Diamond Offshore Drilling Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2024

There are 9 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Diamond Offshore Drilling First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would like now to turn the conference over to Kevin Wardosky, Senior Director of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, Michelle. Good morning or afternoon to everyone and thank you for joining us. With me on the call today are Bernie Wolford, President and Chief Executive Officer Dominic Saverino, Senior Vice President and Chief Financial Officer and John Richards, Senior Vice President and Chief Operating Officer. Before we begin our remarks, I remind you that information reported on call speaks only as of today and therefore time sensitive information may no longer be accurate at the time of any replay of this call. Some of the information referenced on our call today is included in a slide presentation that you can find in the Investor Relations section of our website under Calendar of Events.

Speaker 1

In addition, certain statements made during this call may be forward looking in nature. These statements are based on our current expectations and include known and unknown risks and uncertainties, many of which we are unable to predict or control. These risks and uncertainties may cause our actual results or performance to differ materially from any future results or performance expressed or implied by these statements. These risks and uncertainties include the risk factors disclosed in our 10 ks and 10 Q filings with the SEC. Further, we expressly disclaim any obligation to update or revise any forward looking statements.

Speaker 1

Refer to the disclosure regarding forward looking statements incorporated in our press release issued yesterday evening, and please note that the contents of our call today are covered by that disclosure. In addition, please note that we will be referencing non GAAP figures on our call today. You can find a reconciliation to GAAP financials in our press release issued yesterday. And now, I will turn the call over to Bernie.

Speaker 2

Thanks, Kevin. Good day to everyone and thank you for your interest in Diamond Offshore as we present our results for the Q1 of 2024. Today, I'll provide an update on previously reported GreatWhite incident, highlights from the Q1, our perspective on the deepwater drilling market and opportunities for our fleet. Dominic will then walk through our financial results and guidance for the Q2 and full year before I wrap up and open the floor for questions. I will begin with an update on the GreatWhite.

Speaker 2

On March 15, the GreatWhite arrived in Kishorn Port, where it is now undergoing repairs. Prior to departing the well location, the rig's crew safely recovered the lower marine riser package or LMRP from the seabed. Since arriving in Cushorn, we have dismantled the LMRP, made repairs to damaged equipment and significantly progressed the rebuild of the LMRP. Over the next 4 to 5 weeks, we expect to complete all repairs including the rebuild, commissioning and testing of the LMRP and BOP. As of today, we are more than 90% complete with the shipyard scope and progressing in line with our previously guided estimate for time out of service.

Speaker 2

We currently expect the rig to be back on the well location in the first half of June. Dominic will provide additional information about the estimated repair costs and insurance recovery in his remarks. Before moving on, I'd like to recognize the extraordinary work by our team in response to the incident and the quality of the ongoing collaboration with our client and local authorities. Turning now to our financial results. Total revenue and adjusted EBITDA for the Q1 were $275,000,000 $64,000,000 respectively.

Speaker 2

During the Q1, we safely handed our rig back to the rig owner after managing the rig since March of 2021. The velo remains under our management through August, while it completes its current contract with an operator in the U. S. Gulf of Mexico. At the contracts end, management of the Vila will transfer back to the rig owner.

Speaker 2

Turning now to backlog, as previously announced, we secured $713,000,000 of new backlog during the quarter, which equates to 4.2 rig years of work spread across 3 rigs. These include 2 of our 7th generation drillships, the BlackLine and Black Hornet, which were each contracted for 2 year extensions in the U. S. Gulf of Mexico at substantially higher day rates and the Patriot, one of our more harsh environment semis, which was contracted for a 60 day 2 well P and A campaign in the UK that commenced in early March. The BlackLine and Black Hornet contract extensions will start in direct continuation of their current contracts and provide firm work through the Q3 of 2026 and the Q1 of 2027 respectively.

Speaker 2

Under these new contracts, the BlackLine and Black Hornet will each be positioned to generate approximately $115,000,000 in annualized rig level EBITDA, contributing significantly to our cash flow over the coming years. Since the end of the Q1, we are pleased to announce that the Black Rhino secured a one well job in the Ivory Coast with an independent operator. The campaign is estimated to take 30 days and is planned to commence late this year after the rig's special periodical survey or SPS and managed pressure drilling upgrade. The total prepaid contract value associated with this job is approximately $18,000,000 with a day rate in line with recent global drill fixtures including mobilization and demobilization elements. With our contracting success year to date, we have significantly increased the visibility of our revenues for 2024 and beyond.

Speaker 2

For the full year 2024, excluding cold stacked rigs, 88% of our marketed capacity is contracted, 91% if you include priced options. Similarly, 49% of our 2025 marketed capacity is contracted. If you include priced option, this number rises to 73%. Now I'll turn to our view on the markets in general and opportunities for Diamond. During the Q1, 32 rig years of floating rig demand were booked across the industry with an average per rig duration of approximately 1.1 years.

Speaker 2

This average duration is without cost options extensions, sublets and the recent 10 year JV fixture. We believe the broader trend towards longer term contracts will continue as the year progresses. According to recent data from S and P Global, as of mid April, open demand from floating rig tenders was approximately 56 rig years compared to 42 rig years a year earlier, representing an increase of more than 30%. This uptick in tendering activity coupled with concern over future rig availability has pushed day rates for high specification ultra deepwater drilling rigs into the high $400,000 to low $500,000 per day range. For our fleet, we are tracking 53 contract opportunities totaling 55 rig years of demand with commencement dates from now through the end of 2025.

Speaker 2

This demand is split between DP and moored rigs at 66% and 34% respectively. Demand for floating rigs across the Golden Triangle remained strong, while the UK sector of the North Sea has been more volatile as some operators are deferring decisions for specific programs due to concerns brought about by the extension of the energy profits levy and anticipated national elections. Some of these deferred programs were 2024 opportunities for the Patriot. It is now likely that the Patriot will be idle following its current contract until late this year or early next when it commences its contracted long term P and A campaign. Demand in the region ticks up in 2025 and we remain optimistic for the Endeavour's opportunities following its current campaign as we pursue 4 opportunities for work both in and outside the UK.

Speaker 2

Finally, the BlackRhino is competing for multiple opportunities across the Golden Triangle commencing after its SPS and short term job in the Ivory Coast. It is notable that during the SPS, we are installing an MPD system. When that is completed, all 4 of our black ships will feature owned MPD systems, securing their position at the high end of technical specifications among competing 7th generation drillships. We are in active discussions on a number of opportunities and expect the BlackRhino to secure additional work without a gap between contracts. Change in subjects.

Speaker 2

We are well positioned to capture further upside through marketing rights recently secured for 3 7th generation stranded newbuild drillships. We have entered into an agreement with the owners of the Dorado and Draco to market these rigs in Brazil, Latin America, West Africa, Malaysia and Indonesia. The Dorado was delivered from the shipyard in April and subsequently moved to Malaysia, while the Draco is expected to be delivered from the shipyard in the Q3. In addition, we secured marketing rights for the former West Libra now known as the title action for the U. S.

Speaker 2

Gulf of Mexico region. The rig is currently expected to be delivered in the Q1 of 2025. These are exciting opportunities that could generate meaningful income and increase our exposure to the 7th generation drillship market during a period when our own units are likely to be fully committed. If we are successful in securing work for these rigs, we would manage the rigs on behalf of their respective owners and earn fees that would be accretive to our EBITDA projections without an increase in required working capital. And with that, I'll turn the call over to Dominic before returning with some concluding remarks.

Speaker 3

Thanks, Bernie, and good morning or afternoon to everyone. In my prepared remarks this morning, I'll provide a recap of our results for the Q1 and update on the estimated financial impact of the GreatWhite incident, guidance for the Q2 and updated full year 2024 guidance. For the Q1, we reported revenue excluding reimbursable revenue of $259,000,000 as compared to $280,000,000 in the prior quarter and adjusted EBITDA of $64,000,000 as compared to $72,000,000 The quarter over quarter decrease in revenue was primarily attributable to the completion of 1 of the managed rig contracts and the return of that rig to its owner and the GreatWhite being off contract for 2 months in the Q1 as a result of the LMRP incident, partially offset by the Courage and Blackhawk operating for the full quarter on new higher day rate contracts. Our revenue in the Q1 came in just under our guidance of $260,000,000 to $270,000,000 despite the fact that our guidance did not include the adverse impact on revenue of the GreatWhite incident. The revenue generated from the remainder of the fleet exceeded our expectations for the quarter as a result of additional revenue days for the Patriot and strong revenue efficiency across the remainder of the fleet in the second half of the quarter.

Speaker 3

Contract drilling expense for the Q1 was $184,000,000 compared to $189,000,000 in the prior quarter. The decrease was primarily attributable to lower charter and other operating expenses for the managed rigs, partially offset by higher operating costs for the Courage and Blackhawk as they worked the full quarter after commencing new contracts in the Q4 of 2023 and the recording of the one time expense of $8,000,000 for the insurance deductible associated with the GreatWhite incident. Our resulting adjusted EBITDA of $64,000,000 exceeded our guidance of $45,000,000 to $55,000,000 by almost 30%. Our guidance beat was attributable to the Patriot revenue and fleet revenue efficiency performance I mentioned earlier, as well as the incurrence of lower repairs and maintenance costs in the quarter. Our adjusted EBITDA results for the quarter have been normalized to remove the one time $10,000,000 charge for the insurance deductible, dollars 8,000,000 of which was recorded in contract drilling expense and $2,000,000 of which was recorded as a loss on the disposition of assets.

Speaker 3

Absent this adjustment, adjusted EBITDA still came in at the high end of our guidance despite the GreatWhite earning no revenue in February or March. Operating cash flow for the Q1 was $59,000,000 with free cash flow of $38,000,000 as compared to negative free cash flow of $22,000,000 in the Q4 of last year. The improvement in free cash flow was primarily a result of a release in working capital and lower capital expenditures. Turning now to the GreatWhite and our updated estimate of the financial implications of the unintentional release of the LMRP. As Bernie noted, the GreatWhite is making good progress on the repairs and is estimated to be back on location and earning day rate in the second half of June.

Speaker 3

Simultaneously, we have begun the process of filing the insurance claim for the incident and anticipate beginning to receive reimbursement from our insurance underwriters in the 2nd quarter. After taking into account lost revenue, repair costs, insurance proceeds including loss of higher insurance and our deductible, we now estimate that the overall EBITDA and cash flow impact will be approximately $25,000,000 to $30,000,000 a slight decrease compared to previous expectations. This impact can be broken down into the following three components. First, a decrease in top line revenue of $32,000,000 to $35,000,000 approximately half of which was recognized in the first quarter with the remainder being recognized in the 2nd quarter. 2nd, a net increase in contract drilling expenses of $3,000,000 to $6,000,000 attributable to the insurance deductible, partially offset by the expected reimbursement of a portion of operating expenses as part of the insurance claim.

Speaker 3

And finally, an increase in other operating income due to the expected receipt of loss of higher insurance of $10,000,000 to $11,000,000 all of which should be recognized in the 2nd quarter. In addition, we anticipate an increase in capital expenditures of $15,000,000 to $20,000,000 related to the incident, all of which we anticipate to be subject to recovery and reimbursement under our insurance policy. I would like to now turn to guidance for the Q2 and full year 2024. On our earnings call last quarter, given the recency of the GreatWhite incident, we presented our initial guidance for 2024 by excluding any financial impact from the GreatWhite event. Now that we have better visibility into the estimated impact and how the various components will be accounted for in our financial results, We are updating our full year 2024 revenue, adjusted EBITDA and capital expenditure guidance to take into account the negative impact of the GreatWhite incident offset by various positive outcomes across our fleet.

Speaker 3

Our full year 2024 revenue guidance excluding reimbursable revenue is now $925,000,000 to $945,000,000 and our full year 2024 adjusted EBITDA guidance is now $225,000,000 to $245,000,000 This revised adjusted EBITDA guidance is a considerable increase to our prior guidance as our prior guidance of $230,000,000 to 250 $1,000,000 did not take into account the previously disclosed $25,000,000 to $30,000,000 adverse impact from the GreatWhite incident and our new guidance does. Our updated adjusted EBITDA guidance of $235,000,000 at the midpoint compares favorably to the prior effective guidance of $212,000,000 at the midpoint. The overall increase in guidance is largely driven by higher revenue as a result of certain rigs being on contract more days than originally anticipated and lower operating costs. We are pleased that we have been able to increase our full year adjusted EBITDA guidance. Further, this increased guidance is substantially de risked as 100% of our adjusted EBITDA guidance for the remainder of this year is represented by already contracted work or priced options that are likely to be exercised.

Speaker 3

We have removed any additional contribution from the Patriot for 2024 as opportunities for additional work this year have not materialized. Full year 2024 CapEx is now expected to be between $135,000,000 to $145,000,000 after taking into account the additional capital expenditures for the GreatWhite. Turning to our 2nd quarter guidance, we expect revenue excluding reimbursable revenue to be between $230,000,000 dollars and adjusted EBITDA to be between $55,000,000 to $65,000,000 Again, both ranges inclusive of the negative financial impact we anticipate will be recorded in Q2 from the GreatWhite event. Capital expenditures for Q2 are expected to be between $30,000,000 $35,000,000 Looking forward to the end of 2024 and beyond, our visibility to estimated future earnings and cash flow is increasing as a result of our recent contract awards and our growing backlog at higher average day rates. In addition to our adjusted EBITDA guidance in 2024 being increased and de risked, we have 73% 41% of available days in 2025 and 2026 respectively committed through firm contracts and priced options we expect to be exercised.

Speaker 3

The weighted average drillship and semisubmersible day rate in our 2025 backlog is $475,000 $267,000 per day respectively, with total weighted average day rate across the entire fleet of $356,000 per day. This compares favorably to the $305,000 per day earned in the Q1 of this year. This level of contract coverage and average day rate growth positions us well for the next 3 years, yet still provides plenty of room for positive operational leverage as re contracting opportunities arise. The continued strong operating performance across our fleet has us on track for our net leverage ratio requirements under our credit facility and bond indenture to be met by the end of 2024 giving us additional flexibility with regard to our capital allocation strategy. That concludes my prepared remarks.

Speaker 3

I will now hand it back to Bernie for some closing comments.

Speaker 2

Thank you, Dominic. The demand landscape remains compelling for our business. The high specification deepwater rig supply to demand balance continues to tighten. This is resulting in strong contracting conditions that should benefit our available and marketed fleet. We've made a strong start to 2024, securing $731,000,000 in contract awards, sharing our improved financial outlook for the year and significantly improved earnings visibility into 2025.

Speaker 2

We look forward to delivering our guided results along with further EBITDA and free cash flow improvements in 2025. We appreciate your interest in Diamond Offshore and we'll now open the call for questions.

Operator

Thank And our first question comes from Eddie Kim with Barclays. Your line is now open.

Speaker 4

Hi, good morning. Just wanted to touch on the marketing arrangements on the 3 stranded newbuilds. Would you would Diamond get a say as to the day rate secured on those contracts? And then separately, just with regards to the management arrangement, if those rigs are contracted, Does that cover just the initial job or is that management contract somewhat indefinite? Just any color on those on the marketing agreement would be great.

Speaker 2

Hey, Eddie. Yes, thanks for the question. If we're successful in earning a contract for the rigs, they will be managed and crew by Diamond Offshore employees. And from our customers' perspective, the rig will be a Diamond Offshore rig. Diamond will market the rigs to customers within the stated regions and pursue contracting opportunities in line with how we would market our own diamond rigs.

Speaker 2

Commercial proposals will be evaluated, submitted with the owners input and consent with diamond being the focal point for commercial and the contractual negotiations. With respect to your question about the management of the rigs beyond the marketing agreement, our anticipation is that as marketing agreements lead to managed contracts, those obligations would continue through the term of the managed contract, but by no means indefinite. The marketing agreements themselves are indefinite, subject to certain conditions that might result in the ultimate termination of those.

Speaker 4

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

Speaker 2

Yes, Eddie, before I get to that, I should point out the management agreement would be for the firm term plus any options. With regard to the margins, they would be similar to what we were earning previously or currently. Combined, if all three units were working under these new marketing rights, then we would expect contribution on the order of $35,000,000 to $45,000,000 annually to EBITDA.

Speaker 4

Okay. Got it. Great. And if I could just squeeze one in here. The short term contract you announced for the BlackRhino, the total contract value $18,000,000 works out to $600,000 a day, but I believe you said that included some mobe and demobe and that kind of the clean rate is closer to where leading edge is today.

Speaker 4

Is that clean rate kind of in the mid to high 400s or the low 500s?

Speaker 2

It's in the mid to high 400s.

Speaker 4

Okay, got it. Great. Thank you for all the color. I'll turn it back.

Speaker 2

Thank you, Eddie.

Operator

One moment for the next question. The next question comes from David Smith with Pickering Energy. Your line is now open.

Speaker 5

Hey, good morning. Congratulations on the quarter and on bucking the trend by improving your 2024 outlook.

Speaker 2

All right. Thank you, David. Thanks, Dave.

Speaker 5

And circling back to the management rights, wanted to ask if those agreements include a potential path to ownership? And if so, could you provide any high level color on the timing of valuation?

Speaker 2

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

Speaker 5

Okay. I do appreciate that. And then second for the Endeavor, I think you referenced 4 opportunities that you're pursuing. I was hoping if you could give any color about the duration of those and really how you think about the potential for that rig to work through most of 2025?

Speaker 2

Sure. 2 of those opportunities are Q1 2025 ranging from 7 months to 2 years in duration. The balance of those opportunities start in the Q2 of 'twenty five ranging in duration from just over 2 months to 9 months in duration. So it's a bit of a mixed bag, Dave. We're still chasing every single one of those.

Speaker 2

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

Speaker 5

Makes perfect sense. Thank you for the color.

Operator

One moment for the next question. The next question comes from Noel Parks with Tuohy Brothers Investment. Your line is open.

Speaker 6

Hi, good morning. Just wondered if you maybe could expand a little bit on your thoughts on what you see as far as regional activity trends. You talked a bit about some of the regulatory matters that are having an impact.

Speaker 2

Sure. None in particular to comment on for the U. S, Brazil or West Africa. As I mentioned in my prepared remarks, in the UK, the extension of the energy profits levy has been a source of concern for our clients and potential clients as well as an expectation that the UK will hold national elections sometime before the end of this year, all of which have created some volatility and concern on their parts as to how their profits may be taxed and how their opportunities may be presented in years going ahead in the U. K.

Speaker 2

Sector. So it's somewhat uncertain for the bigger programs and the P and A programs. We see those going ahead for some of the smaller, what I would call brownfields or legacy development areas. We've seen some of those programs deferred until 2025 until there's more clarity on regulatory activity. In Australia, we've seen great progress in our clients being able to secure their environmental permits and that backlog and risk that was well recognized a year 6 months ago has largely cleared.

Speaker 2

Back to the UK, certainly seeing increased demand on the P and A front and that P and A demand doesn't seem to be impacted by the uncertainty around further development activity.

Speaker 6

Great. Thanks a lot.

Operator

One moment for the next question.

Speaker 2

Operator, we were expecting a likely participant, Craig Lewis from BTIG, because we had missed him last quarter, but I don't see him on our role today. Greg, if perhaps you're on the call, please know that we can't see you in the queue.

Operator

Our next question comes from Josh Jain with Daniel Energy. Your line is open.

Speaker 7

Thanks. Good morning.

Speaker 3

Good morning, Josh.

Speaker 7

So I don't want to beat a dead horse, but just to go back to the 3 new gold rigs. Could you talk about why this was the right path for Diamond instead of like with the agreements that you signed instead of pursuing some sort of path to ownership for all three potentially one of the rigs. Was ownership a consideration or an option in your discussions? Or was it because you're a capital constrained today or just maybe just talk me through the discussions and how you were thinking about this being the best path forward for those rigs and diamonds?

Speaker 2

Sure. The first part of that question as to us pursuing the marketing rights and why it's right for Diamond, Largely, that's because we have the global scale, we have the people, processes and systems that allow us to take on those rigs and market those rigs and provide great services for our clients without much add to our infrastructure and costs. And particularly that's important with our expectation that all of our black ships are going to be are likely to be committed in the not too distant future. And so we would be have no availability in the drillship market to make offerings to our clients. With regarding to path to ownership, Josh, we have looked at ownership of these assets and other assets similar to these, that we're well aware of, working in the market today.

Speaker 2

In some cases, simply put, the bid ask spread has been too wide for us to cover. In other cases, as our equity has continued to trade at process that might indicate a per drillship value of $300,000,000 Our equity currency is really not priced to support a potential acquisition right now. We remain genuinely interested in acquiring assets like these and we'll continue to pursue those opportunities, but it does a little good to try to negotiate a path to ownership when there's a large disparity on the bid ask premium at this stage.

Speaker 7

Thanks. That's helpful. Maybe on that point on the equity valuation, as you think about where the fleet is today, where it's going to be earning in 2025 and 2026, How should we be thinking about what your the opportunities to likely return capital over the next couple of years given where we are in the up cycle? Is there any chance that you could give just offer some preliminary thoughts about that?

Speaker 3

This is Dominic, Josh. There certainly is that possibility as we exit 2024 and get into 2025, we'll have the financial profile that we meet our covenants in our RCF and our indenture that would give us the flexibility to be able to do that starting next year. That's a decision that the board will take at that point in time. We are focused on managing our liquidity and our balance sheet in a conservative manner. But certainly, those discussions would take place and we would have that opportunity once we meet those covenants by the

Speaker 2

time we exit this year. And Josh, I might add that part and follow-up to your other question and part to this question, 2 things. 1, we're keenly focused on cash flow and building our cash on the balance sheet. And secondly, with regard to potential acquisitions and my reference to how our equity was trading today on a per 7th gen equivalent, we're obviously very sensitive to pursuing deals that are accretive for our shareholders. And in some cases that simply does not allow us to go to where the ask process.

Speaker 7

Sounds good. I appreciate it.

Operator

The next question comes from Doug Bekaert with Capital One. Your line is open.

Speaker 8

Thank you. Bernie, you mentioned the BlackRhino is expected to secure additional work without gaps between contracts. Curious if that extends through the entire 2025 outlook. I'm really just trying to gauge what type of visibility you have for that rig next year?

Speaker 2

Yes. Thanks, Doug, for the question. Yes, it does extend to the 2025 outlook for the full year. I mean, to the extent, my comment regarding not having any gap, there may be a mobilization involved in getting from where we are to where the job is depending on whether it's in West Africa, Brazil or the U. S.

Speaker 2

Gulf of Mexico, but we expect to be fully contracted for the year at this stage.

Speaker 8

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

Speaker 3

We can get into details about the operating costs, although certainly we've seen costs from our guidance has come down. We are we had some benefits in the Q1 from some deferral of costs that got pushed out into later in the year from a repairs and maintenance perspective. But overall, our operating costs have come down slightly relative to our expectations. But we can talk more offline if we wanted to get into more details about rig by rig view of that from a modeling standpoint.

Speaker 2

Doug, I would add that our inflation expectations for the year, I think, are on the order of 3% to 4% and that's baked to the guidance we provided today.

Speaker 8

Got it. Well, thank you very much.

Speaker 2

Thank you.

Operator

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

Speaker 2

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

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.

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Key Takeaways

  • GreatWhite incident: Repairs to the LMRP are over 90% complete in Kishorn Port with the rig expected back on location in mid-June, and the net EBITDA and cash flow impact is estimated at $25–$30 million (largely covered by insurance).
  • Q1 financials: Diamond reported total revenue of $275 million and adjusted EBITDA of $64 million, beating guidance by ~30%, with free cash flow improving to $38 million versus negative $22 million in Q4.
  • Backlog and contract wins: The company secured $713 million of new work (4.2 rig years) including two-year extensions for the BlackLine and Black Hornet at substantially higher day rates, and a 60-day campaign for the Patriot, leaving 88% of 2024 marketed capacity contracted.
  • Upgraded full‐year 2024 outlook: Revenue guidance is raised to $925 million–$945 million and adjusted EBITDA to $225 million–$245 million (midpoint of $235 million), driven by more contract days and lower operating costs, with 100% of remaining EBITDA de-risked.
  • Strategic marketing rights: Diamond secured marketing and management rights for three stranded 7th-generation drillships (Dorado, Draco, Title Action), which could add $35 million–$45 million of annual EBITDA without incremental capital.
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Earnings Conference Call
Diamond Offshore Drilling Q1 2024
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