Diamond Offshore cuts dividend for more liquidity, unveils unique contract with GE Oil & Gas

By Lisa Kerner

Charlotte, N.C., Feb. 8 – Diamond Offshore Drilling, Inc.’s board has eliminated the company’s regular quarterly dividend of $0.125 cents per share, adding $69 million per year of liquidity, said president and chief executive officer Marc Edwards.

Edwards said he has yet to see signs of improvement in the offshore rig market fundamentals, with all asset classes struggling. The higher-end dynamically positioned fifth- and sixth-generation market has the biggest problem, said Edwards during Diamond’s fourth-quarter earnings call on Monday.

“On a positive note, all of our sixth-generation assets are contracted to 2019 or beyond,” Edwards said.

He believes the market will recover as supply and demand eventually comes back into balance.

“We intend for our company to come out of this downturn well positioned to succeed during the eventual recovery, said Edwards. We will continue to focus on conducting safe operations, delivering quality performance for our clients, rationalizing costs and utilizing our capital efficiently.”

Innovative contract with GE

Diamond is “continuing to look at innovative ways to reduce costs and drive efficiencies for the benefit of our clients and our shareholders,” said Edwards.

As such, the company announced a contractual service agreement with GE Oil & Gas, the first of its kind in the offshore drilling industry.

GE will provide “engageDrilling Services” for blowout-preventer (BOP) systems on Diamond’s four sixth-generation drillships.

In the “Pressure Control by the Hour” model, Diamond will compensate GE when the BOP is available.

Additionally, under the 10-year arrangement, GE will purchase the BOP systems aboard Diamond’s four drillships located in the U.S. Gulf of Mexico for a total of $210 million.

Financial highlights

Diamond ended the quarter on Dec. 31 with cash and cash equivalents of $119.03 million, compared with $233.62 million for the prior-year period. Long-term debt of was roughly flat year over year at about $2 billion.

The Houston-based offshore oil and gas drilling contractor had a net loss for the quarter of $245 million, or a loss of $1.79 per diluted share. This compares to net income of $99 million, or $0.72 per diluted share, in the fourth quarter of 2014.

For full year 2015, Diamond had a net loss of $274 million, or a loss of $2.00 per diluted share, compared to net income of $387 million, or $2.81 per diluted share, in 2014.

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