For the U.S. energy industry, the question at hand is the pace at which drilling activity will return to normal in the Gulf of Mexico, given the lingering effects of April's BP
Not surprisingly, when the industry's second-largest deepwater driller, Houston-based Diamond Offshore
While Diamond registered a beat by topping analysts' $1.47-per-share consensus, the dip in its income and a 5.6% slide in revenues were obviously attributable to conditions in the Gulf. Nevertheless, the company's board came through with a $0.75-a-share special dividend.
Diamond Offshore is hardly hunkering down amid the pullback in activity. Indeed, management has exercised a second option with South Korea's Hyundai for the construction of another 12,000-foot drillship.
CEO Lawrence Dickerson said the rationale for maintaining an active construction program is "based upon ... high product prices that we see out there and our expectation that they would continue ... " Of course, the industry's rigs are busy outside the Gulf: By my count, Diamond Offshore has seven units operating in Brazil, while six Noble
Dickerson also noted in the conference call that all appears to be well aboard the deepwater semisubmersible rig and two jackups the company has working off Egypt's shores. Most administrative types have been evacuated from the country, while those involved in operations are secure.
Diamond Offshore's report happened hard on the heels of federal Judge Martin Feldman's lambasting the Obama administration for its "determined disregard" of his 2010 order to lift its ban on offshore drilling in the Gulf of Mexico. The judge noted that it appears that the federal government is in contempt of court and therefore could be liable for legal fees incurred by Hornbeck Offshore Services
Late last week, Chevron
I must admit to agreeing with increasing concern about the protracted slowdown in Gulf activity, a situation I'm convinced will change soon. For that reason -- among others -- I currently find Diamond Offshore both attractive and cheap.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Fool contributor David Lee Smith doesn't own shares in any of the companies named in this article. The Motley Fool has a disclosure policy.
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