<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------ -------
Commission file number 1-13926
DIAMOND OFFSHORE DRILLING, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0321760
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
15415 Katy Freeway
Houston, Texas
77094
(Address of principal executive offices)
(Zip Code)
(281) 492-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<S> <C> <C>
As of May 8, 2000 Common stock, $0.01 par value per share 135,531,907 shares
</TABLE>
<PAGE> 2
DIAMOND OFFSHORE DRILLING, INC.
TABLE OF CONTENTS FOR FORM 10-Q
QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C> <C>
COVER PAGE.......................................................................................1
TABLE OF CONTENTS................................................................................2
PART I. FINANCIAL INFORMATION...................................................................3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets......................................................3
Consolidated Statements of Income................................................4
Consolidated Statements of Cash Flows............................................5
Notes to Consolidated Financial Statements.......................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................................11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .....................17
PART II. OTHER INFORMATION.....................................................................18
ITEM 1. LEGAL PROCEEDINGS...............................................................18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.......................................18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................18
ITEM 5. OTHER INFORMATION...............................................................18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................18
SIGNATURES......................................................................................19
EXHIBIT INDEX...................................................................................20
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- ------------
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................... $ 106,572 $ 112,316
Marketable securities and other invested assets ......................... 511,578 529,042
Accounts receivable ..................................................... 129,759 143,569
Rig inventory and supplies .............................................. 39,145 38,760
Prepaid expenses and other .............................................. 28,740 36,605
----------- -----------
Total current assets ............................... 815,794 860,292
DRILLING AND OTHER PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION ................................................ 1,763,796 1,737,905
GOODWILL, NET OF ACCUMULATED AMORTIZATION ................................. 72,055 73,174
OTHER ASSETS .............................................................. 9,550 9,658
----------- -----------
Total assets ....................................... $ 2,661,195 $ 2,681,029
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................................ $ 48,433 $ 72,630
Accrued liabilities ..................................................... 40,872 44,051
Taxes payable ........................................................... 14,366 18,720
----------- -----------
Total current liabilities .......................... 103,671 135,401
LONG-TERM DEBT ............................................................ 400,000 400,000
DEFERRED TAX LIABILITY .................................................... 299,341 291,213
OTHER LIABILITIES ......................................................... 11,585 12,193
----------- -----------
Total liabilities .................................. 814,597 838,807
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock (par value $0.01, 25,000,000 shares authorized,
none issued and outstanding) ........................................ -- --
Common stock (par value $0.01, 500,000,000 shares authorized,
139,358,807 issued, 135,531,907 outstanding at March 31, 2000 and
139,342,381 issued, 135,824,281 outstanding at December 31, 1999) ...... 1,394 1,393
Additional paid-in capital .............................................. 1,302,905 1,302,841
Retained earnings ....................................................... 648,452 635,943
Accumulated other comprehensive losses .................................. (8,938) (9,229)
Treasury stock, at cost (3,826,900 shares at March 31, 2000 and
3,518,100 shares at December 31, 1999) ................................. (97,215) (88,726)
----------- -----------
Total stockholders' equity ......................... 1,846,598 1,842,222
----------- -----------
Total liabilities and stockholders' equity ......... $ 2,661,195 $ 2,681,029
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
---------- ----------
<S> <C> <C>
REVENUES ................................................... $ 167,828 $ 228,037
OPERATING EXPENSES:
Contract drilling ................................... 100,823 110,718
Depreciation and amortization ....................... 36,875 35,657
General and administrative .......................... 6,020 6,001
---------- ----------
Total operating expenses ....................... 143,718 152,376
---------- ----------
OPERATING INCOME ........................................... 24,110 75,661
OTHER INCOME (EXPENSE):
Gain on sale of assets .............................. 14,017 125
Interest income ..................................... 8,622 8,351
Interest expense .................................... (1,234) (3,332)
Other, net .......................................... (89) (1,093)
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE ........................... 45,426 79,712
INCOME TAX EXPENSE ......................................... (15,938) (27,894)
---------- ----------
NET INCOME ................................................. $ 29,488 $ 51,818
========== ==========
EARNINGS PER SHARE:
Basic ............................................... $ 0.22 $ 0.38
========== ==========
Diluted ............................................. $ 0.21 $ 0.37
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Common shares ....................................... 135,688 135,816
Dilutive potential common shares .................... 9,876 9,876
---------- ----------
Total weighted average shares outstanding ...... 145,564 145,692
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .................................................. $ 29,488 $ 51,818
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ............................. 36,875 35,657
Gain on sale of assets .................................... (14,017) (125)
Gain on sale of investment securities ..................... -- (6)
Deferred tax provision .................................... 7,648 8,291
Accretion of discounts on investment securities ........... (2,197) (3,229)
Amortization of debt issuance costs ....................... 138 134
Changes in operating assets and liabilities:
Accounts receivable ....................................... 13,810 33,566
Rig inventory and supplies and other current assets ....... 6,830 (4,374)
Other assets, non-current ................................. (30) 162
Accounts payable and accrued liabilities .................. (27,376) (15,293)
Taxes payable ............................................. (4,032) 29,147
Other liabilities, non-current ............................ (608) (2,807)
Other, net ................................................ 132 (820)
---------- ----------
Net cash provided by operating activities ............. 46,661 132,121
---------- ----------
INVESTING ACTIVITIES:
Capital expenditures ........................................ (79,155) (95,019)
Proceeds from sale of assets ................................ 32,177 129
Net change in marketable securities ......................... 19,976 (51,506)
---------- ----------
Net cash used in investing activities ................. (27,002) (146,396)
---------- ----------
FINANCING ACTIVITIES:
Acquisition of treasury stock ............................... (8,489) --
Payment of dividends ........................................ (16,979) (16,977)
Proceeds from stock options exercised ....................... 65 --
---------- ----------
Net cash used in financing activities ................. (25,403) (16,977)
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS ........................... (5,744) (31,252)
Cash and cash equivalents, beginning of period .............. 112,316 101,198
---------- ----------
Cash and cash equivalents, end of period .................... $ 106,572 $ 69,946
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The consolidated financial statements of Diamond Offshore Drilling, Inc.
and subsidiaries (the "Company") should be read in conjunction with the Annual
Report on Form 10-K for the year ended December 31, 1999 (File No. 1-13926).
Interim Financial Information
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all disclosures required by generally
accepted accounting principles for complete financial statements. The
consolidated financial information has not been audited but, in the opinion of
management, includes all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the consolidated balance sheets,
statements of income, and statements of cash flows at the dates and for the
periods indicated. Results of operations for interim periods are not necessarily
indicative of results of operations for the respective full years.
Cash and Cash Equivalents
Short-term, highly liquid investments that have an original maturity of
three months or less which are considered part of the Company's cash management
activities, rather than part of its investing activities, are considered cash
equivalents.
Marketable Securities and Other Invested Assets
The Company's investments in marketable securities are classified as
available for sale and stated at fair value. Accordingly, any unrealized gains
and losses, net of taxes, are reported in the Consolidated Balance Sheets in
"Accumulated other comprehensive losses" until realized. The cost of debt
securities is adjusted for amortization of premiums and accretion of discounts
to maturity and such adjustments are included in the Consolidated Statements of
Income in "Interest income." The cost of debt securities sold is based on the
specific identification method and the cost of equity securities sold is based
on the average cost method. Realized gains or losses and declines in value, if
any, judged to be other than temporary are reported in the Consolidated
Statements of Income in "Other income (expense)."
In January 2000, the Company sold its jack-up drilling rig, the Ocean
Scotian, for $32.0 million in cash which was invested with a third party
pursuant to a Deferred Exchange Agreement (the "Agreement"). The Agreement
provides for investment of the $32.0 million in a money market fund at current
interest rates and restricts the use of the cash to the purchase of replacement
property for the Ocean Scotian for a period of up to 180 days subsequent to the
sale of the rig. See "--Drilling and Other Property and Equipment."
Supplementary Cash Flow Information
Cash payments made for interest on long-term debt totaled $7.5 million
during each quarter ended March 31, 2000 and 1999. Cash payments made, net of
refunds, for income taxes during the quarters ended March 31, 2000 and 1999
totaled $13.5 million and $8.9 million, respectively.
Capitalized Interest
Interest cost for construction and upgrade of qualifying assets is
capitalized. The Company incurred interest cost, including amortization of debt
issuance costs, of $3.9 million during each of the quarters ended March 31, 2000
and 1999. Interest cost capitalized during the quarter ended March 31, 2000 was
$2.7 million. Interest cost capitalized during the quarter ended March 31, 1999
was not material.
6
<PAGE> 7
Goodwill
Goodwill from the merger with Arethusa (Off-Shore) Limited ("Arethusa") is
amortized on a straight-line basis over 20 years. Amortization expense totaled
$1.1 million and $1.6 million for the quarters ended March 31, 2000 and 1999,
respectively.
Debt Issuance Costs
Debt issuance costs are included in the Consolidated Balance Sheets in
"Other assets" and are amortized over the term of the related debt.
Treasury Stock
Depending on market conditions, the Company may, from time to time,
purchase shares of its common stock in the open market. The purchase of treasury
stock is accounted for using the cost method, which reports the cost of the
shares acquired in "Treasury stock" as a deduction from stockholders' equity in
the Consolidated Balance Sheets. During the quarter ended March 31, 2000, the
Company purchased 308,800 shares of its common stock at an aggregate cost of
$8.5 million, or at an average cost of $27.49 per share.
Comprehensive Income
Comprehensive income is the change in equity of a business enterprise
during a period from transactions and other events and circumstances except
those resulting from investments by owners and distributions to owners. For the
three months ended March 31, 2000 and 1999, comprehensive income totaled $29.8
million and $50.6 million, respectively. Comprehensive income includes net
income, foreign currency translation gains and losses, and unrealized holding
gains and losses on investments.
Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing net
income by the weighted average number of shares of common stock outstanding for
the period. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Diluted earnings per share was
calculated by dividing net income, adjusted to eliminate the after-tax effect of
interest expense, by the weighted average number of shares of common stock
outstanding and the weighted average number of shares of common stock issuable
assuming full conversion of the convertible subordinated notes as of the
beginning of the periods presented.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimated.
Reclassifications
Certain amounts applicable to the prior periods have been reclassified to
conform to the classifications currently followed. Such reclassifications do not
affect earnings.
7
<PAGE> 8
2. MARKETABLE SECURITIES
Investments classified as available for sale are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 2000
-------------------------------------------
UNREALIZED MARKET
COST GAIN (LOSS) VALUE
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities issued by the U.S. Treasury
Due within one year ......................... $ 259,237 $ (1,377) $ 257,860
Due after one year through five years ....... 75,025 (1,410) 73,615
Collateralized mortgage obligations .............. 152,989 (6,548) 146,441
Equity securities ................................ 1,446 216 1,662
---------- ---------- ----------
Total ....................................... $ 488,697 $ (9,119) $ 479,578
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------
UNREALIZED MARKET
COST GAIN (LOSS) VALUE
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities issued by the U.S. Treasury
Due within one year ......................... $ 259,090 $ (1,123) $ 257,967
Due after one year through five years ....... 124,935 (2,180) 122,755
Collateralized mortgage obligations .............. 153,004 (6,130) 146,874
Equity securities ................................ 1,446 -- 1,446
---------- ---------- ----------
Total ....................................... $ 538,475 $ (9,433) $ 529,042
========== ========== ==========
</TABLE>
All of the Company's investments are included as current assets in the
Consolidated Balance Sheets in "Marketable securities and other invested
assets," representing the investment of cash available for current operations.
During the three months ended March 31, 2000 and 1999, certain debt
securities due within one year were sold or matured for proceeds of $270.0
million and $269.2 million, respectively. There was no resulting gain or loss
for the first quarter of 2000. The resulting after-tax realized gain for the
quarter ended March 31, 1999 was not material.
3. DRILLING AND OTHER PROPERTY AND EQUIPMENT
Cost and accumulated depreciation of drilling and other property and
equipment are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- ------------
2000 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Drilling rigs and equipment ................................ $ 2,085,195 $ 2,095,613
Construction work in progress .............................. 301,836 241,102
Land and buildings ......................................... 14,106 13,992
Office equipment and other ................................. 17,673 17,552
----------- -----------
Cost ............................................. 2,418,810 2,368,259
Less accumulated depreciation .............................. (655,014) (630,354)
----------- -----------
Drilling and other property and equipment, net... $ 1,763,796 $ 1,737,905
=========== ===========
</TABLE>
In January 2000, the Company sold its jack-up drilling rig, the Ocean
Scotian, for $32.0 million in cash resulting in an after-tax gain of $9.0
million. The rig had been cold stacked offshore Netherlands prior to the sale.
8
<PAGE> 9
4. GOODWILL
The merger with Arethusa in 1996 generated an excess of the purchase price
over the estimated fair value of the net assets acquired. Cost and accumulated
amortization of such goodwill are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------
2000 1999
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill .......................... $ 96,112 $ 96,112
Less accumulated amortization ..... (24,057) (22,938)
-------- --------
Total ................... $ 72,055 $ 73,174
======== ========
</TABLE>
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------- ------------
2000 1999
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Personal injury and other claims .. $ 16,986 $ 18,219
Payroll and benefits .............. 17,319 16,281
Interest payable .................. 1,916 5,667
Other ............................. 4,651 3,884
-------- --------
Total ................... $ 40,872 $ 44,051
======== ========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
In January 2000, the Company successfully completed the defense and
indemnification of Zapata Off-Shore Company and Zapata Corporation (the "Zapata
Defendants"), a former subsidiary of Arethusa, which is now a subsidiary of the
Company, pursuant to a contractual defense and indemnification agreement, in a
suit for tortious interference with contract and conspiracy to tortiously
interfere with contract. The plaintiffs sought $14.0 million in actual damages
and unspecified punitive damages, plus costs of court, interest and attorneys'
fees. In November 1997, the jury awarded a take nothing judgment in favor of the
Zapata Defendants. The plaintiffs appealed the judgment and the appellate court
ordered the parties to mediation. The case went to mediation in July 1998 with
no resolution. In May 1999, the case went before the Texas First Court of
Appeals, Houston, which affirmed the jury verdict. The plaintiffs filed their
petition for review with the Supreme Court of Texas in November 1999 which was
subsequently denied in January 2000.
In August 1999, a customer terminated a contract for use of one of the
Company's drilling rigs located offshore Australia. The termination was not the
result of performance failures by the Company or its equipment. The Company
believes the contract required the customer to pay approximately $16.5 million
in remaining revenue through the end of the contract period, which was
previously scheduled to end in early January 2000. However, the customer
believes that there was no further obligation under the contract and has refused
to pay the $16.5 million early termination fee. The Company filed suit in
Australia in August 1999 requesting reconstruction of the contract and a
declaratory judgment requiring the customer to pay such early termination fee.
The Company intends to vigorously pursue its claim. For financial statement
purposes, the $16.5 million early termination fee was not included in revenues
in the Company's results of operations for the year ended December 31, 1999.
Various claims have been filed against the Company in the ordinary course
of business, particularly claims alleging personal injuries. Management believes
that the Company has established adequate reserves for any liabilities that may
reasonably be expected to result from these claims. In the opinion of
management, no pending or
9
<PAGE> 10
threatened claims, actions or proceedings against the Company are expected to
have a material adverse effect on the Company's consolidated financial position,
results of operations, or cash flows.
7. SEGMENTS AND GEOGRAPHIC AREA ANALYSIS
The Company reports its operations as one reportable segment, contract
drilling of offshore oil and gas wells. Although the Company provides contract
drilling services from different types of offshore drilling rigs and provides
such services in many geographic locations, these operations have been
aggregated into one reportable segment based on the similarity of economic
characteristics among all divisions and locations, including the nature of
services provided and the type of customers of such services.
Similar Services
Revenues from external customers for contract drilling and similar services
by equipment-type are listed below (eliminations offset dayrate revenues earned
when the Company's rigs are utilized in its integrated services):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
High Specification Floaters ....... $ 56,862 $ 63,960
Other Semisubmersibles ............ 88,511 139,453
Jack-ups .......................... 21,019 24,069
Integrated Services ............... 2,601 3,469
Eliminations ...................... (1,165) (2,914)
--------- ---------
Total Revenues ............ $ 167,828 $ 228,037
========= =========
</TABLE>
Geographic Areas
At March 31, 2000, the Company had drilling rigs located offshore seven
countries outside of the United States. As a result, the Company is exposed to
the risk of changes in social, political and economic conditions inherent in
foreign operations and the Company's results of operations and the value of its
foreign assets are affected by fluctuations in foreign currency exchange rates.
Revenues by geographic area are presented by attributing revenues to the
individual country where the services were performed.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Revenues from unaffiliated customers:
United States ............................. $ 79,620 $ 111,208
Foreign:
Europe/Africa .......................... 22,813 64,455
Australia/Southeast Asia ............... 18,432 28,267
South America .......................... 46,963 24,107
--------- ---------
Total Revenues .................... $ 167,828 $ 228,037
========= =========
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements (including the Notes thereto) included
elsewhere herein.
The Company is a leader in deep water drilling with a fleet of 45 offshore
drilling rigs. The fleet consists of 30 semisubmersibles, 14 jack-ups and one
drillship.
RESULTS OF OPERATIONS
General
Revenues. The Company's revenues vary based upon demand, which affects the
number of days the fleet is utilized and the dayrates earned. Revenues can also
increase or decrease as a result of the acquisition or disposal of rigs. In
order to improve utilization or realize higher dayrates, the Company may
mobilize its rigs from one market to another. During periods of mobilization,
however, revenues may be adversely affected. In response to changes in demand,
the Company may withdraw a rig from the market by stacking it or may reactivate
a rig previously stacked, which may decrease or increase revenues, respectively.
Revenues from dayrate drilling contracts are recognized currently. The
Company may receive lump-sum payments in connection with specific contracts.
Such payments are recognized as revenues over the term of the related drilling
contract. Mobilization revenues, less costs incurred to mobilize an offshore rig
from one market to another, are recognized over the term of the related drilling
contract.
Revenues from offshore turnkey contracts are accrued to the extent of costs
until the specified turnkey depth and other contract requirements are met.
Income is recognized on the completed contract method. Provisions for future
losses on turnkey contracts are recognized when it becomes apparent that
expenses to be incurred on a specific contract will exceed the revenue from that
contract.
Operating Income. Operating income is primarily affected by revenue
factors, but is also a function of varying levels of operating expenses.
Operating expenses are not affected by changes in dayrates, nor are they
necessarily significantly affected by fluctuations in utilization. For instance,
if a rig is to be idle for a short period of time, the Company realizes few
decreases in operating expenses since the rig is typically maintained in a
prepared state with a full crew. In addition, when a rig is idle, the Company is
responsible for certain operating expenses such as rig fuel and supply boat
costs, which are typically charged to the operator under drilling contracts.
However, if the rig is to be idle for an extended period of time, the Company
may reduce the size of a rig's crew and take steps to "cold stack" the rig,
which lowers expenses and partially offsets the impact on operating income. The
Company recognizes as operating expenses activities such as painting,
inspections and routine overhauls that maintain rather than upgrade its rigs.
These expenses vary from period to period. Costs of rig enhancements are
capitalized and depreciated over the expected useful lives of the enhancements.
Increased depreciation expense decreases operating income in periods subsequent
to capital upgrades.
11
<PAGE> 12
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Comparative data relating to the Company's revenues and operating expenses
by equipment type are listed below (eliminations offset dayrate revenues earned
when the Company's rigs are utilized in its integrated services). Certain
amounts applicable to the prior period have been reclassified to conform to the
classifications currently followed. Such reclassifications do not affect
earnings.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------- INCREASE/
2000 1999 (DECREASE)
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
High Specification Floaters ............... $ 56,862 $ 63,960 $ (7,098)
Other Semisubmersibles .................... 88,511 139,453 (50,942)
Jack-ups .................................. 21,019 24,069 (3,050)
Integrated Services ....................... 2,601 3,469 (868)
Eliminations .............................. (1,165) (2,914) 1,749
---------- ---------- ----------
Total Revenues .................... $ 167,828 $ 228,037 $ (60,209)
========== ========== ==========
CONTRACT DRILLING EXPENSE
High Specification Floaters ............... $ 23,307 $ 24,390 $ (1,083)
Other Semisubmersibles .................... 54,865 62,251 (7,386)
Jack-ups .................................. 19,845 22,708 (2,863)
Integrated Services ....................... 3,071 3,438 (367)
Other ..................................... 900 845 55
Eliminations .............................. (1,165) (2,914) 1,749
---------- ---------- ----------
Total Contract Drilling Expense ... $ 100,823 $ 110,718 $ (9,895)
========== ========== ==========
OPERATING INCOME
High Specification Floaters ............... $ 33,555 $ 39,570 $ (6,015)
Other Semisubmersibles .................... 33,646 77,202 (43,556)
Jack-ups .................................. 1,174 1,361 (187)
Integrated Services ....................... (470) 31 (501)
Other ..................................... (900) (845) (55)
Depreciation and Amortization Expense ..... (36,875) (35,657) (1,218)
General and Administrative Expense ........ (6,020) (6,001) (19)
---------- ---------- ----------
Total Operating Income ............ $ 24,110 $ 75,661 $ (51,551)
========== ========== ==========
</TABLE>
High Specification Floaters.
Revenues. Revenues from high specification floaters during the first
quarter of 2000 decreased by $7.1 million from the same period in 1999.
Approximately $23.6 million of the revenue decline resulted from lower operating
dayrates as compared to 1999. The average operating dayrate for high
specification floaters during the first quarter of 2000 was $94,600 per day as
compared to $133,100 per day during the first quarter of 1999. In addition,
revenues decreased by $2.7 million due to revenue recognized in the first
quarter of 1999 associated with the late 1998 mobilization of the Ocean Alliance
from the North Sea to Angola. These decreases were partially offset by an
increase in revenues of approximately $16.0 million due to an improvement in
utilization. Utilization for the Company's high specification floaters during
the first quarter of 2000 was 97% as compared to 79% during the first quarter of
1999. Also, revenues increased $3.3 million from the first quarter of 1999, due
to rig downtime in 1999 for inspection and repairs associated with the Ocean
America.
Contract Drilling Expense. Contract drilling expense for high specification
floaters during the first quarter of 2000 decreased $1.1 million from the same
period in 1999. This decrease resulted primarily from costs incurred in the
first quarter of 1999 of approximately $2.7 million for the mobilization of the
Ocean Alliance from the North Sea to Angola and $2.8 million in costs associated
with the mandatory inspection and repairs of the Ocean America. These reductions
were partially offset by an increase in contract drilling expense in the first
quarter of 2000 of approximately $3.6 million for the Ocean Clipper, which began
operating under its three-year contract offshore
12
<PAGE> 13
Brazil. During the first quarter of 1999, the Ocean Clipper was in the shipyard
for modifications, upgrades and the replacement of the blow-out preventer
control system.
Other Semisubmersibles.
Revenues. Revenues from other semisubmersibles during the first quarter
ended March 31, 2000 decreased $50.9 million from the same period in 1999.
Approximately $32.0 million of the decrease resulted from a decline in operating
dayrates as compared to the same period in 1999. The average operating dayrate
for the Company's other semisubmersibles was $67,400 per day during the first
quarter of 2000, as compared to $93,200 per day during the first quarter of
1999. In addition, revenues were reduced by $20.7 million and $2.4 million due
to decreased utilization and rigs removed from service, respectively.
Utilization for the Company's other semisubmersibles during the first quarter of
2000 was 63% as compared to 73% during the first quarter of 1999. These
decreases were partially offset by increases in revenues due to rig downtime
during the first quarter of 1999 for mandatory inspections and repairs of the
Ocean Yatzy.
Contract Drilling Expense. Contract drilling expense for other
semisubmersibles during the first quarter of 2000 decreased $7.4 million from
the same period in 1999. This decrease resulted primarily from a reduction in
costs of $5.6 million associated with the inspection, repair and mobilization of
the Ocean Winner from the Gulf of Mexico to Brazil in the first quarter of 1999.
Contract drilling expense was also reduced by $4.4 million in 2000 due to costs
associated with mandatory inspections and repairs of the Ocean New Era and the
Ocean Yatzy in 1999. In addition, first quarter 2000 costs were reduced by $2.0
million as a result of cold stacking the Ocean Baroness in late 1999. Partially
offsetting these decreases were increases in costs in 2000 of approximately $3.0
million associated with the mandatory inspection and repairs of the Ocean
Lexington and $1.2 million from operating costs for the Ocean General which was
stacked throughout 1999.
Jack-Ups.
Revenues. Revenues from jack-ups during the first quarter of 2000 decreased
$3.1 million from the same period in 1999. This decrease was due primarily, to a
reduction in revenues of $7.8 million from the Ocean Scotian which was sold in
January 2000 but worked throughout the first quarter of 1999. Revenues were also
reduced by approximately $2.9 million attributable to a decline in operating
dayrates as compared to the same period in 1999. The average operating dayrate
for the Company's jack-ups was $19,800 per day during the first quarter of 2000,
as compared to $27,400 per day during the first quarter of 1999. These decreases
were partially offset by an increase in revenues of approximately $7.6 million
due to improvements in utilization. Utilization for the Company's jack-ups
during the first quarter of 2000 was 82% as compared to 61% during the first
quarter of 1999.
Contract Drilling Expense. Contract drilling expense for jack-ups during
the first quarter of 2000 decreased $2.9 million over the same period in 1999.
This decrease resulted primarily from the sale of the Ocean Scotian in January
2000.
Integrated Services.
Revenues and contract drilling expense for integrated services decreased as
a result of fewer projects during the first quarter of 2000 as compared to the
first quarter of 1999.
Depreciation and Amortization Expense.
Depreciation and amortization expense for the three months ended March 31,
2000 of $36.9 million increased $1.2 million from $35.7 million for the three
months ended March 31, 1999. This increase resulted primarily from an increase
in depreciation for the Ocean Clipper, Ocean General, Ocean Concord, and Ocean
King, which completed various upgrades in the second half of 1999. This increase
was partially offset by a decrease in depreciation in the first quarter of 2000
due to the January 2000 sale of the Ocean Scotian and a decrease in goodwill
amortization.
13
<PAGE> 14
Gain on Sale of Assets.
Gain on sale of assets for the three months ended March 31, 2000 of $14.0
million increased $13.9 million from $0.1 million for the three months ended
March 31, 1999. This increase resulted primarily from the January 2000 sale of
the Company's jack-up drilling rig, Ocean Scotian, for $32.0 million in cash
resulting in an after-tax gain of $9.0 million. The rig had been cold stacked
offshore Netherlands prior to the sale.
Interest Expense
Interest expense of $1.2 million for the three months ended March 31, 2000
decreased $2.1 million from interest expense of $3.3 million for the three
months ended March 31, 1999. This decrease resulted primarily from an increase
in capitalized interest for the conversion of the Ocean Confidence. Interest
cost capitalized during the quarter ended March 31, 2000 was $2.7 million.
Interest cost capitalized during the quarter ended March 31, 1999 was not
material. See "-- Capital Resources."
Income Tax Expense.
Income tax expense of $15.9 million for the three months ended March 31,
2000 decreased $12.0 million from $27.9 million for the three months ended March
31, 1999. This decrease resulted primarily from the $34.3 million decrease in
income before income tax expense as compared to the three months ended March 31,
1999.
OUTLOOK
The Company has recently experienced improvement in the domestic jack-up
market along with some stability in its high specification floater business as
the industry concentrates on shallow water natural gas and deep water prospects
offshore. While some high specification floating units have seen idle time
around the world, the Company has maintained high utilization for its rigs in
this class. With a strategy of trying to maintain utilization through short-term
commitments, the Company expects it will be in a position to respond when the
high specification floater market sees improvement. The Company's jack-up fleet
should see improved results in the second quarter as dayrates and utilization
continue to improve.
The Company is less optimistic about the global market for its other
semisubmersibles, despite significant improvements in product prices over the
last year. The results for the Company's other semisubmersibles were slightly
down in the first quarter of 2000 and, due to declining utilization and
dayrates, are expected to experience continued downward pressure in the near
term. Near term results will also be adversely affected as several long-term
contracts previously committed under dayrates in excess of current market rates
expired late in the first quarter and early in the second quarter of 2000.
Historically, the offshore contract drilling industry has been highly
competitive and cyclical, and the Company cannot predict the extent to which
current conditions may or may not continue. However, with the high level of
product prices, there is continued optimism in the offshore contract drilling
industry that oil and gas companies will increase their spending on exploration
and development in the long term, potentially resulting in increased utilization
levels and dayrates for offshore drilling rigs.
LIQUIDITY
At March 31, 2000, cash and marketable securities totaled $618.2 million,
down from $641.4 million at December 31, 1999. Cash provided by operating
activities for the quarter ended March 31, 2000 decreased by $85.4 million to
$46.7 million, as compared to $132.1 million for the same period of the prior
year. This decrease in cash was primarily attributable to a $22.3 million
reduction in net income and various other changes in operating assets and
liabilities.
Investing activities used $27.0 million of cash during the quarter ended
March 31, 2000, as compared to $146.4 million cash used during the same quarter
of the prior year. This decrease resulted primarily from a $71.5 million
decrease in cash used for investments in marketable securities, a $32.0 million
increase in proceeds from the sale of assets, primarily the sale of the Ocean
Scotian in January 2000, and a $15.9 million increase in cash resulting from a
decrease in capital expenditures primarily attributable to the Ocean Confidence.
14
<PAGE> 15
Cash used in financing activities for the quarter ended March 31, 2000 of
$25.4 million resulted primarily from dividends paid to stockholders and the
acquisition of the Company's outstanding common stock, par value $0.01 per
share. Depending on market conditions, the Company may, from time to time,
purchase shares of its common stock in the open market. During the quarter ended
March 31, 2000, the Company purchased 308,800 shares of its common stock at an
aggregate cost of $8.5 million, or at an average cost of $27.49 per share. Cash
used in financing activities for the quarter ended March 31, 1999 of $17.0
million resulted from dividends paid to stockholders.
Other sources of liquidity include the Company's $20.0 million short-term
revolving credit agreement with a U.S. bank. The agreement provides for
borrowings at various interest rates and varying commitment fees dependent upon
public credit ratings. The Company intends to use the facility primarily for
letters of credit that the Company must post, from time to time, for bid and
performance guarantees required in certain parts of the world. The agreement
contains certain financial and other covenants and provisions that must be
maintained by the Company for compliance. As of March 31, 2000, there were no
outstanding borrowings under this agreement and the Company was in compliance
with each of the covenants and provisions.
The Company has the ability to issue an aggregate of approximately $117.5
million in debt, equity and other securities under a shelf registration
statement. In addition, the Company may issue, from time to time, up to eight
million shares of common stock, which shares are registered under an acquisition
shelf registration statement (upon effectiveness of an amendment thereto
reflecting the effect of the two-for-one stock split declared in July 1997), in
connection with one or more acquisitions by the Company of securities or assets
of other businesses.
The Company believes it has the financial resources needed to meet its
business requirements in the foreseeable future, including capital expenditures
for rig upgrades and continuing rig enhancements and for working capital
requirements.
CAPITAL RESOURCES
Cash required to meet the Company's capital commitments is determined by
evaluating rig upgrades to meet specific customer requirements and by evaluating
the Company's continuing rig enhancement program, including water depth and
drilling capability upgrades. It is management's opinion that operating cash
flows and the Company's cash reserves will be sufficient to meet these capital
commitments; however, periodic assessments will be made based on industry
conditions. In addition, the Company may, from time to time, issue debt or
equity securities, or a combination thereof, to finance capital expenditures,
the acquisition of assets and businesses, or for general corporate purposes. The
Company's ability to effect any such issuance will be dependent on the Company's
results of operations, its current financial condition, current market
conditions, and other factors beyond its control.
The Company expects to spend $122.2 million for rig upgrade capital
expenditures during 2000, which is primarily costs associated with the
conversion of the Ocean Confidence. Also included in this amount is
approximately $17.0 million for variable deckload and water depth capability
upgrades on the Ocean Epoch, and $25.2 million for other possible upgrades
depending on market conditions. During the period ended March 31, 2000, the
Company expended $62.6 million, including capitalized interest expense, for rig
upgrades, primarily for the conversion of the Ocean Confidence from an
accommodation vessel to a semisubmersible drilling unit capable of operating in
harsh environments and ultra-deep waters.
The conversion of the Ocean Confidence includes the following enhancements:
capability for operation in 7,500 foot water depths; approximately 6,000 tons
variable deckload; a 15,000 psi blow-out prevention system; and four mud pumps
to complement the existing Class III dynamic-positioning system. The Company
estimates its net cost of conversion for this rig at approximately $375.0
million. Upon completion of the conversion and customer acceptance, the rig is
scheduled to begin a five-year drilling program in the Gulf of Mexico, which is
expected to generate approximately $320.0 million of revenues. The drilling
contract contains a provision allowing the customer to cancel the contract
should the unit not be delivered by July 1, 2000 (with an allowance for up to 30
days additional time for accumulated weather delays). Although the Company is
aggressively working towards delivery of the rig on a timely basis, it is
possible that delays or unforeseen circumstances could extend delivery beyond
the date which would allow the customer the option to cancel the term contract.
Should the Company be required to remarket the unit, dayrate and term available
may not be as favorable as the existing five-year agreement. In such case, the
terms of any new agreement would be dependent on the market conditions
prevailing at that point in time.
15
<PAGE> 16
As a result, future revenues generated by the rig could be less than the current
contracted amount of approximately $320.0 million.
During the period ended March 31, 2000, the Company expended $16.6 million
in connection with its continuing rig enhancement program and to meet other
corporate requirements. These expenditures included purchases of king-post
cranes, anchor chain, riser, and other drilling equipment. The Company has
budgeted $70.8 million for 2000 capital expenditures associated with its
continuing rig enhancement program and other corporate requirements.
The Company continues to consider transactions which include, but are not
limited to, the purchase of existing rigs, construction of new rigs and the
acquisition of other companies engaged in contract drilling or related
businesses. Certain of these potential transactions reviewed by the Company
would, if completed, result in it entering new lines of business. In general,
however, these opportunities have been related in some manner to the Company's
existing operations. Although the Company does not, as of the date hereof, have
any commitment with respect to a material acquisition, it could enter into such
an agreement in the future and such an acquisition could result in a material
expansion of its existing operations or result in it entering a new line of
business. Some of the potential acquisitions considered by the Company could, if
completed, result in the expenditure of a material amount of funds or the
issuance of a material amount of debt or equity securities.
INTEGRATED SERVICES
The Company's wholly owned subsidiary, DOTS, from time to time, selectively
engages in drilling services pursuant to turnkey or modified-turnkey contracts
under which DOTS agrees to drill a well to a specified depth for a fixed price.
In such cases, DOTS generally is not entitled to payment unless the well is
drilled to the specified depth with the profitability of the contract dependent
upon its ability to keep expenses within the estimates used in determining the
contract price. Drilling a well under a turnkey contract therefore typically
requires a greater cash commitment by the Company and exposes the Company to
risks of potential financial losses that generally are substantially greater
than those that would ordinarily exist when drilling under a conventional
dayrate contract. DOTS also offers a portfolio of drilling services including
overall project management, extended well tests, and completion operations.
During the quarter ended March 31, 2000, DOTS provided turnkey and integrated
services and generated an operating loss of $0.5 million.
FORWARD-LOOKING STATEMENTS
Certain written and oral statements made or incorporated by reference from
time to time by the Company or its representatives are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, without limitation, any statement
that may project, indicate or imply future results, performance or achievements,
and may contain the words "expect," "intend," "plan," "anticipate," "estimate,"
"believe," "will be," "will continue," "will likely result," and similar
expressions. Statements by the Company in this Report that contain
forward-looking statements include, but are not limited to, discussions
regarding future market conditions and the effect of such conditions on the
Company's future results of operations (see "-- Outlook"), and future uses of
and requirements for financial resources, including but not limited to,
expenditures related to the conversion of the Ocean Confidence (see "--
Liquidity" and "-- Capital Resources"). Such statements inherently are subject
to a variety of risks and uncertainties that could cause actual results to
differ materially from those projected. Such risks and uncertainties include,
among others, general economic and business conditions, casualty losses,
industry fleet capacity, changes in foreign and domestic oil and gas exploration
and production activity, competition, changes in foreign, political, social and
economic conditions, regulatory initiatives and compliance with governmental
regulations, customer preferences and various other matters, many of which are
beyond the Company's control. The risks included here are not exhaustive. Other
sections of this Report and the Company's other filings with the Securities and
Exchange Commission include additional factors that could adversely impact the
Company's business and financial performance. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any forward-looking
statement is based.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information included in this Item is considered to constitute
"forward-looking statements" for purposes of the statutory safe harbor provided
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Forward-Looking
Statements" in Item 2 of this Report.
The Company's financial instruments include the Company's convertible
subordinated notes and investments in debt securities, including U.S. Treasury
securities and collateralized mortgage obligations ("CMO's"). The Company's
convertible subordinated notes, which are due February 15, 2007, have a stated
interest rate of 3.75 percent and an effective interest rate of 3.93 percent. At
March 31, 2000, the fair value of these notes, based on quoted market prices,
was approximately $451.9 million, as compared to a carrying amount of $400.0
million. At March 31, 2000, the fair market value of the Company's investment in
debt securities issued by the U.S. Treasury was approximately $331.5 million,
which includes an unrealized holding loss of $2.8 million. These securities bear
interest rates ranging from 4.00 percent to 6.00 percent. These securities are
U.S. government-backed and are generally short-term and readily marketable. The
fair value of the Company's investment in CMO's at March 31, 2000 was
approximately $146.4 million, which includes an unrealized holding loss of $6.5
million. The CMO's are also short-term and readily marketable with an implied
AAA rating backed by U.S. government guaranteed mortgages.
The Company believes the declines in the fair value of its investments in
debt securities due to interest rate sensitivity are temporary in nature. This
determination was based on marketability of the instruments, the Company's
ability to retain its investment in the instruments, past market movements and
reasonably possible, near-term market movements. Therefore, the Company does not
believe that potential, near-term losses in future earnings, fair values, or
cash flows are likely to be material.
At March 31, 2000, the fair value of the Company's investment in equity
securities was approximately $1.7 million, which includes an unrealized holding
gain of $0.2 million.
Other than trade accounts receivable and trade accounts payable, the
Company does not currently have financial instruments that are sensitive to
foreign currency exchange rates.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Brown Services, Inc. and KOS Industries, Inc. v. Michael D. Brown, BSI
International, Inc., Robert Brown, Robert Furlough, Power House International,
Inc., Zapata Off-Shore Company and Zapata Corporation; No. 92-05691 in the 334th
Judicial District Court of Harris County, Texas, filed February 7, 1992.
Plaintiffs sued Zapata Off-Shore Company and Zapata Corporation (the "Zapata
Defendants") for tortious interference with contract and conspiracy to
tortiously interfere with contract seeking $14.0 million in actual damages and
unspecified punitive damages, plus costs of court, interest and attorneys' fees.
A former subsidiary of Arethusa (Off-Shore) Limited, which is now a subsidiary
of the Company, defended and indemnified the Zapata Defendants pursuant to a
contractual defense and indemnification agreement. In November 1997, the jury
awarded a take-nothing judgment in favor of the Zapata Defendants. The
plaintiffs appealed the judgment and the appellate court ordered the parties to
mediation. The case went to mediation in July 1998 with no resolution. In May
1999, the case went before the Texas First Court of Appeals, Houston, which
affirmed the jury verdict. The plaintiffs filed a petition for review with the
Supreme Court of Texas in November 1999 which was subsequently denied in January
2000.
The Company and its subsidiaries are named defendants in certain other
lawsuits and are involved from time to time as parties to governmental
proceedings, all arising in the ordinary course of business. Although the
outcome of lawsuits or other proceedings involving the Company and its
subsidiaries cannot be predicted with certainty and the amount of any liability
that could arise with respect to such lawsuits or other proceedings cannot be
predicted accurately, management does not expect these matters to have a
material adverse effect on the financial position, results of operations, or
cash flows of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
See Exhibit Index for a list of those exhibits filed herewith.
(b) No reports on Form 8-K were filed during the first quarter of 2000.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIAMOND OFFSHORE DRILLING, INC.
(Registrant)
Date 12-May-2000 By: /s/ GARY T. KRENEK
------------------- -----------------------------------------
Gary T. Krenek
Vice President and Chief Financial Officer
Date 12-May-2000 /s/ BETH G. GORDON
------------------ -----------------------------------------
Beth G. Gordon
Controller (Chief Accounting Officer)
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998).
3.2 Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1998).
11.1* Statement re Computation of Per Share Earnings.
27.1* Financial Data Schedule.
</TABLE>
- -----------------
* Filed herewith
20
<PAGE> 1
EXHIBIT 11.1
DIAMOND OFFSHORE DRILLING, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------------------------
2000 1999
------------------------------------------ ------------------------------------------
WEIGHTED WEIGHTED
AVERAGE PER SHARE AVERAGE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
(NUMERATOR) (DENOMINATOR) (NUMERATOR) (DENOMINATOR)
----------- ------------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income ........................ $ 29,488 135,688 $ 0.22 $ 51,818 135,816 $ 0.38
EFFECT OF DILUTIVE POTENTIAL SHARES
Convertible notes ................. 802 9,876 2,166 9,876
DILUTED EPS
---------- --------- ---------- ---------- --------- ----------
Net income + assumed conversions... $ 30,290 145,564 $ 0.21 $ 53,984 145,692 $ 0.37
========== ========= ========== ========== ========= ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 106,572
<SECURITIES> 511,578
<RECEIVABLES> 129,759
<ALLOWANCES> 0
<INVENTORY> 39,145
<CURRENT-ASSETS> 815,794
<PP&E> 2,418,810
<DEPRECIATION> 655,014
<TOTAL-ASSETS> 2,661,195
<CURRENT-LIABILITIES> 103,671
<BONDS> 400,000
0
0
<COMMON> 1,394
<OTHER-SE> 1,845,204
<TOTAL-LIABILITY-AND-EQUITY> 2,661,195
<SALES> 0
<TOTAL-REVENUES> 167,828
<CGS> 0
<TOTAL-COSTS> 100,823<F1>
<OTHER-EXPENSES> 42,895<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,234
<INCOME-PRETAX> 45,426
<INCOME-TAX> 15,938
<INCOME-CONTINUING> 29,488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,488
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
<FN>
<F1>Includes contract drilling expenses only.
<F2>Includes other operating expenses.
</FN>
</TABLE>
