Diamond Offshore 2Q Profit Up 19% As Revenue, Expenses Grow

(Dow Jones) Diamond Offshore Drilling Inc.’s (DO) second-quarter earnings jumped 19% as the company posted stronger revenue, though day rates fell and utilization rates were mixed.

The oil driller’s profit has fallen in recent quarters on generally weaker day rates and lower rig-utilization levels. The offshore drilling sector had a challenging year following last year’s Deepwater Horizon disaster in the Gulf of Mexico, when a rig explosion triggered a massive oil spill. U.S. authorities have since reined in new permits for deep-water drilling.

Before the oil spill, deepwater drillers had fared better during the recession than other drillers since they tend to have longer contracts. The company said it has put in place 10 new agreements in the past 45 days that are expected to generate a combined maximum total revenue of $1 billion and represent 14 years of contract drilling backlog.

Diamond Offshore, which is majority owned by Loews Corp. (L), posted a profit of $266.6 million, or $1.92 a share, up from $224.4 million, or $1.61 a share, a year earlier. Revenue increased 8.1% to $889.5 million.

Analysts surveyed by Thomson Reuters most recently forecast earnings of $1.92 a share on revenue of $870 million.

Operating margin narrowed to 41.3% from 42% as operating expenses increased 9.5%.

The average day rate for Diamond’s high-specification floaters fell 2.4% from a year earlier, while the utilization rate rose to 94% from 69% a year earlier. For intermediate submersibles, day rates fell 1.1% and the utilization rate was down at 76% from 82%. Both types of vessels typically operate in deeper water than conventional drilling platforms.

Diamond shares closed at $72.73 Wednesday and were inactive premarket. The stock has risen 13% over the past year.

-By Nathalie Tadena, Dow Jones Newswires