• Added $482 Million of Backlog in Fourth Quarter
• Earned Sixth Performance Bonus in Senegal
• Progressed Ocean GreatWhite Reactivation
Diamond Offshore Drilling, Inc. reported the following results for the fourth quarter of 2022:
Bernie Wolford, Jr., President and Chief Executive Officer, stated "Diamond delivered another strong operational quarter with 96.4% revenue efficiency and industry-leading safety performance. This completes a strong year in which our overall revenue efficiency was just under 94% and our safety performance beat industry averages by a large margin. I would like to thank the entire Diamond team for continuing to deliver for our customers, enabling us to strengthen our relationships and favorably positioning the Company for future contract awards.
"We finished the year with approximately $1.8 billion, or 17.6 rig years of backlog, including $482 million added during the fourth quarter, and importantly we will have repricing opportunities for two high-specification drillships and two semisubmersibles in the next 12 months."
Fourth Quarter Results
Contract drilling revenue for the fourth quarter, excluding reimbursable revenue, totaled $208 million compared to $190 million in the third quarter of 2022. The increase in revenue was due to a full quarter of operation in Senegal for the Ocean BlackHawk, the Ocean BlackLion operating for a full quarter at its higher dayrate, and the Vela going on contract in the fourth quarter. The increased revenue was partially offset by reduced revenues from the Ocean Onyx, which was cold stacked during the quarter, and the Ocean Endeavor which was in the shipyard for repairs, regulatory surveys, and steel renewals.
Contract drilling expense as a percentage of revenue remained relatively flat compared to the prior quarter despite expenses associated with the reactivation of the Ocean GreatWhite, the Vela commencing its maiden contract under Diamond management, and the Ocean Endeavor being in shipyard for two months of the quarter.
Adjusted EBITDA for the fourth quarter was $12.5 million compared to $18.4 million in the prior quarter, primarily as a result of the reactivation expenses associated with the Ocean GreatWhite. Net loss for the fourth quarter was $52.4 million compared to net income of $5.5 million in the third quarter. The decrease in net income was largely a result of a swing in discrete, non-cash tax adjustments of approximately $49 million quarter to quarter. Tax expense during the fourth quarter was $26 million, primarily a result of the mix of the Company's quarterly earnings and the lack of tax benefit on losses in certain jurisdictions as well as the increase in certain tax reserves for potential tax exposures. The tax benefit during the third quarter was $23 million, primarily due to the recognition of certain deferred tax assets, the release of a valuation allowance, and the reversal of tax reserves after the expiration of the applicable statute of limitations in certain jurisdictions.
Free cash flow during the fourth quarter was $15 million compared to negative free cash flow during the third quarter of $30 million, primarily due to changes in working capital.
Operational Highlights
During the fourth quarter, the Ocean BlackHawk and Ocean BlackRhino combined efforts to earn a well-based performance bonus for the second consecutive quarter. This marks the sixth performance bonus earned by a combination of these rigs working on the Woodside Energy campaign in Senegal. The Company's owned and managed fleet continued to perform well during the quarter, achieving a revenue efficiency of 96.4%. During the quarter, the Company made good progress on the reactivation of the Ocean GreatWhite. The rig is currently undergoing acceptance testing and is expected to commence its contract in March.
Wolford concluded, "Diamond's performance continues to demonstrate our ability to deliver operational excellence to our customers in an efficient and industry-leading safe manner and positions us well to be a key beneficiary of this burgeoning upcycle in deepwater offshore drilling."
