DO - Earnings call transcript Q1 2024 | Diamond Offshore Drilling, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Diamond Offshore Drilling First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.I would like now to turn the conference over to Kevin Bordosky, Senior Director of Investor Relations. Please go ahead.

Kevin Bordosky

Thank you, Michelle. to thank afternoon us. for or morning everyone you and joining Good call. and and me are and Dominic Executive President today the Chief Savarino, Financial Wolford, Vice With information replay remind begin at may call Chief Operating call no be Bernie on Officer.Before on accurate speaks of therefore, only our remarks, reported Vice and information Richards, I Jon Senior as time President time-sensitive we any of and the this you that Senior Chief this President Officer of today, longer Officer;

performance contents in the or press these that release call or nature. forward control. to Some the statements uncertainties evening, disclaim that by our is looking of expectations during the actual risks from the differ cause XX-Q our incorporated please and information and referenced find uncertainties, that any forward-looking Events.In are many our can on Calendar revise the covered or our in note in in known unknown future unable Investor statements forward-looking are presentation our obligation the These our made results our addition, Further, or filings slide under we based disclosure call any issued These to section risks statements current update statements. include of in call and Referred regarding today are predict website this risks disclosure. of to and today the yesterday factors XX-K and statements.These risk may disclosed include and may in be uncertainties which and implied Relations included you of certain or with to performance expressed expressly results SEC. materially by any we of

referencing on In non-GAAP note call be will addition, our today. figures that we please

a release call the yesterday.And can Bernie. I over to GAAP press financials our issued to in will You find reconciliation now turn

Bernie Wolford

quarter, rigs interest update provide to for in for day GreatWhite quarter I'll present highlights Kishorn, reported will and and where Diamond begin the Offshore Port, or previously XX, guidance repairs. departing first thank on Since floor for first and the from with full before GreatWhite. the update everyone, marine significantly undergoing package, crew the second rebuild we to and will now our our equipment questions.I your an the our results and for the the it results on drilling damaged the open seabed. safely recovered for arriving the I dismantled market LMRP On LMRP, from riser GreatWhite LMRP. wrap deepwater an repairs you the and Prior arrived as in progress then the perspective Today, is the the walk Kevin. fleet. March financial location, the lower Thanks, in we incident, year made well of have Kishorn quarter up opportunities our Good XXXX. to of through Dominic on

previously and the and insurance on, his work in are moving by including additional more quarter and repair on costs for complete X and back next in remarks.Before of to the respectively. I'd rebuild, provide the rig $XXX the LMRP in the to the the collaboration we and BOP.As about incident first were recovery the of like shipyard response quality our testing well extraordinary and our to recognize will all with expect Dominic in team currently line half information progressing client estimated our million expect scope guided We the the and of we time than and service. the repairs, complete to Over $XX weeks, revenue of commissioning for of ongoing EBITDA the results, be now local authorities.Turning to financial total the million, with location out estimate June. today, to X XX% our with first adjusted

BlackRhino the of generation each in substantially rig were And P&A campaign one the contracted our the of for extensions managing of operator to its U.S. management BlackHornet X-well back March.The have approximately equates as contract Vela commenced are in the XXXX our extensions quarter, our cash Gulf and more The operator. while rig $XX total that special of this rig rates. that job after commence current of our the XX-day to across late we Ivory the X pressure is value Xth Auriga quarter XX line year planned million spread drilling the at we X will start new the respectively. upgrade. first EBITDA, over back of announced, a to associated harsh of of through with take campaign be our increased years in X-year recent pleased revenues day level prepaid mobilization is U.S. and At and third rigs. approximately rig including owner an announce and BlackLion one-well of Gulf in day these the a These estimated handed the backlog first semis, demobilization for and it and the our is during million Vela XXXX, BlackLion in work after work with $XXX which the significantly provide rate Mexico first remains quarter, the beyond. previously Under contracted end under X.X firm for drillships, million in environment independent or contract's management days BlackHornet, of flow and each a safely $XXX job years.Since an the the through new contract current significantly The contracts, include the secured of BlackHornet Coast transfer global managed end, BlackLion owner.Turning and which the contracts Mexico. rig's contract contracting continuation drillship we with early fixtures, XXXX quarter, annualized of the quarter was August, Patriot, to coming SPS, with success in to to their periodical and positioned year-to-date, rig elements.With we U.K. completes will in with the During the survey to to now direct visibility will XXXX. of backlog, to secured since this The March the the higher which generate contributing

marketed XXXX, year contracted. XX% capacity XX% stacked full of of you contracted, our capacity the For priced is options. is our include cold if XX% XXXX marketed excluding rigs, Similarly,

on in general this XX%.Now markets and to priced option, rises our for Diamond. I'll opportunities you include If number view turn to the

sector next, high this deferring endeavors some year up data average is idle it decisions quarter, term long-term continue floating XX across drilling availability as or XX programs remain about MPD we from are to broader early uptick optimistic been among Demand contract U.K.Finally, ships progresses. the tendering our demand without per concerns opportunities its of XXXX activity, DP of its profits drillships. the during more $XXX,XXX over rig is years feature It low year now remained high current following per options will has due the representing XX approximately we first MPD in of commences demand system. across This compared XX the likely totaling at years extensions, we and specific competing approximately and rig the our rigs ultra-deepwater its $XXX,XXX Patriot its of campaign systems, to than levy year their coupled as S&P split recent XXXX. years. for tenders tracking SPS contract for current recent deferred position from is technical following the in we were the duration opportunities average for multiple notable in now P&A with be the of contracts and will During national the into an the rig XX pursue of mid-April, that X.X This X outside longer ticks of believe booked and with at rig BlackRhino Sea that the of these of from years for region Demand commencement anticipated for the the and job rig an This is open U.K. until fleet, to will And installing generation the work high-specification completed, Black It when years sublets XX% XX%, the opportunities moored demand end more rig pushed an commencing as are elections.Some in future a opportunities priced the is to XX-year concern When X industry JV end XXXX. the by Triangle in opportunities of rig According late day both day all after North is for the while rates Ivory duration demand campaign. the Coast. the earlier, XX%. short-term as picture.We with respectively. contracted to rigs towards strong, brought trend of triangle volatile Global, floating energy rig floating were competing programs dates across rigs Patriot. securing Golden was SPS, owned specifications between increase has for the are extension and golden Xth range.For the that operators

of generation opportunities without the X further recently We Xth are and positioned in work discussions drillships. additional capture gap secured to are through number BlackRhino well expect contracts.Changing a on a secure between marketing subjects, rights we newbuild active for stranded to upside

earn opportunities These XXXX. fully meaningful are I'll some the our call to increase their a are that fees U.S. the the former now as and of Indonesia. shipyard Draco to of region. be currently The to quarter.In these West before is agreement could of manage increase accretive into in during capital.And drillship third over our delivered exciting Brazil, with own units would for owners for with and Libra, projections rig expected to returning to likely rigs secured If successful from we and we behalf securing market delivered expected Dorado for and be generate delivered was owners The to generation Tidal April Action rigs, the first We shipyard with in addition, Mexico West would Africa, the while EBITDA the committed. moved to the have Draco Latin on of that the period working work remarks. in are marketing the in our to the in respective in an from entered be Dominic required without Gulf concluding be the rights the Dorado the turn these is Malaysia, exposure Xth an America, we income quarter known and market rigs that, subsequently Malaysia when

Dominic Savarino

its and The full being quarter-over-quarter X rig the financial the the the of of Bernie, morning the to quarter second months new for adjusted in of GreatWhite the provide morning, just partially GreatWhite prior results quarter of in Thanks, million reimbursable guidance updated million everyone. I'll to for of decrease $XX contracts year first of the contract the LMRP guidance incident, generated as and our million the the quarter, half on first and an for of in off as higher operating quarter in expenses they of remarks under for million this my to revenue day fleet result quarter by offset impact decrease first BlackHawk primarily include was BlackHawk for $XXX the the result of guidance.For a additional for of rate the to managed quarter that expectations other million revenue, revenue fourth did XXXX. as was the quarter and in contracts $XX compared adjusted the of attributable we owner. the $X compared million our million to our EBITDA higher the charter rig a the fact the the days afternoon offset to for compared across million. full our prepared of the XX%. managed rigs, with of the expense contracts.Our revenue was the attributable excluding return adverse one The reported good came the the the fleet first $XX commencing guidance of quarter. And the $XXX completion that insurance or recording strong GreatWhite revenue quarter million incident. update operating first and recap and resulting quarter.Contract Courage our incident.Our deductible on million in incident, the not million despite a quarter new one-time as prior full of $XXX in In revenue, for The estimated partially exceeded of operating revenue the expense in by the of Courage as quarter GreatWhite on by And costs the and XXXX to from quarter, lower the after $XX and EBITDA Patriot the of impact efficiency $XXX exceeded the to worked million remainder revenue $XXX for to guidance almost drilling associated of $XXX for the $XX second remainder the primarily

quarter. to incurrence Patriot mentioned efficiency of repairs lower revenue fleet the earlier in attributable maintenance and was as beat the performance revenue guidance well I costs and the Our as

charge quarter was disposition recorded and in release EBITDA insurance of was for the updated no implications this primarily the results the our cash Our the capital came a million of a $X financial of the result in million estimate the GreatWhite for the Absent first to last still which $XX expense LMRP. the on adjusted drilling million as compared GreatWhite earning million, $XX adjusted with of and The million flow which February assets. have adjustment, of was and flow the remove free working normalized quarter in in as high loss in cash in million guidance flow to flow the or contract at of March.Operating improvement $X end deductible, recorded the capital been cash of EBITDA of expenditures.Turning negative for cash to onetime revenue free now $XX quarter a of year. free release the lower $XX fourth our of was unintentional of despite

in GreatWhite income June. filing the the As incident begun offset by underwriters of to of quarter. recognized Bernie receipt and increase in the rate insurance part million, have $XX reimbursement million process earning $XX be the first half increase Simultaneously, in insurance expenses making portion other, half of good claim; second to insurance operating location beginning million of components.First, was repairs million, and million recognized in and top-line $X progress a back is insurance to a quarter; recognized decrease on our from the claim remainder of anticipate is the on which noted, all to million X revenue the the following day second operating insurance $XX the receive the the million, expected finally, of the of the and we the for estimated of second of to being the reimbursement $XX be with EBITDA approximately higher an the deductible a in broken of costs, expenses as approximately revenue, expectations. of of to due including down repair that partially $XX impact expected loss in and cash second, into our to second estimate be flow and lost million loss can to compared should quarter.After slight taking previous to higher now account be into the quarter $XX attributable proceeds, which a insurance deductible, in of we This in overall $X impact net will contract insurance decrease drilling

call impact presented by the guidance the quarter, quarter the GreatWhite any year of full recovery recency for In On guidance to and related insurance $XX our we to given anticipate the now subject million addition, our expenditures initial XXXX second million our excluding policy.I from all reimbursement the we to incident, event. of to we to would GreatWhite financial increase for be an to in incident, XXXX. anticipate of and earnings under like last which capital $XX turn

driven positive will our the adjusted million our into million XXXX contract have to compares by revenue EBITDA expenditure impact certain of full of that incident on estimated negative does.Our days costs.We adjusted year year adjusted offset of million. pleased adjusted guidance incident, the EBITDA $XXX in $XXX million as the Now updated account excluding take to our at increased GreatWhite been remainder accounted for more that substantially prior rigs as to operating various our year adjusted $XXX effective result and various contracted a lower into exercised. full XXX% million. our better how updating account results, EBITDA likely being is new the than midpoint. as increase of components guidance already $XXX guidance the reimbursable EBITDA million of work adverse we be $XX $XXX are visibility and GreatWhite impact in is financial Further, The to largely impact to is across from is take And to guidance prior is that guidance we the our capital favorably the the revenue, considerable the EBITDA at fleet.Our outcomes originally by not overall $XXX our we revised is prior million and increase anticipated increase year our midpoint or This million higher options $XXX guidance guidance, guidance revenue a for year represented now to now guidance of are and full XXXX our disclosed million be into by this to revenue able this are guidance million previously guidance. $XXX $XX guidance to priced the EBITDA did adjusted have derisked guidance XXXX full of

XXXX our as year ranges, to from opportunities revenue, the recorded QX from earnings average million to at to QX and result We estimated future awards the $XX million quarter to Again, be GreatWhite.Turning expenditures are XXXX anticipate to additional expected end GreatWhite materialized. be second and of now the million inclusive growing million million. to $XXX expect taking rates. million.Looking $XX the increasing be million is $XX to EBITDA to of $XXX visibility work year event. Patriot and the forward reimbursable we revenue, and flow beyond, the between in expected financial of impact we remainder the $XXX Full a XXXX adjusted this be our excluding $XX after will higher to million CapEx be for have into $XXX additional contribution our between between expenditures account additional removed for and our backlog for contract of cash between capital not recent any to have both is day negative for as guidance, Capital

some met rate allocation prepared now net plenty years, provides operating hand closing X coverage our on In addition us across to strategy.That our increased through to room our being and XX% of of capital day semisubmersible options drillship EBITDA yet XXXX exercised.The bond adjusted giving has per recontracting I we XXXX and XX% Bernie average the XXXX, is comments. under first continued our strong as days leverage with in we and in backlog it priced opportunities us performance facility in contracts ratio firm across still fleet guidance day additional favorably end remarks. the respectively, of day derisked, compares XXXX, earned respectively, be per in available for year. and concludes be for operational flexibility my day, rate $XXX,XXX requirements have regard and back of This rate expect for next by weighted our level to to XXXX arise.The the other and total and positions to weighted our per contract will track average fleet with the $XXX,XXX day entire growth credit to average This $XXX,XXX this of $XXX,XXX well indenture day. us for and quarter of committed the leverage and positive

Bernie Wolford

improvements should securing demand year with million Dominic. your the and business. and significantly our for landscape available to high specification free sharing balance XXXX. outlook into you, results $XXX the XXXX. resulting guided interest strong for Offshore start XXXX, our supply We and in in forward along further Thank conditions delivering Diamond and in questions. a our benefit tighten. strong earnings rig marketed EBITDA look remains improved we'll deepwater that awards, The appreciate This We to open to in fleet.We've to our is demand improved financial flow The now made cash call contract compelling visibility continues contracting for

Operator

[Operator from Barclays. Instructions] comes Kim first question And Eddie our with

Edward Kim

marketing if a with get as arrangements on the on newbuilds. day on those Just Just management contracted. then initial to separately, wanted the to arrangement the Or those Does touch color that those indefinite? secured Would stranded contracts? just just Diamond X the management on marketing are great. any job? say rate agreement And to on that contract be the is the would -- regards somewhat rigs cover

Bernie Wolford

focal within to Commercial anticipation rig. stated Diamond and managed management we're in from subject the agreement, a how crew rigs, the Offshore Diamond the yes, those the term being then certain evaluated, commercial with Offshore negotiations.With to by marketing rigs. respect means our successful result for the submitted marketing will indefinite. of rig input question. the contract, conditions for marketing regions agreements would Diamond will as themselves the of contracts, pursue The manage termination market with and continue managed market perspective, ultimate to point that beyond If the are would through thanks owners' contract in own line a question diamond is our Eddie, customers agreements by be we in in lead for that your rig proposals in the employees. customers' obligations about those. to Diamond will might earning rigs but we'll contracting our opportunities contractual and the with the be the consent no definite of the And

Edward Kim

about on you how I Auriga earned margins assume the we fair is the it management would margins the to that the of for similar what mean, think be kind or Vela that? the to the regards with just then, And should and contract. margins the to on

Dominic Savarino

Yes, Eddie.

these regard firm we be to options. point were they With would management what marketing should million term the the previously million X $XX to currently would under be were plus units get we the on to would if expect I for EBITDA. of combined similar or I earning to Then, the working out that, rights. order annually contribution margins, all Before any new to agreement $XX

Edward Kim

for million $XXX,XXX included closer some if mobe here. works I of contract rate to in one edge today. kind day. I said you then The contract demobe the could the and leading and And a Is out the BlackRhino, mid that just short-term XXXs clean total or believe clean is But $XX squeeze where that value, to announced the of to kind in high that is rate the low XXXs? you

Bernie Wolford

It's in high the XXXs. mid to

Operator

question David Energy. Pickering next The from with comes Smith

David Smith

ask the the could Congratulations those so, management by bucking timing on to you provide high-level include quarter rights, ownership. outlook. of valuation? on the and back 'XX to your if to on a path potential Circling agreements And any I trend wanted the improving color if

Dominic Savarino

Obviously, say, current explicit the be The should managing potential do lead to the the chances we not marketing specific marketing ultimately somewhat relative rights in Yes. rigs kind include future. there's of would does in I a or no position, our at rigs. but successful ownership provisions some rights any It all. and improve that would

David Smith

'XX. Okay. the really potential of I that you're opportunities most that think work to second, you And was do duration think hoping the you color of and if those any could endeavor, that. about through for I I the referenced X about how for you then, pursuing. appreciate give rig

Bernie Wolford

ranging months years those the X every first mixed balance, single of Dave.We're of those. in of of still to from The in from duration. those in a to ranging bag start opportunities in X duration 'XX duration, are second opportunities quarter X it's months months over just one so bit Sure. a chasing quarter of Two X 'XX,

the tendered power. out short-term under ultimate closed, over bit term we of are mixed so a line a Some be would Others always market, term hadn't with stages pursuing bag.And as in that's pricing prefer are evaluation. obviously, bids yet of pricing already will the of adjusted are those on the in but a and opportunity bit already

Operator

comes Brothers Noel question with Tuohy The next from Parks Investment.

Noel Parks

far you Just a bit on could maybe your see on you as wondered activity if what expand as thoughts trends. regional little

of an You about are some that regulatory matters talked a having bit the impact.

Bernie Wolford

Sure. Brazil on the West U.S., Africa. or None comment for particular in to

As been potential remarks, extension concern I mentioned U.K., the will expectation in in election sometime well year. that a this the energy U.K. our national of the source my clients as of end the as levy has profits hold for clients before the of prepared an and

there's BTIG, expecting But Greg were doesn't can't further certainly the environmental permits. we see we was cleared. going those of see created areas. programs, on seeing ahead until the to their well clarity taxed clients development has be until presented would by activity.Operator, to able how largely months on him be on We've And because Lewis in the legacy on that be deferred All that opportunities secure perhaps of bigger their somewhat years activity.In a Back more their brownfields know their of to may ahead our we've front. as a call programs backlog concern I or for that and have I seem ago And the today. uncertainty development participant in around you're demand if last recognized impacted to likely P&A had you some volatility progress P&A 'XX call. and Greg, missed U.K., the what queue. we some programs. uncertain that regulatory quarter. well year smaller, and P&A don't seen sector.So as being risk X those demand Australia, which And him the seen great Please some it's parts the increased the from may and the going for how on U.K. see in profits in we

Operator

Energy. Our next question comes from Josh Jayne Daniel with

Unknown Analyst

Diamond today So for the but you why to forward your because go option Diamond? pursuing me that just just or capital want X an newbuild was of X? were or Potentially all about instead ownership I the talk horse, discussions it path this you this the the dead agreement was sort consideration back right talk to constrained being rigs. of instead discussions to the with don't or to rigs signed best was about like you beat Could you path a those how for and thinking path some ownership one rigs for the in through just or of maybe were for of

Bernie Wolford

Sure.

us, of right we and The that's for first global why it's Largely, as question the have to the scale. that because rights pursuing marketing Diamond? part

systems that's our without our clients and to services are We us provide with -- to our are and future. market in be committed have Black of to important much particularly, infrastructure the people, rigs processes and not-too-distant those be on allow expectation and add that likely our great all to take rigs the ships those And going that costs. for

right not interested genuinely it does $XXX drillship has And the would premium when no regarding these market assets be has the like our in trade there's we'll continue us this similar at to we some cases, negotiate bid opportunities. large those now. to ownership at that to might well Josh, a million.Our today. But equity have our wide that little assets as prices working stage. good in at value we're -- really continued to simply availability to bid-ask a offerings cases, And to to remain we aware market other too spread clients.With to these. on to is indicate equity pursue been a In support ownership disparity to put, other as to per in of path try looked ownership, and of path a potential assets the cover. acquiring priced for In acquisition to these of drillship currency so, have a make the We

Unknown Analyst

And equity maybe on on the that point valuation.

to where over be should to thinking about there it's what's earning you today, fleet where any the thoughts next opportunities likely is return up the the going given some couple of we and about in about think that 'XX. you How years, could we are Is 'XX preliminary be chance cycle? offer just As that? in the capital where

Dominic Savarino

-- is possibility. There's Dominic, that certainly is This Josh.

and starting to and XXXX, be next we'll indenture RCF decision the would time we a our discussions are take point this As we And we we exit our financial XXXX the But we have focused by those managing and a to able year. certainly, give covenants opportunity get would That's that balance meet liquidity in that covenants that once place. year. sheet our in have meet at that will on us that manner. time.We the exit those into our take profile conservative in our Board would that the do flexibility

Bernie Wolford

potential your is. Josh, question building acquisitions And question, the to flow with One, and sheet. on focused and balance two we're on to simply keenly very my our cash today add regard some this price ask reference not pursuing cases, and to per sensitive the that our part shareholders. follow-up equivalent. We're other Xth-gen how was things. trading to I and allow that a go that our where accretive in us to does And secondly, cash might And on part obviously equity are for to deals to

Operator

question from Capital next Becker One. Doug The Instructions] with [Operator comes

Doug Becker

extends contracts. to for work really curious I'm Bernie, And you year? if what mentioned secure XXXX gauge gaps that BlackRhino type outlook. next the trying you to the entire to is of rig expected that visibility have just between without additional

Bernie Wolford

we a for extend involved may is, comment having outlook it be for extent are fully Brazil But on full XXXX gap, whether Mexico. to does not the year. to at the my in expect stage. contracted where the to mobilization we it's West getting depending from the any I there Gulf where of year or the job in this be Africa, to the Yes, mean regarding U.S.

Doug Becker

you just was I on guess efficiency just outlook. costs first I a bonuses. the the explicitly. context normalized going some Auriga little forward, being derisks released. talk any was fleet were trying about really the operating just But costs operating about there to that think could bit quarter, Now hoping

Dominic Savarino

costs. get can operating about details into We the

Although certainly, talk maintenance if modeling some deferral perspective. details more we've costs slightly to the get offline But pushed seen down. out we wanted we into standpoint. expectations. some has from of can relative benefits repairs our that costs operating about our had from come year that from in of later to overall, and got a come in costs view from a quarter have rig-by-rig the first into guidance more down But our We

Bernie Wolford

guidance year, X% provided on the think, add. today. the we to our would the I inflation into that's order I would I expectations are baked And Doug, for that of X%. add

Operator

back for I show turn call to would questions remark. this like at to further Bernie closing no now time. the I

Bernie Wolford

today's quarter for to wish with you all speaking and next call. all again forward Thanks We and participation your Thanks in look certainly day. you good a goodbye.

Operator

This concludes today's participation. conference call. Thank you for your

disconnect. may now You

Diamond Offshore Drilling (DODRW) 8 May 242024 Q1 Earnings call transcript