Diamond Offshore to Scrap Half-Dozen Rigs, Fleet Now Contracted to 2019

Diamond offshore semisubmersible upgrade shipyard
A Diamond Offshore-owned semisubmersible at Keppel AMFELS shipyard in 2012. File image (c) R.Almeida/gCaptain

With the huge influx of new steel heading into the offshore drilling market, Diamond Offshore Drilling announced today plans to retire and scrap six of their mid-water semi-submersible drilling rigs, five of which are currently either cold stacked or idle.  The rigs include the Ocean Epoch, Ocean New Era and Ocean WhittingtonOcean Concord, Ocean Yatzy and lastly the Ocean Winner, will be retired and scrapped upon completion of its current contract term in Brazil.

All the rigs were originally built in the 1970s except for the Ocean Yatzy which was built in 1989.

Helping to replace these rigs are two of Diamond’s new-build drillships, the Ocean BlackRhino and Ocean BlackLion which have both just signed long term Gulf of Mexico drilling contracts with Hess commencing in Q4 2016 and Q4 2015, respectively.   Diamond Offshore notes that the contracts are contingent on Hess obtaining full project sanction from its partners, but should everything materialize, it will add approximately $1.02 billion to the company’s backlog, representing 7 years of contract drilling.

Diamond Offshore’s President and CEO Marc Edwards notes, “With this announcement, all of our new-build units—four drillships and a harsh environment semisubmersible—are contracted into 2019 or beyond.”

All of his company’s newbuild drillships are operating in the U.S. Gulf of Mexico.

Diamond Offshore’s Q3 revenues increased $32 million over last years numbers to $738 million, however they saw a sharp drop in net income to $53 million as compared to $95 million in Q3 2013.

Additional contracts signed

Petrobras awarded Diamond Offshore contract extensions on three of the company’s ultra-deepwater semisubmersibles which is expected to generate maximum total revenue of $1.4 billion and represent nine years of contract drilling backlog.  The new contract terms and dayrates are as follows:

  • Ocean Baroness:  Three-year term extension at $310,000 per day.
  • Ocean Courage:  Three-year term extension at $455,000 per day, plus a $112,000 uplift in day rate for a period of 390 days, related to the early termination of the Ocean Concord.
  • Ocean Valor:  Three-year term extension at $455,000 per day.

“Today we have announced term contracts and extensions that add more than $2.4 billion to our existing revenue backlog, bringing the total to $8.2 billion,” said Mr. Edwards. “In addition, we recently increased our revolving credit facility to $1.5 billion, which will provide added flexibility to our already strong balance sheet.”

Shares of NYSE-listed Diamond Offshore are up over 4 percent in premarket activity.