit agreements that provide for maximum borrowings~~debt repayments and interest payments, as well as funding our working capital requirements and capital expenditures. As of ~~up to $1.2 billion, all~~

~~of which was available to us as of July 26, 2019. In addition, as of July~~April 1, ~~2019,~~2020, our contractual backlog was ~~$2.0~~$1.4 billion, of which $0.5 billion is expected to be realized during the ~~second half~~remaining nine months of ~~2019.~~

~~Our worldwide~~ ~~earnings~~ ~~and cash balances are available to finance both our domestic and foreign activities. We record~~2020. Also, during the ~~withholding income tax impact, if any, associated with the potential distribution~~fourth quarter of ~~earnings of our foreign subsidiaries; however,~~2020, we ~~have not provided income tax on the outside basis difference of our international subsidiaries as management does not intend to dispose of these subsidiaries. We~~ expect to ~~utilize~~receive a $25.0 million payment from a customer for a gross margin commitment pursuant to terms of an existing ~~structuring alternatives to mitigate any potential liability should~~contract if the commitment is not satisfied by the signing of a ~~disposition take place.~~

new contract commencing in 2020. At ~~June 30, 2019,~~March 31, 2020, we had cash available for current operations of ~~$147.5 million and investments in U.S. Treasury bills of $149.9~~$499.1 million.

We have historically invested a significant portion of our cash flows in the enhancement of our drilling fleet. The amount of cash required to meet our capital commitments is determined by evaluating the need to upgrade our rigs to meet specific customer requirements and our ongoing rig equipment enhancement/replacement programs. We make periodic assessments of our capital spending programs based on current and expected industry conditions and make adjustments to them if required.

Based on our cash available and contract drilling backlog, we believe our 2019 capital spending and debt service requirements will be funded from our cash and cash equivalents, future operating cash flows and borrowings under our credit agreements, as needed. We expect, based on our current forecast, to utilize a portion of the availability under our credit agreements, commencing in the first half of 2020, to meet our short-term liquidity requirements. See “– Sources and Uses of Cash – ~~Rig Reactivation, Upgrades and Other Capital Expenditures~~.”

Depending on market conditions, we may, from time to time, purchase shares of our common stock in the open market or otherwise. We did not purchase any shares of our outstanding common stock during the six-month period ended June 30, 2019.

We may, from time to time, issue debt or equity securities, or a combination thereof, to finance capital expenditures, the acquisition of assets and businesses or for general corporate purposes. We have an effective automatic shelf registration statement under which we may publicly issue debt, equity or hybrid securities. Our ability to access the capital markets by issuing debt or equity securities will be dependent on our results of operations, our current financial condition, current credit ratings, current market conditions and other factors beyond our control.

During the ~~six-month period ended June 30, 2019,~~first quarter of 2020, net cash usage for operating activities and capital expenditures was ~~$2.7~~$22.8 million and ~~$172.3~~$74.9 million, respectively. Our primary sources of cash during the same period were ~~$152.9~~$436.0 million in ~~proceeds from maturities of marketable securities, net of purchases,~~borrowings under our credit facility and ~~$15.6 million in~~ proceeds ~~from the disposition of assets, primarily~~ from the sale of the Ocean ~~Guardian.~~Confidence of $4.6 million.

Cash Flow from Operations. Cash flow from operations for the ~~six-month period ended June 30, 2019~~first quarter of 2020 decreased ~~$133.5~~$25.7 million compared to the ~~six-month period ended June 30, 2018,~~first quarter of 2019, primarily due to ~~lower cash receipts for contract drilling services ($143.7 million) and~~ higher ~~cash expenditures for interest and bank fees ($3.2 million) and income tax payments,~~ net ~~of refunds ($6.0 million), partially offset by a net decrease in~~ cash expenditures related to contract drilling, shorebase support and general and administrative costs ($~~19.4~~44.2 million). The incremental cash used for operations during the first quarter of 2020 was partially offset by an increase in cash receipts for contract drilling services ($20.1 million) and lower foreign income tax payments, net of refunds ($1.6 million).

~~Rig Reactivation,~~ Upgrades and Other Capital Expenditures. As of the date of this report, we expect cash capital expenditures ~~in 2019~~for the remaining nine months of 2020 to be approximately ~~$360~~$115 million to ~~$380~~$135 million for ~~projects under our capital maintenance and replacement programs, including~~a total spend of approximately $190 million to $210 million in 2020. Planned spending for the remainder of 2020 primarily consists of equipment upgrades for the Ocean ~~BlackHawk~~BlackRhino , andOcean ~~BlackHornet~~BlackLion. ~~and~~ ~~Ocean Courage~~ ~~and other large shipyard projects. In addition, other specific projects for 2019 include (i) approximately $110 million in capitalized costs associated with the reactivation and upgrade of the~~ ~~Ocean Onyx~~ ~~and (ii) approximately $20 million associated with the reactivation of the~~ ~~Ocean Endeavor~~.

At ~~June 30, 2019~~March 31, 2020, we had no significant purchase obligations, except for those related to our direct rig operations, which arise during the normal course of business.

Other Obligations. As of ~~June 30, 2019,~~March 31, 2020, the total net unrecognized tax benefits related to uncertain tax positions was ~~$63.5~~$245.6 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.

~~We have various obligations corresponding to our lease arrangements.~~ SeeNote ~~10 “Leases~~9 “Credit Agreements and ~~Lease Commitments”~~Credit Ratings” to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this ~~report.~~

~~Our current corporate~~report for a discussion of the recent downgrades of our credit ratings from S&P Global Ratings, or S&P, and Moody’s Investor Services, or Moody’s, are B and B2, respectively, and our current senior unsecured notes credit rating from Moody’s is B3. The rating outlook from both S&P and Moody’s is negative. These credit ratings are below investment grade and could raise our cost of financing. As a consequence, we may not be able to issue additional debt in amounts and/or with terms that we consider to be reasonable. These ratings could limit our ability to pursue other business opportunities.ratings.

~~We were contingently liable as~~See Note 10 “Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in Item 1 of ~~June 30, 2019 in the amount~~Part I of ~~$41.7 million under certain tax, customs, performance and value-added tax, or VAT, bonds and letters~~this report for a discussion of credit. Agreements relating to approximately $33.2 million of tax and customs bonds can require collateral at any time. As of June 30, 2019, we had not been required to make any collateral deposits with respect to these agreements. The remaining agreements cannot require collateral except in events of default. Banks have issued letters of credit on our ~~behalf securing certain of these bonds. The table below provides a list of these obligations in U.S. dollar equivalents and their time to expiration (in thousands).~~other commercial commitments.

For the Years Ending December 31,

Total

2019 ⁽¹⁾

2020

2021

2022

Other Commercial Commitments

Tax bonds

$
25,114

$
5,949

$
-

$
3,394

$
15,771

Custom bonds

9,308

8,382

742

184

—

Performance bonds

7,100

—

1,000

6,100

—

VAT bonds

227

227

-

—

—

Total obligations

$
41,749

$
14,558

$
1,742

$
9,678

$
15,771

At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had no off-balance sheet debt or other off-balance sheet arrangements.

See Note 1 “General Information – Recently Adopted Accounting Pronouncements” ~~and “~~ ~~– Accounting Pronouncements Not Yet Adopted”~~ to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of recently issued accounting pronouncements.

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, 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 under “Risk Factors” in Item 1A in our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2018~~2019 and Item 1A, “Risk Factors,” included in Part II of this report.

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. We monitor our sensitivity to interest rate risk by evaluating the change in the value of our financial assets and liabilities due to fluctuations in interest rates. The evaluation provides the sensitivity of the market value of our financial instruments to selected changes in market rates and prices which we believe are reasonably possible over a one-year period. This sensitivity analysis estimates the change in the market value of our interest sensitive liabilities that were held on March 31, 2020 and December 31, 2019, due to instantaneous parallel shifts in the yield curve of 100 basis points, with all other variables held constant.

Our existing senior notes have been issued at fixed rates, and as such, interest expense would not be impacted by interest rate shifts. However, changes in market interest rates are reflected in the fair value of the debt. The impact of a 100-basis point increase in interest rates on fixed rate debt would result in a decrease in market value of $11.0 million and $89.7 million as of March 31, 2020 and December 31, 2019, respectively. A 100-basis point decrease would result in an increase in market value of $11.6 million and $102.0 million as of March 31, 2020 and December 31, 2019, respectively.

There were no other material changes in our market risk components for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. See “Quantitative and Qualitative Disclosures About Market Risk” included in Item 7A of our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2018~~2019 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 ~~June 30, 2019.~~March 31, 2020. Based on their participation in that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of ~~June 30, 2019.~~March 31, 2020.

There were no changes in our internal control over financial reporting identified in connection with the foregoing evaluation that occurred during our ~~second~~first fiscal quarter of ~~2019~~2020 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 910 “Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report. In addition, information related to the Chapter 11 Cases that we filed in the Bankruptcy Court on April 26, 2020 is included in Note 13 “Subsequent Events – Bankruptcy Filing” 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~~10-K/A for the year ended December 31, ~~2018~~2019 includes a detailed discussion of certain material risk factors facing our company. InThe additional risk factors presented below describes additional risk factors and should be read in conjunction with the Risk Factors included under Item 1A of our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K/A for the ~~quarter~~year ended ~~March~~December 31, ~~2019,~~2019.

The Chapter 11 Cases may have a material adverse impact on our business, financial condition, results of operations, and cash flows. In addition, the Chapter 11 Cases may have a material adverse impact on the trading price and may result in the cancellation and discharge of our securities, including our common stock. If approved by the Bankruptcy Court, a plan of reorganization will govern distributions to and the recoveries of holders of our securities.

We engaged financial and legal advisors to assist us in, among other things, analyzing various strategic alternatives to our capital structure. These efforts led to the commencement of the Chapter 11 Cases in the Bankruptcy Court on April 26, 2020.

The Chapter 11 Cases could have a material adverse effect on our business, financial condition, results of operations and liquidity. So long as the Chapter 11 Cases continue, our management may be required to spend a significant amount of time and effort dealing with the restructuring while at the same time attending to our business operations. Bankruptcy Court protection and operating as debtors in possession, also may make it more difficult to retain management and the key personnel necessary to the success and growth of our business. In addition, during the pendency of the Chapter 11 Cases, our customers and suppliers might lose confidence in our ability to reorganize our business successfully and may seek to establish alternative commercial relationships, which may cause, among other things, our suppliers, vendors, counterparties and service providers to renegotiate the terms of our agreements, attempt to terminate their relationship with us or require financial assurances from us. Customers may lose confidence in our ability to provide them the level of service they expect, resulting in a significant decline in our revenues and cash flow.

If we ~~restated one~~are not able to obtain confirmation of a Chapter 11 plan of reorganization, or if current liquidity is insufficient or exit financing is not available, we could be required to liquidate under Chapter 7 of the Bankruptcy Code.

In order to successfully emerge from Chapter 11 bankruptcy protection, we must obtain confirmation of a Chapter 11 plan of reorganization by the Bankruptcy Court. If confirmation by the Bankruptcy Court does not occur, we could be forced to liquidate under Chapter 7 of the Bankruptcy Code.

There can be no assurance that our current cash position and amounts of cash from future operations will be sufficient to fund operations. In the event that we do not have sufficient cash to meet our liquidity requirements or exit financing is not available, we may be required to seek additional financing. There can be no assurance that such ~~risk factor.~~ Noadditional financing would be available, or, if available, would be available on acceptable terms. Failure to secure any necessary exit financing or additional financing would have a material ~~changes have been~~adverse effect on our operations and ability to continue as a going concern.

Upon a showing of cause, the Bankruptcy Court may convert our Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to ~~such risk factors~~our creditors than those provided for in a plan of reorganization because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern, (ii) additional administrative expenses involved in the appointment of ~~June 30, 2019.~~a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

We are subject to the risks and uncertainties associated with our Chapter 11 proceedings.

As more fully described elsewhere in this report, the Debtors filed voluntary petitions to reorganize under Chapter 11 on April 26, 2020. During our Chapter 11 Cases, we plan to continue to operate our business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11. As a consequence of our Chapter 11 filing, our operations, including our ability to develop and execute our business plan, and our continuation as a going concern, will be subject to the risks and uncertainties associated with bankruptcy. These risks include, but are not limited to, the following:

Delays in the Chapter 11 proceedings increase the risks of our inability to reorganize our business and emerge from bankruptcy and may increase our costs associated with the bankruptcy process.

31These risks and uncertainties could affect our business and operations in various ways. For example, negative publicity associated with the Chapter 11 proceedings could adversely affect our relationships with our vendors, suppliers, service providers, customers, employees and other third parties, which in turn could adversely affect our operations and financial condition. In particular, critical suppliers, vendors and customers may determine not to do business with us due to the Chapter 11 proceedings. In addition, certain transactions may also require the consent of lenders under any subsequent debtor-in-possession financing. Also, during the pendency of any Chapter 11 proceedings, we will need the prior approval of the Bankruptcy Court for certain transactions outside the ordinary course of business, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Additionally, losses of key personnel or erosion of employee morale could have a material adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations. Because of the risks and uncertainties associated with a voluntary filing for relief under Chapter 11 of the Bankruptcy Code and the related proceedings, we cannot accurately predict or quantify the ultimate impact that events that occur during our Chapter 11 Cases may have on our business, financial condition and results of operations, and there is no certainty as to our ability to continue as a going concern.

Any plan of reorganization that we may implement will be based in large part upon assumptions and analyses developed by us; if these assumptions and analyses prove to be incorrect, our plan may be unsuccessful in its execution.

Any plan of reorganization that we may implement could affect both our capital structure and the ownership, structure and operation of our businesses and will reflect assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we consider appropriate under the circumstances. Whether actual future results and developments will be consistent with our expectations and assumptions depends on a number of factors, including but not limited to:

The failure of any of these factors could materially adversely affect the successful reorganization of our business.

In addition, any plan of reorganization will rely upon financial projections, including with respect to revenues, earnings, capital expenditures, debt service and cash flow. Financial forecasts are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts will not be entirely accurate. The forecasts may be even more speculative than normal, because they may involve fundamental changes in the nature of our capital structure. Accordingly, we expect that our actual financial condition and results of operations will differ, perhaps materially, from what we have anticipated. Consequently, there can be no assurance that the results or developments contemplated by any plan of reorganization we may implement will occur or, even if they do occur, that they will have the anticipated effects on us and our subsidiaries or our business or operations. The failure of any such results or developments to materialize as anticipated could materially adversely affect the successful execution of any plan of reorganization.

As a result of the Chapter 11 Cases, the realization of our assets and liquidation of our liabilities are subject to uncertainty, and our historical financial information will not be indicative of our future financial performance.

If a plan of reorganization is ultimately confirmed by the Bankruptcy Court, our capital structure will likely be significantly altered under such plan (whether or not following a sale of our business or certain of our material assets pursuant to Section 363 of the Bankruptcy Code). Under fresh-start reporting rules that may apply to us upon the effective date of a plan of reorganization, our assets and liabilities would be adjusted to fair values and our accumulated deficit would be restated to zero. Accordingly, if fresh-start reporting rules apply, our financial condition and results of operations following our emergence from Chapter 11 would not be comparable to the financial condition and results of operations reflected in our historical financial statements. Further, a plan of reorganization could materially change the amounts and classifications reported in our consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

While operating under the protection of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, we may seek a sale of our business or certain of our material assets pursuant to Section 363 of the Bankruptcy Code in conjunction with, or instead of, a plan of reorganization. Any sales or disposals of assets and liquidations or settlements of liabilities may be for amounts other than those reflected in our consolidated financial statements. In connection with the Chapter 11 Cases, the development of a plan of reorganization and/or sale of our business or certain of our material assets pursuant to Section 363 of the Bankruptcy Code, it is also possible that additional restructuring and related charges may be identified and recorded in future periods. Such sales, disposals, liquidations, settlements or charges could be material to our consolidated financial position and results of operations in any given period.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from, among other things, substantially all debts arising prior to consummation of a plan of reorganization. With few exceptions, all claims against the Debtors that arose prior to the commencement of the bankruptcy proceedings or before consummation of the plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the plan of reorganization. Subject to the terms of the plan of reorganization and orders of the Bankruptcy Court, any claims not ultimately discharged pursuant to the plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis.

Operating under Chapter 11 may restrict our ability to pursue our business strategies.

Under Chapter 11, transactions outside the ordinary course of business will be subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond in a timely manner to certain events or take advantage of certain opportunities. We must obtain Bankruptcy Court approval to, among other things:

The pursuit of the Chapter 11 Cases has consumed, and will continue to consume, a substantial portion of the time and attention of our corporate management and will impact how our business is conducted, which may have an adverse effect on our business and results of operations,and we may face increased levels of employee attrition.

The requirements of the Chapter 11 Cases have consumed and will continue to consume a substantial portion of our corporate management’s time and attention and leave them with less time to devote to the operations of our business. This diversion of corporate management’s attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the Chapter 11 Cases are protracted.

During the pendency of the Chapter 11 proceedings, our employees will face considerable distraction and uncertainty, and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could have a material adverse effect on our ability to effectively, efficiently and safely conduct our business, and could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our business and on our financial condition and results of operations. The loss of the services of any members of our senior management could impair our ability to execute our strategy and, as a result, could have a material adverse effect on our financial condition and results of operations.

Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. It is impossible to predict at this time whether our common stock will be cancelled or if holders of such common stock will receive any distribution with respect to, or be able to recover any portion of, their investments.

We have a significant amount of indebtedness that is senior to our common stock in our capital structure. It is unclear at this stage of the Chapter 11 Cases if any plan of reorganization would allow for distributions with respect to our common stock and other outstanding equity interests. It is possible that these equity interests may be cancelled and extinguished upon the approval of the Bankruptcy Court and the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests. In the event of a cancellation of these equity interests, amounts invested by such holders in our outstanding equity securities will not be recoverable. Consequently, our currently outstanding common stock would have no value. Trading prices for our common stock are very volatile and may bear little or no relationship to the actual recovery, if

any, by the holders of such securities in the Chapter 11 Cases. Accordingly, we urge that extreme caution be exercised with respect to existing and future investments in our equity securities and any of our other securities.

We have received notice of the New York Stock Exchange (“NYSE”) determining to commence proceedings to delist our common stock. Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks.

As a consequence of the Chapter 11 Cases, on April 27, 2020, the NYSE suspended trading in our common stock at the market opening. We received written notice from the NYSE that it had determined to commence proceedings to delist our common stock because we are no longer suitable for listing pursuant to Listed Company Manual Section 802.01D as a result of the filing of the Chapter 11 Cases. Since April 28, 2020, our common stock has been quoted on the OTC Pink Open Market under the symbol “DOFSQ.” We can provide no assurance that our common stock will continue to trade on this market, whether broker-dealers will continue to provide public quotes of our common stock on this market, whether the trading volume of our common stock will be sufficient to provide for an efficient trading market or whether quotes for our common stock will continue on this market in the future. These recent developments could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell shares of our common stock.

The impacts of the COVID-19 pandemic and efforts to mitigate the spread of the virus and the failure of certain oil producing nations to reach an agreement on oil production quotas in early 2020 have materially adversely affected and could continue to materially adversely affect our operations and financial results.

The novel coronavirus, or COVID-19, outbreak and actions taken by businesses and governments in response to it have precipitated a lockdown in many parts of the world, leading to a dramatic fall in economic activity and the demand for oil. The COVID-19 pandemic has negatively impacted the global economy and disrupted financial markets and international trade, resulting in increased unemployment levels and significantly impacting global supply chains and travel networks. In the midst of the ongoing COVID-19 pandemic, the Organization of Petroleum Exporting Countries and other oil producing nations, or OPEC+, were unable to reach an agreement on oil production quotas, at which point Saudi Arabia and Russia initiated efforts to aggressively increase production. The combination of these events created the unprecedented dual impact of a global oil demand decline coupled with the risk of a substantial increase in supply. While OPEC+ agreed in April 2020 to cut production, downward pressure on oil prices has remained and could continue for the foreseeable future.

These events have materially negatively affected and are expected to continue to materially negatively affect our business. Due to the impact on demand and resulting downward pressure on commodity prices, our customers may delay or cancel planned drilling campaigns or seek to terminate existing contracts. In addition, Federal, state, and local governments, as well as foreign countries in which we operate, have implemented various mitigation measures, including travel restrictions, border closings, restrictions on public gatherings, shelter-in-place restrictions and limitations on business. Although we are considered an essential business, some of these actions have impacted our operations, causing us to find workarounds to normal processes to staff our offshore drilling rigs and to conduct our business due to shelter-in-place restrictions for our corporate office and many of our international shorebase locations. Given that the situation surrounding the COVID-19 pandemic remains fluid, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist, the extent of the impact they will have on our results of operations, financial condition and liquidity, or the pace of any subsequent recovery. However, the potential for a materially adverse impact on our results of operations, financial condition, and liquidity increases the longer the COVID-19 pandemic continues to impact global and U.S. economic conditions.

See “ – We can provide no assurance that our drilling contracts will not be terminated early or that our current backlog of contract drilling revenue will be ultimately realized.”included under Item 1A of our Annual Report on Form 10-K/A for the year ended December 31, 2019.

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, $0.01 par value per share		DODOFSQ*		~~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 Comprehensive ~~Income or~~ Loss	5
		Condensed Consolidated Statements of Stockholders’ Equity	6
		Condensed Consolidated Statements of Cash Flows	87
		Notes to Unaudited Condensed Consolidated Financial Statements	98

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	30

	ITEM 4.	Controls and Procedures	30

PART II. OTHER INFORMATION			31

	ITEM 1.	Legal Proceedings	31

	ITEM 1A.	Risk Factors	31

	ITEM 6.	Exhibits	3236

SIGNATURES			3337

	Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Employee and director:
Stock appreciation rights		994		1,144		1,008		1,207
Restricted stock units		1,273		1,194		1,151		1,133

	Three Months Ended March 31,
	2020		2019
Employee and director:
Stock appreciation rights		918		1,022
Restricted stock units		912		1,027

	Six Months Ended June 30, 2019
Operating cash flows used for operating leases	$	20,659
Right-of-use assets obtained in exchange for lease liabilities		16,300
Weighted-average remaining lease term	7.0 years
Weighted-average discount rate		8.63	%


☒	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 June 30, 2019
										Accumulated
					Additional					Other								Total
	Common Stock				Paid-In		Retained			Comprehensive			Treasury Stock					Stockholders’
	Shares		Amount		Capital		Earnings			Gains (Losses)			Shares		Amount			Equity
April 1, 2019		144,606,992	$	1,446	$	2,019,555	$	1,696,087		$	2			7,026,789	$	(205,214	)	$	3,511,876
Net loss		—		—		—		(113,988	)		—			—		—			(113,988	)
Stock-based compensation, net of tax		157,133		2		1,540		—			—			46,709		(525	)		1,017
Net loss on investments		—		—		—		—			(6	)		—		—			(6	)
Net loss on derivative financial instruments		—		—		—		—			(2	)		—		—			(2	)
June 30, 2019		144,764,125	$	1,448	$	2,021,095	$	1,582,099		$	(6	)		7,073,498	$	(205,739	)	$	3,398,897

	Three Months Ended June 30, 2018
										Accumulated
					Additional					Other								Total
	Common Stock				Paid-In		Retained			Comprehensive			Treasury Stock					Stockholders’
	Shares		Amount		Capital		Earnings			Gains (Losses)			Shares		Amount			Equity
April 1, 2018		144,249,563	$	1,442	$	2,012,993	$	1,969,006		$	(7	)		6,906,592	$	(203,802	)	$	3,779,632
Net loss		—		—		—		(69,274	)		—			—		—			(69,274	)
Anti-dilution adjustment		—		—		—		3			—			—		—			3
Stock options exercised		3,773		—		—		—			—			—		—			—
Stock-based compensation, net of tax		120,670		2		869		—			—			36,498		(532	)		339
Net gain on investments		—		—		—		—			31			—		—			31
Net loss on derivative financial instruments		—		—		—		—			(1	)		—		—			(1	)
June 30, 2018		144,374,006	$	1,444	$	2,013,862	$	1,899,735		$	23			6,943,090	$	(204,334	)	$	3,710,730

	Six Months Ended June 30, 2018
										Accumulated
					Additional					Other								Total
	Common Stock				Paid-In		Retained			Comprehensive			Treasury Stock					Stockholders’
	Shares		Amount		Capital		Earnings			Gains (Losses)			Shares		Amount			Equity
December 31, 2017		144,085,292	$	1,441	$	2,011,397	$	1,964,497		$	(5	)		6,857,510	$	(203,069	)	$	3,774,261
Impact of change in accounting principle		—		—		—		(14,812	)		—			—		—			(14,812	)
Adjusted balance at January 1, 2018		144,085,292	$	1,441	$	2,011,397	$	1,949,685		$	(5	)		6,857,510	$	(203,069	)	$	3,759,449
Net loss		—		—		—		(49,953	)		—			—		—			(49,953	)
Anti-dilution payments		—		—		—		3			—			—		—			3
Stock options exercised		3,773		—		—		—			—			—		—			—
Stock-based compensation, net of tax		284,941		3		2,465		—			—			85,580		(1,265	)		1,203
Net gain on investments		—		—		—		—			31			—		—			31
Net loss on derivative financial instruments		—		—		—		—			(3	)		—		—			(3	)
June 30, 2018		144,374,006	$	1,444	$	2,013,862	$	1,899,735		$	23			6,943,090	$	(204,334	)	$	3,710,730

	Net Contract
	Balances
Contract assets at January 1, 2019	$	8,939
Contract liabilities at January 1, 2019		(20,526	)
Net balance at January 1, 2019		(11,587	)
Decrease due to amortization of revenue included in the beginning contract liability balance		3,681
Increase due to cash received, excluding amounts recognized as revenue during the period		(17,698	)
Increase due to revenue recognized during the period but contingent on future performance		2,535
Decrease due to transfer to receivables during the period		(926	)
Adjustments		(1,044	)
Net balance at June 30, 2019	$	(25,039	)
Contract assets at June 30, 2019	$	9,505
Contract liabilities at June 30, 2019		(34,544	)

	Year ended December 31, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value
U.S. Treasury bills	$	299,849	$	—	$	—	$	299,849
Money market funds		135,822		—		—		135,822
Total short-term investments	$	435,671	$	—	$	—	$	435,671

2019	$	28,373
2020		27,144
2021		26,565
2022		26,281
2023		26,280
Thereafter		64,062
Total lease payments	$	198,705

2019 (excluding six months ended June 30, 2019)	$	17,079
2020		30,597
2021		28,702
2022		28,252
2023		28,236
2024		28,315
Thereafter		46,448
Total lease payments		207,629
Less: interest		(52,990	)
Total lease liability	$	154,639
Amounts recognized in unaudited Condensed Consolidated Balance Sheets:
Accrued liabilities	$	19,697
Other liabilities		134,942
Total operating lease liability	$	154,639


Exhibit No.		Description of Exhibit

~~3.1~~10.1		~~Amended and Restated By-Laws~~ ~~(as amended through July 23, 2018)~~Employment Agreement, dated as of March 20, 2020, between Diamond Offshore Drilling, Inc. and Marc Edwards (incorporated by reference to Exhibit ~~3.1~~10.1 to our Current Report on Form 8-K filed ~~July 24, 2018).~~March 23, 2020)

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

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

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

99.1*		Letter Agreement re Termination of Services Agreement, dated April 7, 2020, between Loews Corporation and Diamond Offshore Drilling, Inc.

101.INS*		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 ~~Quarter~~Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2019, formatted in Inline XBRL (included with the Exhibit 101 attachments).


	DIAMOND OFFSHORE DRILLING, INC.
	(Registrant)

Date ~~August 5, 2019~~May 4, 2020	By:	/s/ Scott Kornblau
		Scott Kornblau
		Senior Vice President and Chief Financial Officer


Date ~~August 5, 2019~~May 4, 2020		/s/ Beth G. Gordon
		Beth G. Gordon
		Vice President and Controller (Chief Accounting Officer)