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Diamond Offshore (DO) Q3 Earnings Top, Rig Utilization Rises

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Diamond Offshore Drilling, Inc. (DO - Free Report) incurred third-quarter 2019 adjusted loss of 67 cents per share, narrower than the Zacks Consensus Estimate by a penny. However, it was wider than the year-ago loss of 26 cents.

Moreover, total revenues amounted to $254 million, down from $286.3 million in the year-ago quarter. The figure beat the Zacks Consensus Estimate of $247 million.

The better-than-expected results were primarily aided by higher rig utilization, and the startup of Ocean Apex and Ocean Endeavor. The positives were partially offset by lower average day rates and higher operating expenses.

Operational Performance

In the quarter under review, the company began operations of two premier moored rigs, Ocean Apex and Ocean Endeavor, which boosted the results. Ocean Endeavor was brought back from cold-stacked state.

The rigs recorded an average day rate of $253,000, lower than $333,000 in the prior year. Operational efficiency in the reported quarter was 96.6% compared with 97% in the year-ago period. However, rig utilization jumped to 65% from 54% a year earlier.

In the third quarter, Contract Drilling revenues dropped 13.7% year over year to approximately $242.3 million.

Total operating expenses in the quarter were recorded at $326.9 million, higher than $304.4 million in the year-ago quarter, primarily due to higher contract drilling costs.

Backlog

Notably, as of Oct 1, 2019, the company had a total contracted backlog of $1.8 billion. It secured around $90 million of additional backlog in the quarter under review.

Financials

As of Sep 30, 2019, Diamond Offshore had approximately $209.1 million in cash and cash equivalents, while long-term debt totaled $1,975.3 million. The debt-to-capitalization ratio was 37.4%.

Guidance

For the fourth quarter, the firm anticipates contract drilling revenues in the range of $235-$245 million. Contract drilling expenses for the final quarter of 2019 is expected between $195 million and $205 million. G&A expense through the quarter is expected to be around $17 million.

Moreover, its capital budget guidance for the full year is estimated in the range of $360-$380 million. The figure is expected to significantly decline in the next year.

Zacks Rank and Stocks to Consider

Currently, Diamond Offshore has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Pembina Pipeline Corp. (PBA - Free Report) , Matrix Service Company (MTRX - Free Report) and Exterran Corporation (EXTN - Free Report) . While Pembina sports a Zacks Rank #1 (Strong Buy), Matrix Service and Exterran hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Pembina’s 2019 earnings per share are expected to rise 21.5% year over year.

Matrix Service’s 2019 earnings per share are expected to rise 58.4% year over year.

Exterran’s top line for the current year is expected to rise around 5% year over year.

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