Diamond Offshore secures $610M in new drilling rig contracts

Diamond Offshore Drilling Inc. touted rig $610 million in contract awards and that three other rigs secured additional backlog in its latest quarterly results report.

Diamond Offshore announced contract awards for the harsh environment semisubmersible Ocean GreatWhite in the UK North Sea, the semisubmersible Ocean Apexin Australia, and the Ocean BlackHornet and a Diamond-managed rig (both seventh-generation drillships) in the US Gulf of Mexico (GoM). These new contracts added about $610 million of backlog for the company. The new contracts are in addition to the $995 million of backlog reported as of July 1, 2022.

With the Ocean GreatWhite rig now contracted, Diamond Offshore will have three assets working in the UK sector of the North Sea. The Ocean GreatWhite was awarded five wells, with an estimated duration of 300 days. The contract is expected to begin in first-quarter 2023. Total contract value of the committed scope is about $80 million, and the contract also includes priced options for up to eight additional wells.

The Ocean Apex has been awarded three new contracts for work on the Northwest Shelf of Australia. The first new award commences in second-quarter 2023, with an estimated duration of 75 days. The second award is also for an estimated duration of 75 days, commencing in direct continuation of the previous award. The third award has an estimated duration of 150 days with a commencement in 2024. The combined awards add about $90 million of backlog to the Ocean Apex. A potential fourth new contract under negotiation would fill out the remaining availability in 2023, and combined, keep the rig fully contracted until late 2024, according to the report.

The Ocean BlackHornet has secured a two-year extension with its current client in the US GoM in direct continuation of the rig’s current term. The two-year extension will keep the rig working until early 2025. Total contract value for the extension is about $290 million.     

Finally, the Diamond-managed rig has been extended by its current client for work in the US GoM for an additional one-year term in direct continuation of the rig’s current term. The contract value for this extension is about $150 million.    

President and CEO Bernie Wolford, Jr. said, “With improved day rates and approximately 75% of 2023 marketed capacity contracted, we have an opportunity to earn considerably higher margins in 2023."

Contract drilling revenue for the second quarter totaled $177 million compared to $150 million in the first quarter of 2022, the company reported. The increase in revenue was primarily driven by the Ocean Apex semisubmersible returning to active service under a new contract that commenced in May, completion of shipyard stays for the Ocean Endeavor and Ocean Patriot, and a full quarter of drilling operations for the Auriga.

Contract drilling expense for the second quarter was relatively flat at $142 million compared to $145 million in first-quarter 2022. During the quarter, the company said it "continued to perform in an exceptional manner, achieving revenue efficiency of 96.3%."

After eight years of continuous performance, the Ocean BlackHawk rig completed its inaugural contract in the US GoM. The rig has mobilized to Senegal to join the Ocean BlackRhino.

The Ocean Apex returned to work in May, and the Ocean Monarch completed its contract and was cold stacked.

Diamond Offshore also noted that three of its rigs reached significant safety milestones this quarter, each achieving three years without a recordable incident.

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