Diamond Offshore Drilling (DODRW) 10-Q 29 Jul 09 2009 Q2 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
	6 Months Ended Jun. 30, 2009	Jul. 24, 2009	Jun. 30, 2008
Document and Company Information [Abstract]
Entity Registrant Name	DIAMOND OFFSHORE DRILLING, INC
Entity Central Index Key	0000949039
Document Type	10-Q
Document Period End Date	2009-06-30
Amendment Flag	false
Amendment Description	N/A
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$9,584,683,667
Entity Common Stock, Shares Outstanding		139,003,798

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Thousands	Jun. 30, 2009	Dec. 31, 2008
Current assets:
Cash and cash equivalents	$470,428	$336,052
Marketable securities	200,920	400,592
Accounts receivable, net of provision for bad debts	736,518	574,842
Prepaid expenses and other current assets	150,052	123,046
Assets held for sale	32,201	32,201
Total current assets	1,590,119	1,466,733
Drilling and other property and equipment, net of accumulated depreciation	3,918,052	3,414,373
Long-term receivable	17,157	0
Other assets	83,205	73,325
Total assets	5,608,533	4,954,431
Current liabilities:
Accounts payable	66,004	93,982
Accrued liabilities	315,932	329,526
Taxes payable	46,627	85,579
Current portion of long-term debt	4,107	0
Total current liabilities	432,670	509,087
Long-term debt	998,562	503,280
Deferred tax liability	501,745	462,026
Other liabilities	129,371	118,553
Total liabilities	2,062,348	1,592,946
Stockholders' equity:
Common stock (par value $0.01, 500,000,000 shares authorized, 143,920,598 shares issued and 139,003,798 shares outstanding at June 30, 2009 and 143,917,850 shares issued and 139,001,050 shares outstanding at December 31, 2008)	1,439	1,439
Additional paid-in capital	1,960,534	1,957,041
Retained earnings	1,694,755	1,516,908
Accumulated other comprehensive income	3,870	510
Treasury stock, at cost (4,916,800 shares at June 30, 2009 and December 31, 2008)	(114,413)	(114,413)
Total stockholders' equity	3,546,185	3,361,485
Total liabilities and stockholders' equity	$5,608,533	$4,954,431

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) (USD $)
	Jun. 30, 2009	Dec. 31, 2008
Common stock, par value	0.01	0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	143,920,598	143,917,850
Common stock, shares outstanding	139,003,798	139,001,050
Treasury stock, shares	4,916,800	4,916,800

Consolidated Statements of Oper

Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Revenues:
Contract drilling	$923,458	$936,626	$1,779,166	$1,706,966
Revenues related to reimbursable expenses	22,949	17,746	52,961	33,508
Total revenues	946,407	954,372	1,832,127	1,740,474
Operating expenses:
Contract drilling	304,853	273,436	602,600	558,443
Reimbursable expenses	22,431	17,346	52,146	32,534
Depreciation	85,431	70,803	170,493	139,995
General and administrative	16,166	15,768	32,481	31,490
Gain on disposition of assets	(93)	(226)	(148)	(277)
Total operating expenses	428,788	377,127	857,572	762,185
Operating income	517,619	577,245	974,555	978,289
Other income (expense):
Interest income	1,190	2,941	1,766	7,314
Interest expense	(11,288)	(1,895)	(12,405)	(3,237)
Foreign currency transaction gain	13,733	12,574	9,608	14,441
Other, net	(416)	(86)	651	(248)
Income before income tax expense	520,838	590,779	974,175	996,559
Income tax expense	(133,398)	(174,615)	(238,154)	(289,888)
Net income	$387,440	$416,164	$736,021	$706,671
Income per share:
Basic	2.79	2.99	5.3	5.09
Diluted	2.79	2.99	5.29	5.08
Weighted-average shares outstanding:
Shares of common stock	139,002	138,959	139,001	138,916
Dilutive potential shares of common stock	79	124	72	152
Total weighted-average shares outstanding	139,081	139,083	139,073	139,068

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Thousands	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Operating activities:
Net income	$736,021	$706,671
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	170,493	139,995
(Gain) on disposition of assets	(148)	(277)
(Gain) loss on sale of marketable securities, net	(599)	3
(Gain) on foreign currency forward exchange contracts	(8,837)	(17,150)
Deferred tax provision	37,910	22,715
Accretion of discounts on marketable securities	(503)	(838)
Amortization/write-off of debt issuance costs	274	304
Amortization of debt discounts	134	120
Stock-based compensation expense	3,376	3,209
Excess tax benefits from stock-based payment arrangements	0	(1,081)
Deferred income, net	66,716	2,113
Deferred expenses, net	(2,257)	(4,650)
Long-term receivable	(17,157)	0
Other items, net	6,619	5,019
Changes in operating assets and liabilities:
Accounts receivable	(166,449)	(150,283)
Prepaid expenses and other current assets	(25,108)	(17,731)
Accounts payable and accrued liabilities	(49,073)	(69,834)
Taxes payable	(46,014)	(24,219)
Net cash provided by operating activities	705,398	594,086
Investing activities:
Capital expenditures	(226,284)	(319,879)
Rig acquisition	(460,000)	0
Proceeds from disposition of assets, net of disposal costs	453	1,131
Deposits received on sale of rig	6,000	0
Proceeds from sale and maturities of marketable securities	3,198,829	650,022
Purchases of marketable securities	(2,998,780)	(649,107)
(Cost of) proceeds from settlement of foreign currency forward exchange contracts	(28,862)	7,496
Net cash used in investing activities	(508,644)	(310,337)
Financing activities:
Issuance of 5.875% senior unsecured notes	499,255	0
Debt issuance costs and arrangement fees	(3,752)	0
Payment of dividends	(558,036)	(382,648)
Proceeds from stock plan exercises	155	1,510
Excess tax benefits from stock-based payment arrangements	0	1,081
Redemption of 1.5% debentures	0	(73)
Net cash used in financing activities	(62,378)	(380,130)
Net change in cash and cash equivalents	134,376	(96,381)
Cash and cash equivalents, beginning of period	336,052	637,961
Cash and cash equivalents, end of period	$470,428	$541,580

General Information

General Information
	6 Months Ended Jun. 30, 2009 USD / shares
General Information [Abstract]
General Information	1. General Information The unaudited 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 for the year ended December31, 2008 (File No. 1-13926). As of July24, 2009, Loews Corporation, or Loews, owned 50.4% of the outstanding shares of our common stock. Interim Financial Information The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S., or GAAP, for interim financial information and with the instructions to Form 10-Q and Article10 of RegulationS-X of the Securities and Exchange Commission, or SEC. Accordingly, pursuant to such rules and regulations, they do not include all disclosures required by GAAP for complete financial statements. The consolidated financial information has not been audited but, in the opinion of management, includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the consolidated balance sheets, statements of operations 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. Our management has evaluated subsequent events through July28, 2009. Adoption of FSP APB 14-1. We adopted Financial Accounting Standards Board, or FASB, Staff Position, or FSP, Accounting Principles Board, or APB, No.14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (including Partial Cash Settlement), or FSP APB 14-1, on January 1, 2009. FSP APB 14-1 applies to convertible debt securities that may be settled by the issuer fully or partially in cash and requires that the statement be retrospectively applied to all past periods presented. For convertible debt securities falling within the scope of FSP APB 14-1, issuers must separate the securities into two components: debt and equity. The proceeds of the issuance are first allocated to the debt based on the estimated fair value of a similar debt issue without a conversion option; the remaining proceeds are allocated to equity. Both our Zero Coupon Convertible Debentures due 2020, or Zero Coupon Debentures, and our 1.5% Convertible Senior Debentures Due 2031, or 1.5% Debentures, are within the scope of FSP APB 14-1. Consequently, we retrospectively applied the requirements of the pronouncement to both of these issuances. The effect of adoption on our Consolidated Balance Sheets is as follows: Zero Coupon Debentures 1.5% Debentures Total June 30, December 31, June 30, December 31, June 30, December 31, 2009 2008 2009 2008 2009 2008 (In thousands) Increase (Decrease): Drilling and other property and equipment, net $ 6,256 $ 6,429 $ 9,046 $ 9,240 $ 15,302 $ 15,669 Deferred tax liability 1,049 1,08

Earnings Per Share

Earnings Per Share
	6 Months Ended Jun. 30, 2009 USD / shares
Earnings Per Share Disclosure [Abstract]
Earnings Per Share	2. Earnings Per Share A reconciliation of the numerators and the denominators of our basic and diluted per-share computations follows: Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 (In thousands, except per share data) Net income basic (numerator): $ 387,440 $ 416,164 $ 736,021 $ 706,671 Effect of dilutive potential shares 1.5% Debentures 10 11 Zero Coupon Debentures 24 5 46 8 Net income including conversions diluted (numerator) $ 387,464 $ 416,179 $ 736,067 $ 706,690 Weighted average shares basic (denominator): 139,002 138,959 139,001 138,916 Effect of dilutive potential shares 1.5% Debentures 5 38 Zero Coupon Debentures 52 52 52 52 Stock options and SARs 27 67 20 62 Weighted average shares including conversions diluted (denominator) 139,081 139,083 139,073 139,068 Earnings per share: Basic $ 2.79 $ 2.99 $ 5.30 $ 5.09 Diluted $ 2.79 $ 2.99 $ 5.29 $ 5.08 Our computation of diluted earnings per share, or EPS, for the three months ended June 30, 2009 excludes stock options representing 8,000 shares of common stock and 449,652 stock appreciation rights, or SARs. Our computation of EPS for the six months ended June30, 2009 excludes stock options representing 15,704 shares of common stock and 466,029 SARs. The inclusion of such potentially dilutive shares in the computation of diluted EPS would have been antidilutive for the periods presented. Our computation of diluted EPS for the three and six months ended June30, 2008 excludes 140,607 and 149,178 SARs, respectively. The inclusion of such potentially dilutive shares in the computation of diluted EPS would have been antidilutive for the periods presented.

Marketable Securities

Marketable Securities
	6 Months Ended Jun. 30, 2009 USD / shares
Marketable Securities Disclosure [Abstract]
Marketable Securities	3. Marketable Securities We report our investments as current assets in our Consolidated Balance Sheets in Marketable securities, representing the investment of cash available for current operations. See Note 5. Our investments in marketable securities are classified as available for sale and are summarized as follows: June 30, 2009 Amortized Unrealized Market Cost Gain Value (In thousands) Due within one year $ 199,988 $ 2 $ 199,990 Mortgage-backed securities 872 58 930 Total $ 200,860 $ 60 $200,920 December 31, 2008 Amortized Unrealized Market Cost Gain Value (In thousands) Due within one year $ 398,791 $ 758 $ 399,549 Mortgage-backed securities 1,016 27 1,043 Total $ 399,807 $ 785 $400,592 Proceeds from sales and maturities of marketable securities and gross realized gains and losses are summarized as follows: Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 (In thousands) Proceeds from sales $ 999,886 $ 99,992 $ 2,448,829 $ 100,022 Proceeds from maturities 750,000 250,000 750,000 550,000 Gross realized gains 36 768 Gross realized losses (34 ) (2 ) (169 ) (3 )

Derivative Financial Instrument

Derivative Financial Instruments
	6 Months Ended Jun. 30, 2009 USD / shares
Derivative Financial Instruments [Abstract]
Derivative Financial Instruments	4. Derivative Financial Instruments Foreign Currency Forward Exchange Contracts Our international operations expose us to foreign exchange risk associated with our costs payable in foreign currencies for employee compensation, foreign income tax payments and purchases from foreign suppliers. We may utilize foreign currency forward exchange contracts to reduce our forward exchange risk. Our foreign currency forward exchange contracts may obligate us to exchange predetermined amounts of foreign currencies on specified dates or to net settle the spread between the contracted foreign currency exchange rate and the spot rate on the contract settlement date, which, for certain of our contracts, is the average spot rate for the contract period. We enter into foreign currency forward exchange contracts when we believe market conditions are favorable to purchase contracts for future settlement with the expectation that such contracts, when settled, will reduce our exposure to foreign currency gains/losses on foreign currency which we do business and for which there is a financial market (i.e., Australian dollars, Brazilian reais, British pounds sterling, Mexican pesos and Norwegian kroner). These forward contracts are derivatives as defined by Statement of Financial Accounting Standards, or SFAS, No.133, Accounting for Derivatives and Hedging Activities, or SFAS 133. SFAS 133 requires that each derivative be stated in the balance sheet at its fair value with gains and losses reflected in the income statement except that, to the extent the derivative qualifies for hedge accounting, the gains and losses are reflected in income in the same period as offsetting losses and gains on the qualifying hedged positions. For derivative contracts entered into prior to May2009, we did not seek hedge accounting treatment under SFAS 133. Accordingly, prior to May2009, all adjustments to record the carrying value of our derivative financial instruments at fair value were reported as Foreign currency transaction gain (loss) in our Consolidated Statements of Operations. Realized gains or losses upon settlement of the derivative contracts not designated as cash flow hedges are reported as Foreign currency transaction gain (loss) in our Consolidated Statements of Operations. During the six months ended June30, 2009, we settled foreign currency exchange contracts with an aggregate notional value of approximately $214.6million. Beginning in May2009, we began a hedging strategy and designated certain of our qualifying foreign currency forward exchange contracts as cash flow hedges pursuant to SFAS 133. These hedges are expected to be highly effective, and therefore, , adjustments to record the carrying value of the effective portion of our derivative financial instruments to their fair value is recorded as a component of Accumulated other comprehensive income, or AOCI, in our Consolidated Financial Statements. The effective portion of the cash flow hedge will remain in AOCI until it is reclassified into earnings in the period or periods during which the hedged transaction affects earnings or it is determined that the hedged transaction will not occu

Financial Instruments and Fair

Financial Instruments and Fair Value Disclosures
	6 Months Ended Jun. 30, 2009 USD / shares
Financial Instruments and Fair Value Disclosures [Abstract]
Financial Instruments and Fair Value Disclosures	5. Financial Instruments and Fair Value Disclosures Concentrations of Credit and Market Risk Financial instruments which 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, including mortgage-backed securities. We place our excess cash investments in high quality short-term money market instruments through several financial institutions. At times, such investments may be in excess of the insurable limit. We periodically evaluate the relative credit standing of these financial institutions as part of our investment strategy. Concentrations of credit risk with respect to our trade accounts receivable are limited primarily due to the entities comprising our customer base. Since the market for our services is the offshore oil and gas industry, this customer base consists primarily of major and independent oil and gas companies and government-owned oil companies. In general, before working for a customer with whom we have not had a prior business relationship and/or whose financial stability may appear uncertain to us, we perform a credit review on that company. Based on that analysis, we may require that the customer present a letter of credit, prepay or provide other credit enhancements. In December2008, we recorded a $31.9million provision for bad debts to reserve the uncollected balance of one of our customers in the United Kingdom, or U.K., that has entered into administration (a U.K. insolvency proceeding similar to U.S. Chapter11 bankruptcy). We also provide allowances for potential credit losses when necessary. In addition, during the first three months of 2009, we recorded a $3.2million provision for bad debts related to receivables owed by one of our customers in the U.S. Gulf of Mexico that is experiencing credit problems; however, we subsequently collected $0.6million of these previously reserved amounts and reversed a corresponding portion of the provision for bad debts. No additional allowances were deemed necessary for the periods presented. Prior to December 2008, we have not experienced significant losses on our trade receivables. A majority of our investments in debt securities are U.S. government securities with minimal credit risk. However, we are exposed to market risk due to price volatility associated with interest rate fluctuations. Fair Values The amounts reported in our Consolidated Balance Sheets for cash and cash equivalents, marketable securities, accounts receivable, forward exchange contracts and accounts payable approximate fair value. Fair values and related carrying values of our debt instruments are shown below: June 30, 2009 December 31, 2008 Fair Value Carrying Value Fair Value Carrying Value (In millions) Zero Coupon Debentures $ 4.3 $ 4.1 $ 3.0 $ 4.0 4.875% Senior Notes 254.1 249.6 230.0 249.6 5.15% Senior Notes 246.0 249.7 237.0 249.6 5.875% Senior Notes 491.6 499.3

Prepaid Expenses and Other Curr

Prepaid Expenses and Other Current Assets
	6 Months Ended Jun. 30, 2009 USD / shares
Prepaid Expenses and Other Current Assets [Abstract]
Prepaid Expenses and Other Current Assets	6. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: June 30, December 31, 2009 2008 (In thousands) Rig spare parts and supplies $ 52,541 $ 52,481 Deferred mobilization costs 24,138 28,924 Prepaid insurance 24,982 11,845 Deferred tax assets 9,350 9,350 Foreign currency forward exchange contracts 6,536 Deposits 4,136 3,846 Prepaid taxes 25,437 11,589 Other 2,932 5,011 Total $ 150,052 $ 123,046

Drilling and Other Property and

Drilling and Other Property and Equipment
	6 Months Ended Jun. 30, 2009 USD / shares
Drilling and Other Property and Equipment [Abstract]
Drilling and Other Property and Equipment	7. Drilling and Other Property and Equipment Cost and accumulated depreciation of drilling and other property and equipment are summarized as follows: June 30, December 31, 2009 2008 (In thousands) Drilling rigs and equipment $ 6,275,825 $ 5,600,306 Land and buildings 31,806 35,069 Office equipment and other 35,936 34,021 Cost 6,343,567 5,669,396 Less: accumulated depreciation (2,425,515 ) (2,255,023 ) Drilling and other property and equipment, net $ 3,918,052 $ 3,414,373 In June2009, we acquired the Ocean Courage, a newbuild, dynamically positioned, semisubmersible drilling rig, for $460.0million, exclusive of final commissioning and initial mobilization costs, drill string and other necessary capital spares.

Long term Receivable

Long term Receivable
	6 Months Ended Jun. 30, 2009 USD / shares
Long Term Receivable [Abstract]
Long-term Receivable	8. Long-term Receivable During the second quarter of 2009, one of our customers sought short-term financial relief with respect to an existing contractual agreement with us for a six-well, one-year minimum contract term, program that began in May2009. As a result, we agreed to amend our existing contract with this customer, and in consideration of this amendment, we will receive a $20,000 per day increase in the total contractual operating dayrate, to a total of $560,000 per day, for a minimum of the first 240days of the initial one-year contract. Under the terms of the amended agreement, the customer is obligated to pay us $75,000 per day in accordance with our normal credit terms (due 30 days after receipt of invoice). The remainder of the dayrate for the six well program (minimum of 240days) will be paid through the conveyance of a 27% net profit interest, or NPI, in three developmental oil-and-gas producing properties covering six wells owned by the customer. Based on the current production payout estimate, we anticipate that the first payment from the conveyance of the NPI will commence in early 2010. Payment of such amounts, and the timing of such payments, are contingent upon such production and upon energy sale prices. At June30, 2009, the $17.2million portion of this trade receivable, which is expected to be paid from the NPI, is presented as Long-term Receivable in our Consolidated Balance Sheets.

Accrued Liabilities

Accrued Liabilities
	6 Months Ended Jun. 30, 2009 USD / shares
Accrued Liabilities Disclosure [Abstract]
Accrued Liabilities	9. Accrued Liabilities Accrued liabilities consist of the following: June 30, December 31, 2009 2008 (In thousands) Accrued maintenance/capital projects $ 92,172 $ 106,135 Deferred revenue 85,063 39,307 Payroll and benefits 59,482 69,326 Rig operating expenses 27,318 30,056 Interest payable 15,036 10,385 Personal injury and other claims 10,146 10,489 Hurricane related expenses 3,219 5,080 Foreign currency forward exchange contracts 243 37,301 Other 23,253 21,447 Total $ 315,932 $ 329,526

Long Term Debt

Long Term Debt
	6 Months Ended Jun. 30, 2009 USD / shares
Long Term Debt Disclosure [Abstract]
Long-Term Debt	10. Long-Term Debt Long-term debt consists of the following: June 30, December 31, 2009 2008 (In thousands) Zero Coupon Debentures (due 2020) $ 4,107 $ 4,036 5.15% Senior Notes (due 2014) 249,652 249,623 4.875% Senior Notes (due 2015) 249,646 249,621 5.875% Senior Notes (due 2019) 499,264 1,002,669 503,280 Less: Current maturities (4,107 ) Total $ 998,562 $ 503,280 At June30, 2009, there was $6.0million aggregate principal amount at maturity, or $4.1 million accreted, or carrying, value, of our Zero Coupon Debentures outstanding. 5.875% Senior Notes On May4, 2009, we issued $500.0million aggregate principal amount of our 5.875% Senior Notes Due May1, 2019, or 5.875% Senior Notes, for general corporate purposes. The 5.875% Senior Notes were issued at an offering price of 99.851% of the principal and resulted in net proceeds to us of approximately $495.5million. The notes bear interest at 5.875% per year, payable semiannually in arrears on May 1 and November 1 of each year, beginning November1, 2009, and mature on May1, 2019. The 5.875% Senior Notes are unsecured and unsubordinated obligations of Diamond Offshore Drilling, Inc., or DODI, and rank equal in right of payment to existing and future unsecured and unsubordinated indebtedness of DODI. We have the right to redeem all or a portion of these notes for cash at any time or from time to time, on at least 15days but not more than 60days prior written notice, at the redemption price specified in the governing indenture plus accrued and unpaid interest to the date of redemption. As reflected in the table below, the holders of our outstanding Zero Coupon Debentures have the right to require us to purchase all or a portion of their outstanding debentures on June6, 2010. The aggregate maturities of long-term debt for each of the five years subsequent to June30, 2009 are as follows: (In thousands) 2009 $ 2010 4,107 2011 2012 2013 Thereafter 998,562 1,002,669 Less: Current maturities (4,107 ) Total $ 998,562

Commitments and Contingencies

Commitments and Contingencies
	6 Months Ended Jun. 30, 2009 USD / shares
Commitments and Contingencies [Abstract]
Commitments and Contingencies	11. Commitments and Contingencies Various claims have been filed against us in the ordinary course of business, including claims by offshore workers alleging personal injuries. In accordance with SFAS No.5, Accounting for Contingencies, or SFAS 5, we have assessed each claim or exposure to determine the likelihood that the resolution of the matter might ultimately result in an adverse effect on our financial condition, results of operations and cash flows. When we determine that an unfavorable resolution of a matter is probable and such amount of loss can be determined, we record a reserve for the estimated loss at the time that both of these criteria are met. Our management believes that we have established adequate reserves for any liabilities that may reasonably be expected to result from these claims. Litigation. During the second quarter of 2009, the U.S. District Court ruled in our favor and dismissed a lawsuit filed in January 2005 by Total EP USA, Inc. and several oil companies against us alleging that our semisubmersible rig, the Ocean America, damaged a natural gas pipeline in the Gulf of Mexico during Hurricane Ivan. The plaintiffs have 30 days to appeal the judgment. We are one of several unrelated defendants in lawsuits filed in the Circuit Courts of the State of Mississippi 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 offshore drilling rigs. The plaintiffs seek, among other things, an award of unspecified compensatory and punitive damages. We expect to receive complete defense and indemnity from Murphy Exploration Production Company pursuant to the terms of our 1992 asset purchase agreement with them. We are unable to estimate our potential exposure, if any, to these lawsuits at this time but do not believe that ultimate liability, if any, resulting from this litigation will have a material adverse effect on our financial condition, results of operations and cash flows. Various other claims have been filed against us in the ordinary course of business. In the opinion of our management, no pending or known threatened claims, actions or proceedings against us are expected to have a material adverse effect on our consolidated financial position, results of operations and cash flows. Personal Injury Claims. Our deductible for liability coverage for personal injury claims, which primarily result from Jones Act liability in the Gulf of Mexico, is $5.0million per occurrence, with no aggregate deductible. 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 experts to assist us in estimating our aggregate reserve for personal injury claims based on our historical losses and utilizing various actuarial models. At June30, 2009, our estimated liability for personal injury claims was $33.0million, of which $9.5million and $23.5million were recorded in Accrued liabilities

Segments and Geographic Area An

Segments and Geographic Area Analysis
	6 Months Ended Jun. 30, 2009 USD / shares
Segments and Geographic Area Analysis [Abstract]
Segments and Geographic Area Analysis	12. Segments and Geographic Area Analysis 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 reportable segment based on the similarity of economic characteristics among all divisions and locations, including the nature of services provided and the type of customers of such services, in accordance with SFAS No.131, Disclosures about Segments of an Enterprise and Related Information. Revenues from contract drilling services by equipment-type are listed below: Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 (In thousands) High Specification Floaters $ 334,527 $ 354,218 $ 646,661 $ 635,289 Intermediate Semisubmersibles 465,762 464,598 882,762 837,820 Jack-ups 123,169 117,810 249,743 233,857 Total contract drilling revenues 923,458 936,626 1,779,166 1,706,966 Revenues related to reimbursable expenses 22,949 17,746 52,961 33,508 Total revenues $ 946,407 $ 954,372 1,832,127 $ 1,740,474 Geographic Areas At June30, 2009, our drilling rigs were located offshore twelve countries in addition to the United States. As a result, we are exposed to the risk of changes in social, political and economic conditions inherent in international operations and our results of operations and the value of our international assets are affected by fluctuations in foreign currency exchange rates. Revenues by geographic area are presented by attributing revenues to the individual country or areas where the services were performed. Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 (In thousands) United States $ 333,865 $ 396,048 $ 690,180 $ 719,561 International: Australia/Asia/Middle East. 199,232 147,793 373,457 254,768 South America 172,708 158,067 297,409 285,604 Europe/Africa/Mediterranean 160,970 172,077 310,802 309,608 Mexico 79,632 80,387 160,279 170,933 Total revenues $ 946,407 $ 954,372 $ 1,832,127 $ 1,740,474

Income Taxes

Income Taxes
	6 Months Ended Jun. 30, 2009 USD / shares
Income Taxes [Abstract]
Income Taxes	13. Income Taxes Our income tax expense is a function of the mix between our domestic and international pre-tax earnings or losses, as well as the mix of international tax jurisdictions in which we operate. Certain of our international rigs are owned and operated, directly or indirectly, by Diamond Offshore International Limited, or DOIL, a Cayman Islands subsidiary which we wholly own. It is our intention to indefinitely reinvest future earnings of DOIL to finance foreign activities except to the extent that such earnings were immediately subject to U.S. federal income taxes and except for the earnings of Diamond East Asia Limited, a wholly-owned subsidiary of DOIL formed in December 2008. Accordingly, U.S. income taxes have been provided on the earnings of Diamond East Asia Limited. On March31, 2009, the statute of limitations relative to a 2003 uncertain tax position in Mexico expired. As a consequence we reversed $5.5million of previously accrued interest expense and $5.9million of previously accrued tax expense, $0.8million of which had been accrued for penalties.