With the cancellation of the deepwater drilling moratorium -- which followed the massive BP
Diamond, the second-largest offshore drilling contractor, reported on Thursday that given the events of the quarter, its net income decreased by 45% to $198.5 million, or $1.43 per share, compared with $364.1 million, or $2.62 per share, for the same quarter a year ago. The company's revenues for the quarter were $799.7 million, versus $908.4 million a year earlier.
The company's CEO Larry Dickerson attributed the quarter's financial slippage to reserves taken in a contractual dispute with a customer in connection with the moratorium, increased downtime for special surveys, maintenance and acceptance testing, and the costs of relocating rigs from the Gulf. He noted, however, that "we anticipate that most of these rigs will be employed during the majority of the fourth quarter of 2010."
Despite the decline in Diamond's earnings, the company's board will again pay a special cash dividend of $0.75 per share of common stock and a regular dividend of $0.125 per share. These amounts -- the same as was paid last quarter -- reflect a continuation of the policy of considering special cash dividends each quarter.
Looking at the likely pace of activity levels in the Gulf, Lyndol Dew, who oversees the company's worldwide operations, said on the post-release call that, "It's all about the permits. If we look to shallow water permitting, where there was no moratorium as a guide, we believe the permitting process will be slow for the foreseeable future, especially for new deepwater oil wells."
Beyond that assessment, however, Dew added that, "In general, our traditional market remains stable and looks good, with the exception of the U.S. Gulf of Mexico. This should come as no surprise if oil is above $80 per barrel."
As such, Diamond Offshore has moved several rigs to new international locations. For instance, one unit crossed the Atlantic and is working for Murphy
We'll have to wait until Nov. 3 for what surely will be an eagerly awaited release and call from Transocean. Nevertheless, reflecting Dew's comments about the strength of most of the offshore markets, I'd urge Foolish energy investors to pay close attention to the progress being made at Diamond Offshore.
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