For the six months ended June 30, 2004, the Company reported a net loss of $21.5 million, or $0.17 per share on a diluted basis compared with a net loss of $38.3 or $0.29 per share on a diluted basis for the same period in 2003. Revenue for the six months ended June 30, 2004 was $369.1 million, compared with $309.3 million for the first six months of 2003.
Results for the quarter were impacted by planned regulatory surveys as well as lower utilization of several of the Company's mid-water and deepwater units in the Gulf of Mexico. In particular, the semisubmersible rig Ocean Alliance experienced a series of sub-sea and electrical problems after returning to work following a scheduled regulatory survey and sub-sea equipment upgrade. As a result, gross revenue was negatively impacted by $8.9 million and net income, including approximately $1.5 million of repair costs on the Ocean Alliance, by $7.8 million ($0.06 per share on a diluted basis). The Alliance has continued to operate on term contract for Petrobras in Brazil since returning to work on July 2.
Regulatory surveys and related costs caused higher than normal contract drilling expense during the quarter. A survey for the Ocean Vanguard, which was scheduled for the second quarter of 2005, was accelerated in conjunction with that rig returning to work in the U.K. sector of the North Sea. In addition, planned regulatory surveys for the Ocean Yatzy and the Ocean Confidence were conducted during the period, and a survey for the Ocean Winner, which extended into the second quarter, was completed. Together, costs for the four surveys and related expenses totaled approximately $6 million for the period.
Diamond Offshore President and Chief Operating Officer Larry Dickerson noted that, "The market for all classes of our jack-up rigs in the U.S. Gulf of Mexico experienced firming utilization and improving dayrates during the second quarter of 2004. As a result, utilization averaged 90% in the period compared with 85% in the first quarter of 2004, and dayrates increased an average of approximately $1,000 per day across our jack-up fleet to average approximately $37,000. The gains also factored into our decision in late June to reactivate the Ocean Champion from cold-stack status. The rig is currently in Lake Charles, La., being prepared for a return to work anticipated in mid-August 2004.
"Outside of the U.S. Gulf, markets for our rigs have seen generally increasing demand and improving dayrates. Both the North Sea and Australasia have shown recent strength, and additional rigs are also being drawn to the Mid-East," Mr. Dickerson said.
Diamond Offshore is a leader in deep water drilling. The Company's fleet of 45 offshore drilling rigs consists of 30 semisubmersibles, 14 jack-ups and one drillship. The fleet operates in the waters of six of the world's seven continents.
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