Why Diamond Offshore Drilling Inc's Shares Plunged Last Month

A solid earnings report gave investors a reason to dive into offshore drilling in November.

Travis Hoium
Travis Hoium
Dec 8, 2015 at 8:35AM
Energy, Materials, and Utilities

What: Shares of drilling rig owner Diamond Offshore Drilling Inc (NYSE:DO) jumped over 10% in November after reporting better than expected earnings.

So what: Third-quarter net income was $136 million, or $0.99 per share, a number assisted by management rapidly cutting expenses to make up for falling demand for drilling rigs. The company also paid out a dividend of $0.125 per share, a rarity in the drilling business, which has seen most companies eliminate their dividends altogether.  

Now what: This doesn't eliminate the risk drillers face in finding work with oil prices near $40 per barrel, but Diamond Offshore is profiting while it can, and that's a good sign. The company also has just $2.0 billion in debt, a manageable figure given the company's profitability.

Like other drilling stocks, Diamond Offshore is at the whim of oil prices long term, but it's a positive that the company can make money and pay a dividend until the market recovers -- all of which helped drive the stock higher in November.