Diamond Offshore Drilling (DODRW) 10 Aug 222022 Q2 Earnings call transcript

Good day and thank you for standing by. Welcome to the Q2 2022 Diamond Offshore Drilling Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference call is being recorded. I would now like to turn the conference over to Kevin Bordosky. Please go ahead.

Lisa. you, Thank and everyone for us. joining Good thank morning, you Senior Investor Relations. My name of Bordosky, Kevin is Director With the Senior Chief Executive Chief me President Officer. Officer; Wolford, on Financial and call today Dominic Savarino, Vice and Bernie President are and

of you accurate Before on information of at of and the this I may information replay as reported therefore, only time that time-sensitive we this speaks no remarks, begin today our call. remind call, longer any be

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

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

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

significant relisted the Stock call to with to saying interest X approximately average in million to traded date are and everyone to how seen shares. and Thanks, your excited XXX Exchange. volumes liquidity we Diamond for start afternoon we Kevin. million daily like Good to or relisting, have York exceeding on you morning Offshore. shares New Since by I'd the thank be

prices listed we good quarter months, markets Since on spot unusually have base. particularly dramatically profile increased markets. Brent led per February decade. quarterly company, of Diamond. we averaging $XXX commodity have the high have seen than recent at regular our of have improvement provide natural barrel as doing cash plan gas the we a earnings -- XXXX, work These completed flow the calls are in have that levels volatility for a broader Now high been and have over seen hydrocarbons the full in updates global in increases market with as not client to significant the In to more hitting of to the and

We offshore expect of XXXX only way we will already improved seeing into and that and drilling its to commodity a but demand supportive of underinvestment to offshore energy underinvestment, offshore drive capital past expect billion approximately projected been our materialize. years environment this significant make demand drilling project catalyst beyond the $XXX do are flow a cash related in demand expenditures in historic the bear. Rystad Not estimates increased that security services. in coupled XXXX is have for finally to coming was The concerns with billion for compared XXXX. $XX portions sanctioning

therefore, delivery, meaningful demand-driven Given commit a the for that offshore between will significant anticipate poised and view the as CapEx years customers we market investment our coming lag over drilling and recovery. energy the

of primarily net by quarter-over-quarter Diamond the a XXXX. first was compares relatively rigs the Apex, activity, flat level the this fully costs resumed were of XXXX. second had Offshore our $X.XX. per higher Ocean Auriga, to Ocean loss of net X $X.XX the improvement Ocean to Turning and throughout second share quarter the The quarter Despite per driven operations in share the of the This rigs, a the Patriot. X Endeavor of loss Patriot were quarter X Ocean and mid-quarter. of quarter-over-quarter. operational the

'XX, had of I'm of operating second the to quarter that highlights. pleased efficiency Turning report XX.X% revenue to across in Diamond our our fleet.

importantly, safe to and highest years each the Courage Hats COVID great and earlier. to of for all that its standards, outstanding all Ocean this these off challenges completed our single safety who operations day. without another dealing and infections. the years with May Ocean by wave recordable to BlackHawk In of the crews of while results safety BlackHornet, I'm Ocean posed inaugural which 'XX, began has Endeavor deliver completing materially report injury. while X More to maintaining work delivered X the every performance achievements the improved recognize a these contract pleased our the want quarter Ocean

were Over the reducing for Woodside of we with XX an rig XXX drilling over quarter, new to wells. of fuel its completed wellbore our drilled The plants. power Endeavor. course is comprised In by to commenced use impact. of since Ocean an worked this and accomplished and mobilized remains the was duration Senegal additional Diamond contract XX% efficient the fuel providing the more focused of miles by with our information actionable rigs rig real-time X wells XX and year. consumption efficient contract, our environmental support making of able or the on over This crew reduce on second to anticipated

both reduce hardware to our explore solutions and further software-based COX to emissions. We continue

in whose Officer is Additionally, facilitate ESG sole our to Sustainability continuous improvement a we appointed performance. recently focus

Turning to outlook. our

to the X-year be for the into to in The busy second start This half period assure and haul conduct survey upgrades future. late work to the the of a recertification. includes in fourth work will for high braces 'XX the rig previously availability be and special Vela announced quarter The company. Ocean had third prepping for contract. promises diagonal going BOP quarter the a replace X We Endeavor a to shipyard

this and quarter earnings a commences Finally, with which leads first XXXX. announced quarter's the for up the ramp of new the backlog Ocean high-level reactivation This new me its GreatWhite commencing in is of release. contract to summary

facilitated we announced our Ocean focus not safety delivering performance the Starting Our has GreatWhite. success. some secured. Yesterday, of award all backlog additional for million superior of on with compromising $XXX this customers, while the recently

rig previously is contract with be increase million. this in in quarter position stacked value, for was duration These BP unit. XXX approximately Total X-well for The with $XX work expected should of contracts will With semisubmersibles the days including U.K. of XXXX. warm all Sea, working Diamond first the coming demand modest a with the to through this harsh a years. X well secured mobilization contracts anticipated environment XXXX. have in an estimated contract us awarded start to the in award, North that run have We

estimates in will XXXX. through A is demand security. $XX X of million. portion demand by of also grow Rystad that Apex For the likely floater driven push Sea with XX% Ocean approximately had Europe's material reference, Australia with success backlog securing energy new North contracts a contracting Diamond for this combined by

a mid-XX being Woodside for estimated for XX with XX then additional an X estimated of The wells days, award first days. commencing new combined a duration Chevron in from

contract space Santos Santos estimated An astute beginning third with duration white an that Chevron from work. pick could the award a in listener have and of we up between mid-'XX Finally, may XXX days.

to late stages fill additional late will through of negotiations For an XXXX. information, the to be Apex are we contract Ocean successful, this committed the in gap. If secure

BP to X across work closer X years Diamond rigs. Turning of secured home. additional from drillship

years extension add $XXX contract Firstly, its BlackHornet X through extended with This X for million. the the rate leading premier a an estimated backlog of of XXXX. offshore by Ocean first quarter secures our of assets had edge

backlog March which through keep of XXXX, demand multiple Secondly, with estimated the the reflect rig additions an in extension Diamond across contracted Clearly, of improvement BP managed these Auriga offshore will regions. secured backlog meaningful add a million. X-year with drilling $XXX

and Diamond earn will improved who XXXX Dominic. our hard-working and class-leading people thank to the higher Difference. margins opportunity I over of turn Dominic. a call to everyone Offshore you, beyond. prouder high unwavering and rates this brand, that, this are in as we More HSE with importantly, have these And I’d like the with in testament an the involved day Diamond I Over securing utilization, commitment cannot to awards backlog considerably team. be to to to contribute to the

Bernie Thanks, to good and or afternoon everyone. morning

it quarter Diamond indicated, overview company. New beginning management for the the overview contract I'll In our be our this under a the full providing also and announced on full commentary my Ocean As insight once results reactivation listed preparation Exchange is marketing the some morning, be offer remarks prepared provide GreatWhite, and year for LLC, services touch provide new yesterday. agreement XXXX an Stock share our results we of a that work a of York now and to on projected from to Bernie able contracts story with into Aquadrill great the as brief I'll some belt have we our quarter. again this past

to a of in we in the reported million $X.XX reported $XX reported improvement per share. adjusted $XX or compares of The loss like by in result in activity was little over as to increased the the The just driven contract a our $XX would detail. For $X.XX quarter, quarter favorably quarter EBITDA of results a share. more net diluted per revenue million, quarter. of from I the for our for or improvement million first $XX results million second which quarter second the drilling diluted an included loss a net prior a This increase provide XX%

grew for to million second drilling rigs Endeavor Both one Patriot. idle semisubmersible undergoing million the U.K. contract working our the the a the Our time quarter and a to the quarter, semisubmersible of $XXX the quarter North more in prior as rigs in quarter. quarter of our in operations second X special the period revenue, after of compared the The for early return hull Sea survey Ocean first Australia excluding prior in commenced the contract shipyard of in Ocean $XXX reimbursable the in spending quarter. a following the moored revenue and repairs Ocean Apex, in to sector second of working Ocean much Patriot,

Ocean manage and Auriga In These in reactivated Monarch drillship, spending quarter by and owner, being readied Gulf BlackRhino after prior on the in drilling contract addition, contract in of Ocean of joining cold quarter. Gulf a and $XXX to we for subsequently increases to The contract the the drilling by Endeavor being of million begin offset $XXX Ocean deployment. for the Ocean conclusion undergoing completing of more offset compared G&A in was spending in hull million quarter expense Patriot of quarter $XX the Mexico prior million contract new quarter. survey million the remained rigs the repair-related Ocean relatively costs in as and the and full the prior in Contract stacked and revenue Mexico under with contract BlackHawk the had second Diamond portion behalf July. its mobilization prior expense quarter contract quarter. increase a in completing to its the activity and its operations by expense related the initial totalled a partially the the in seventh-generation than special early the to flat activity secured the Senegal $XX at which and of preparation were for compared associated the quarter prior

and million due The managed $X revenue fees compensation on rig some balance award. the additional the status interest we and fixed of manage quarter quarter second of a different was incurred terms for applicable generation to the quarter Auriga drilling cold the G&A to Vela seventh revolving rate. and long-term borrowing Net incentive the credit facility a $X arrangement. and market operating The associated as earned daily million arrangement warm that operate the of the of color prior an increase a expense manage provide of Capricorn. stacked, our based is million will and in four on is I a expense financial LIBOR included $XX drillships, of primary higher In three compared reimbursement rigs expense May this to with to on rate a second on XX% charge of noncash X.X% XXXX, rig, the fee and to in agreed two our consists the equal the now components: rig drawn and the including semisubmersible of costs rigs, based undergoing variable stacked, on contract. margins rig or whether a reactivation for

currently is Auriga its Management. contract the Diamond previously, under mentioned operating As under initial

the second finally, the specific is party. the that a that agreements have to We for commencement Capricorn helped third in handover no contract Capricorn activities the currently in managed longer any The contract contract they contract to In expense as contract result to results facilitate place responsibilities the rigs when In intended with for with revenue we late we additional the rigs. a Vela preparation of a operation for early the as in revenue quarter. associated recorded $X drilling of sale revenue and the addition, are the the contract the with expenses owner of that quarter, rig buyer and in And contract just and regard in of our in are notification rig. drilling undergoing and to associated drilling received contract third we these owned rigs. cancel July $XX reflected do million managed million our rigs drilling EBITDA of drilling on

the to activities preparation now the Turning Ocean of GreatWhite. reactivation and contract

In reactivation window, for some our a capital $XX of full provide in XXXX prior at day be of in year XXXX will million with and operating year expenses to from activities to to our revenue. planned. is of commencement, to recognition mobilization booked backlog some the I million lower XXXX, accelerated an will than and to than via million half the to cost year to Consequently, we $XX in XXXX and be of emissions to of XXXX and with range total in result million with recent market continue activities. Through provide expected rates is our million of like to the forward guidance. preparation EBITDA for our current million our order issued $XX into remaining acceleration equipment. significant X of in full but and of guidance anticipated line million previously now XXXX the the expect spot We drilling second $XX prior results as to major remain This term insight company until XXXX incurred reflect. $XX benefit $XX commencement guidance be equipment, exclusive would $XXX reduction meet contract contract the reimbursable to associated scopes originally expenditure revenue earlier of of being and consisting ultimately to impact and undertaken longer the brought $XX to costs customer XXXX. to expected the previously than lower be contract revenue million work commencement negatively million, for specified portion a XXXX will updates be the allocated contract off awards end EBITDA million, the as million anticipated million prior $XXX $XX between $XX full $XX guidance into advance

cost XXXX a costs acceleration will total this of acceleration, special to the acceleration And braces, to survey. be mentioned The the rig's is activities Endeavor's of XXXX coupled planned million. previously approximately to as return this haul the the First, days higher benefiting for with GreatWhite. project certain in and fourth be result ultimately our whole $XX XXXX reactivation of contract replace XX estimated the diagonal associated Ocean shipyard quarter the the preparation results. with in second, and

had also million reasons, XXXX XXXX. million originally increasing a For negative increase of a to to to guidance million $XX largely from range are been GreatWhite in a and $XX free our in $XXX a expenditure of guidance from negative $XXX is $XX $XX cash reactivation the to be range full flow to million we flow capital as million cash Ocean incurred to $XX issue decreasing a these to cost million This timing million. million anticipated early same our $XX negative

costs recent at with edge of should improve awards contract rates. course the Our XXXX, EBITDA the a over of cash result this acceleration of as reactivation flow along leading into and XXXX

stood of the including cash second $XXX million, of million unrestricted quarter of revolving $XXX at capacity notes. liquidity the million first on Our the draw lien undrawn delayed $XX at credit and and end facility

and As our should increased our legacy begin day down wind to executed, significantly liquidity be awards improve new at rates significantly. our contracts profile

approximately contracts, visibility planned point, for stacked confidence evening. we additional contracts our Although in provide giving we with and announced I regarding The revenue combined available and capacity, our in at XXXX results. stays new we XXXX provide existing quarter, not guidance since previously of rigs, the cold the to awards of this our greater like to the excluding million prepared secures close $XXX would signed shipyard details contract XXXX are yesterday for XX% some us

estimated representing XX% increase addition, an In revenue to as in a legacy compared our the average EBITDA contracts, percentage as margin of in the points approximately in new aggregate than contracts is these percentage our higher current contracts. approximate XX

XX% higher almost as our For XX current new contract’s margin approximately compared in our an EBITDA Diamond-owned representing than rigs is contracts. points increase only, contracts, legacy percentage to the

a as Bernie I commence in flow results for should these cash and over additional back some to now XXXX. new will turn considerably consequence, EBITDA improve call our begin As remarks. to the contracts

demand Dominic. At been our and of customers, the for each as Diamond, busy point, call much fleets. York regions continued X to We now for From incredibly and open our constrained. to unfolding. semisubmersible in adding the last you, performance Thank increases, We continue your drilling outlook relisting drillship our is benefit and the relatively both we we've appreciate significant and interest for supply the operating currently vantage the New remains over expect backlog Exchange foresee Stock on months, our recovery Offshore questions. we'll to improvement Diamond in while very delivering from offshore robust

ahead. First is Frederik to Instructions] going question from come Please go [Operator [ph].

some so what's the question relates So get And quarter here. a contract on of new awards. and on to on even happening my nice maybe kind more color congratulations more think I

I many that's coming since up we the then We've And been in Gulf just report, players with that with we seems the can BlackHornet crossing are start hot maybe numbers Mexico recently. mark Auriga and a think based start that's XXXs. well. rates the for $XXX,XXX where have your area as the I U.S. is other are above of seen well. as disclosing But it below and that on just probably see we like XXX you --

rates why any et best estimate And the wondering you is could rate for services, give here? was maybe different. clean there I the underlying are if cetera? Are as what a So extra special to bit color any a

rigs NPD. very of Frederik. provided in Ocean think Thanks by think and for Black should Auriga, the Hornet, being rates the XXXs. Auriga, equipped Whereas high regard Both you of I to both equipment. the With BlackHornet of those of client. question, is the as In and the clean an operation the the is case the piece NPD it with purchase of the in case owner-provided are

perspective, well So high think those both point very rigs. the perhaps XX% from are associated compare out, I utilization with also think just XXXs long those contracts, utilization into of rates with clean would the with it term would given clean rate a as for I relatively which XXX% XXXs.

helpful. see very And strong that actually to on those kind it’s That’s agree rates term. I that of

with maybe visit to other that, this want I I X to So as region regions want have I well.

-- $XXX,XXX. also be The to that rate, here. start seems market not you your around booked mostly Apex backlog, working XXXX, can space, rigs average and But some given then now. looks additional with be are that some in we for I So region, have white right Australian total to think the the there out XXXX now

addition what market more dairy So the you you and developments? you there rigs Australian opportunities and to of if working generally comment could maybe the in nonworking wondering for see on

Sure. We'll do.

and in location and the route up currently 'XX stack current the mid by the the see whole only with in that the given reactivating expenses Northwest Beach. the survey that near and special currently. a the term to sufficient on starting The hole Malaysia investment opportunity working and rig that justify do to driven Onyx unit, be and to rates And is survey. in term the that shelf, on region completing is beyond. demand actively XX X That Monarch would start that stacked with special market cold rig we of with state associated Let's for opportunities contract upgrades. in in emerging a We're

rig on So tightly the given optimistic market very work for trending we're in don't that in and although region, above Australia the today, additional a of rates day a have clean that work with rig future. XXX we'll we in the sight for find that reasonably today not-too-distant line constrained now

I off would No, reason. Yes. kick some for

to it transcript me the color for So But of leave to I’ll guys. for one have more I before I just go that lost. back the the I’ll rest

on of if On the one. have part options you on That possible. are that cost. GreatWhite, that color was mentioning some And the but price good the you gave it report one you reactivation

the you’re or I I days, going into as the described firm contract on fee. wondering think a some kind you direction XXXX? on color that, of obligation where XX coming including give per you’re like was price some if the I the XXX, of value those at since to could, moderate well, working to days what options least on are think, keep it color assuming rig able

pass going Dominic? that to I'm Sure. to one Dominic.

firm Thanks, Bernie. than our rate higher EBITDA priced at end. all optional the the and scope day costs of positive the options Yes, are to a designed was provide with the wells then contract is -- for cover at The firm scope. reactivation the

And firm for scope -- a of once we that they’re rate the we you see options once executed. will execute So higher successfully those day contract.

in color. exercised firm we well will And to program. one by and will the a start recall well, all more those they If complete I Frederik, just options each at be correctly, well exercised one if as little be

Okay.

to you So added first being the way fixed it? well, full to could if potentially see the the Is X understand a scope. complete well you then well that

I how it. Correct. That's understand

next The will David Smith question from come [ph].

it sure I you extraordinary if costs make And for it warm something the correctly think touch if is put work on wanted and tax real to to understood Wanted any stacked. so, should fleet Onyx quick just we to back being year? the find that to next about

work correctly. I at the all. have major And anticipated any X The runs Onyx put will rig work That expected special be if it back additional work recall for to we survey extraordinary warm to years, for No in an stacked. XXXX. don't hull

Monarch. All right. And Great. back the circle I on if could

would You SBS the mentioned cost need for that it and upgrades.

of if would provide total if costs to Just range you work? wondering a expected put back the to you could you were anticipate Monarch

Yes.

some survey magnitude. a pieces X Australia. likely also hull associated I the would most special ballast think water the And include BOP required of work is which call upgrade offer treatment order There's would the meet, I would the acceptable The offshore an with be could what to Monarch. of system. second I standards, one

works bring to would those So be $XX back work. on the million order million to of $XX or on to them

color. other durations? but status appreciate option wanted that I if are And couldn’t your you the and priced than ask rigs any to so, tell the the of rigs on please which GreatWhite? share I fleet from maybe report there could I options any if

Sure.

through have check on I'm Ocean that's BlackHawk it. list it. and just priced That's the options the rest Yes. here we running I So the of BlackRhino. to double believe

the BlackHawk approximate have the BlackRhino options for now? you of in those duration Do

a Rhino set our that and combined basis at It's apply on a options of the both of to well-by-well client. discretion Hawk the

And would progress program those which have a have with their some ahead their just very longer-term high to stage, regard is running at of visibility plans expect of don't depends completing so this with But and exercising on what schedule. into we those options. any number date well, exercised performance at would don't much into stage. We how to to we visibility exercised. be of development this It be wells

how in I -- could and been Gulf Yes, more gen it I for gen sure Gulf one there the of other versus other refer has think And the with U.S. seems be in rate world? parts your you the premium to sneak in greedy a team spread that. U.S. rigs appreciate for the in about seventh I’ll regions. like you seventh capacity to versus do but if marketing

the numbers. would the We region. to go were Africa. Gulf seen a I XXX at months across are so of good, for West in gens for the in of or the in Petrobras of closed gen some high-capacity that Brazil part fairly excess me that that is spread. More There's fixtures approaching dual to those see And we've kind rigs. big recently, to ago, seventh of there's you rates I Obviously, question available X sixth in closing X significant rates expect Africa at this looking to the think and for have gens West stage. said a in demand really ask in that, capacity see Mexico of world you'll seventh vicinity. think And is activity If

my X So the ago. Gulf demand the spot, the the Mexico some months bright I is materializing definitely, today, was see of But we from gap X perspective, close. to with think one distinct

appreciate Really the solid the congratulations I color. And want and the on quarter earlier the to echo addition. backlog

company. your Thanks, interest David. Appreciate in the

over I call to back to closing like management the would now for turn remarks.

one. Thank next participating quarter calls look this much. for you all Thanks again or you very any follow-up in today’s call. after We forward to with speaking

Thank today's concludes conference. for you This participating.

a disconnect day. great You and all may have