Diamond Offshore Announces Second Quarter 2012 Results

Diamond Offshore Drilling, Inc. (NYSE:DO) today reported net income for the second quarter of 2012 of $201.5 million, or $1.45 per share on a diluted basis, compared with net income of $266.6 million, or $1.92 per share on a diluted basis, in the same period a year earlier. Revenues in the second quarter of 2012 were $738.2 million, compared with revenues of $889.5 million for the second quarter of 2011.

Results for the quarter included an after tax gain of approximately $50.5 million, or $0.36 per share, related to the sale of five jack up rigs. These transactions included the sale of the Ocean Sovereign for $38.5 million cash, in addition to the previously announced sales of the Ocean Heritage, Ocean Drake, Ocean Crusader and Ocean Champion. The reduction in the Company’s overall effective tax rate for the quarter, compared to the previous quarter, resulted primarily from the low effective tax rate associated with these sales transactions.

Since the first quarter of 2012, the Company put in place 14 new agreements that are expected to generate maximum total revenue of approximately $1.1 billion and 10 rig years of contract drilling backlog. Significant among these awarded contracts are the following:

* The Ocean Onyx was awarded a one year contract with Apache Deepwater LLC, a subsidiary of Apache Corporation, at a rate of $490,000 per day. The rig will work in the U.S. Gulf of Mexico upon its completion and delivery from the shipyard in 3Q of 2013.

* The Ocean Vanguard was extended with Statoil by 20 months to continue operating in the Norwegian sector of the North Sea into March of 2015. The new rate will be $450,000 per day, up from the previous rate of $352,000 per day.

* The Ocean Nomad was awarded a two year contract with Dana Petroleum to work in the U.K. North Sea until June of 2015. The rate will be $330,000 per day.

* The Ocean Guardian was extended with Shell for one year at a rate of $350,000 per day to continue working in the U.K. North Sea until July of 2015. The current rate is $263,000 per day.

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Diamond Offshore: Market Sentiment Is Shifting, Rare Opportunity Is Ending

From Seeking Alpha contributor Hester.....

Earlier in the year, at the end of May, I wrote a bullish article on Diamond Offshore (DO). At the time, shares of Diamond were getting crushed, as the hysteria over the BP spill was in full swing, with many speculating that BP would go bankrupt. The offshore drilling industry was just starting to go under a microscope by regulators. The drilling moratorium was just a twinkle in Ken Salazar's eye. People refused to go near drilling stocks because of regulatory uncertainty, possible increased insurance costs, the risk of another spill, and most importantly, the general dislike of the sector.

It has been nearly five months since all of this, and most of the reasons to sell are nearly gone. The moratorium and regulatory scrutiny is basically over. Insurance costs will be passed on to customers. The BP spill has ended, it is out of the news, and cleanup is moving swiftly. The risk of another spill is the exact same as before the BP spill (which is low), but perception of the risk is lowered. The general dislike and hatred of anything in the sector is slowly ending. The opportunity to purchase great companies at ridiculous prices is may be ending.

Yet, DO is trading at basically the same price as when my article came out and when I started buying. The stock price took a big plunge, from high $60's per share to mid $50's, after the article when people were speculating that Diamond had a spill themselves. However, anybody who took the time to listen to management or actually read past the headlines knew it was a non issue, and the stock eventually recovered to where it is now. So even though these issues are ending, today's buyers are offered a rare opportunity to buy one of the highest quality oil drillers in the world, at just 10 times earnings......Read the entire article.


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Transocean Rents Seen Sinking on Deepwater Rig Glut

Transocean Ltd. and Diamond Offshore Drilling Inc., [RIG] and [DO] the world’s biggest deepwater oil drillers, may face a drop in rig-rental revenue because of a glut of vessels that can operate in oceans two miles (3.2 kilometers) deep. The oversupply will develop in 2011 as rigs that drillers started building when oil prices surged to a record last year are completed, said Jud Bailey, an analyst at investment bank Jefferies & Co. in Houston. Rig rents are likely to drop 10 to 15 percent and stay down until new deepwater developments create enough demand to end the surplus in 2012 or 2013, he said.

“It was a classic case of panic on the part of operators when oil was over $100,” Bailey said. “A part of that panic was just the fact that they couldn’t get a rig. When that psychology reverses, it can be a pretty powerful dynamic.” Of the so called ultra deepwater rigs scheduled for completion between now and the end of 2011, 22 don’t have contracts to drill, according to researcher ODS-Petrodata Inc. in Houston. The most ultra-deepwater rigs to sit without a contract was three in April 2004, said Tom Kellock, head of consulting and research at ODS. Today there is just one......Read the entire article.

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Goldman Sachs Call For $85 Crude Oil, We Are Taking Profits At $70

Today’s Stock Market Club Trading Triangles

July crude oil closed up $2.66 at $68.78 a barrel today. Prices closed nearer the session high today and hit a fresh seven month high on a prediction from Goldman Sachs that crude oil prices would reach $85.00 a barrel this year and $95.00 next year. However, Goldman's track record on oil predictions is spotty. I would not be surprised to see crude oil prices touch the $70.00 a barrel mark and then see a good profit taking pullback. Crude oil bulls have the near term technical advantage. A six week old uptrend is still in place on the daily bar chart.

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July natural gas closed up 9.3 cents at $3.859 today. Prices closed nearer the session high today, on short covering in a bear market. The key "outside markets" were bullish for the natural gas futures market today, as the U.S. stock indexes were higher, crude oil prices were sharply higher and the U.S. dollar was weaker. Bears have the near term technical advantage.

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The September U.S. dollar index closed down 4 points at 80.00 today. Prices closed near mid range. Prices are still in an 11 week old downtrend on the daily bar chart. Bears still have the near term technical advantage.

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The U.S. stock indexes closed firmer today. Traders are awaiting Friday's key U.S. jobs report, which is not expected to be bullish, but traders have already factored in a significantly negative jobs loss figure. Do not be surprised to see more consolidative trade in the stock indexes, heading into the summer months, when traders focus more on family vacations and outdoor activities.

Crude Oil Falls as Equities Decline, Oil Workers Seem To Be Kept On The Job, OPEC Unlikely To Announce New Cuts

"Crude Oil Falls as Equities Decline, Signaling Lower Demand"
Crude oil fell as declining equity markets signaled that the recession in major energy consuming countries will prevent demand from rebounding. Prices retreated from the highest level this year as a drop in telephone and technology companies snuffed out an early stock rally. The Energy Department said yesterday that U.S. crude oil supplies climbed to the highest level since 1990 as fuel consumption tumbled.

“We’re just tracking equities,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “The recent demand data are so weak that we could have a remarkable increase in demand.....Complete Story

"Oil Workers Stay Put In a Downturn"
The recent oil boom spurred the largest expansion in offshore drilling since the 1970s. Diamond Offshore Drilling (DO) particularly cashed in on the huge demand for its 45 deepwater oil rigs that it contracts to oil companies such as ExxonMobil (XOM), Chevron (CVX) and Conoco-Phillips (COP). During the past three years, Diamond's average annual growth rate was 41%, and in 2008 it increased profits by 55%,to $1.3 billion. But when the economy took a nosedive and oil prices plummeted last year, drilling activity saw a precipitous drop, too. While Diamond is still growing, the pace has slowed: On Apr. 23 the Houston company announced a 13% revenue increase in the first quarter of 2009. In 2008, revenue had grown by nearly 30% compared to the same period the year before.....Complete Story

Today’s Stock Market Club Trading Triangles

"OPEC Unlikely to Announce New Output Cut in May, Barclays Says"
The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s oil, is unlikely to announce a further output cut at its next meeting as prices “stabilize,” according to Barclays Capital. OPEC will probably keep production targets unchanged as long as crude prices remain around current levels and inventory growth continues to slow, according to Barclays’s head of commodities research, Paul Horsnell. The group meets on May 28 in Vienna.

“If they held the meeting today, there’s no reason to change” quotas, Horsnell said in a telephone interview from London. “Prices are stabilizing and starting to nudge up in the direction they want.....Complete Story



Do you think OPEC cuts have an influence on the price of oil anymore? Let's us know what you think, please feel free to leave a comment!


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