Diamond Offshore Drilling, Inc. (NYSE: DO) has reported the following results for the first quarter of 2023:

Diamond Offshore announced contract awards for the 7th generation drillship Ocean BlackHawk in the U.S. Gulf of Mexico and the harsh environment semisubmersibles, Ocean Patriot, Ocean Endeavor and Ocean GreatWhite in the U.K. North Sea. The $212 million in contract awards for the Company is in addition to the $1.6 billion of backlog reported as of April 1, 2023.

Bernie Wolford, Jr., President and Chief Executive Officer of Diamond Offshore, stated “Securing work at significantly improved dayrates with quality customers further demonstrates the value our crews and assets are delivering. These awards reflect the continued strength of both the drillship and semisubmersible markets and our ability to capture meaningful upside as our rigs become available."

The Ocean BlackHawk has been awarded a one-year contract with a one-year priced option with Anadarko Petroleum Corporation, a wholly-owned subsidiary of Occidental, in the U.S. Gulf of Mexico. The contract is expected to commence in the fourth quarter of 2023.

In the U.K. North Sea, the Ocean Patriot has secured a two-well contract. The contract is expected to commence in the second half of the third quarter. Wolford added, “A potential second new contract currently under negotiation would fill out the remaining availability in 2023 and keep the rig contracted through the winter season.” The Ocean Endeavor has been awarded an extension covering two wells with an estimated duration of 120 days with its current client. The contract is expected to commence in early November 2023. Further, the Ocean GreatWhite had its first option well exercised by its current client with an estimated duration of 60 days. The option well is expected to commence in mid-January 2024 after completion of the initial five-well firm period. There are priced options remaining for up to seven additional wells.

First Quarter Results

Contract drilling revenue for the first quarter totaled $232 million compared to $223 million in the fourth quarter of 2022. The increase in revenue quarter-over-quarter was primarily driven by the Ocean BlackHornet commencing its second option period with bp at a higher dayrate. Results for the first quarter also reflect the completion of the reactivation of the Ocean GreatWhite and commencement of its contract in the North Sea near the end of March.

Contract drilling expense for the first quarter decreased to $173 million, compared to $178 million in the prior quarter, largely due to the Ocean Onyx being cold-stacked for the entire quarter.

General and administrative expenses were $20 million in the first quarter compared to $17 million in the prior quarter. The increase was primarily attributable to higher personnel costs and professional fees.

Tax benefit for the first quarter was $26 million as compared to a tax expense of $26 million in the prior quarter. The tax benefit recorded in the first quarter is based on the computation and application of the Company’s annual effective tax rate in accordance with U.S. GAAP accounting standards, adjusted for discrete items. The fourth quarter tax provision was attributable to the lack of tax benefit on losses in certain jurisdictions as well as the increase in certain tax reserves for potential tax exposures.

Operational Highlights

The reactivation of the Ocean GreatWhite was completed in the first quarter, and the rig commenced an approximate 300-day contract with bp, its first contract award since stacking in 2020. The Ocean Blac Rhino, operating in Senegal, earned a performance bonus from Woodside Energy, marking the third consecutive quarter during which the Company’s Senegal rigs earned a bonus. The Ocean Endeavor returned to work for Shell in the North Sea after completing its shipyard stay for its special hull survey and structural upgrades.

Revenue efficiency for the quarter remained level at approximately 96%, demonstrating consistent and efficient operations.

Also, during the quarter, the Company engaged a broker to assist in evaluating the potential sale of the Ocean Monarch, a deepwater semisubmersible rig, which is currently cold stacked. The rig is reported as “Asset Held for Sale” on the Company’s balance sheet.

Outlook

Commenting on the outlook for the offshore drilling market, Wolford concluded, “The market exhibits the characteristics underpinning the continuation of the broad based upcycle, as demonstrated by our recent fixtures for both drillships and semisubmersibles across multiple regions and tendering activity for longer term prospects. As we move through 2023 and into 2024, our EBITDA and cash flow from operations should continue to improve quarter over quarter, further strengthening Diamond’s financial position.”