Diamond Offshore Announces Third Quarter 2004 Results

Diamond Offshore Drilling Inc. (NYSE:DO) reported net income for the third quarter of 2004 of $2.9 million, or $0.02 per share on a diluted basis, compared with a net loss of $11.5 million, or $0.09 per share on a diluted basis, in the same period a year earlier. Revenues for the third quarter of 2004 were $208.2 million, compared with revenues of $183.9 million for the third quarter of 2003.

Results for the period were negatively impacted by $.04 per share for the deductible portion of insurance claims made for damage caused by Hurricane Ivan. Additionally, the Ocean Alliance incurred 29 days of downtime during the quarter due to equipment repairs, which negatively impacted net income by $.02 per share. The Company also recorded a provision for potential labor cost increases in the U.K. related to mandated legislative benefits that negatively impacted net income by $.01 per share. In addition, the Company incurred reactivation costs to bring the jack-up Ocean Champion out of cold-stack and into the U.S. Gulf of Mexico ("GOM") market, which negatively impacted net income by $.01 per share.

For the nine months ended Sept. 30, 2004, the Company reported a net loss of $18.5 million, or $0.14 per share on a diluted basis, compared with a net loss of $49.7 million or $0.38 per share on a diluted basis for the same period in 2003. Revenue for the nine months ended Sept. 30, 2004 was $577.3 million, compared with $493.3 million for the first nine months of 2003.

The Company has received contracts and Letters of Intent for nine of its semisubmersible units for work in the GOM and North Sea beginning in the fourth quarter of 2004 and early 2005 at rates substantially higher than average rates recorded for these units in the third quarter of 2004. Commitments for Diamond Offshore's fourth generation rigs have reached as high as $140,000 per day for GOM work beginning in 2005. Improving dayrates were a factor in the Company's decision to begin reactivation of the Ocean Voyager for the mid-water GOM market. The Voyager is expected to be ready to begin work by mid-December and has a contract for an initial well at a dayrate in the low $70,000s. Reactivation costs are estimated to be approximately $8 million.

In the North Sea, the Ocean Vanguard recently arrived in Norway where it began an approximate 15 month series of contracts for a dayrate in the low $140,000s. Both the Ocean Guardian and Ocean Princess have one year extensions in the U.K. at $80,000 dayrates. The Ocean Nomad is in the process of mobilizing from West Africa to the U.K. where, following shipyard work, it will begin a one-year contract at a dayrate of $80,000. As of Sept. 30, 2004, there were 128.5 million shares of Diamond Offshore common stock outstanding. During the third quarter of 2004, the Company repurchased 782,200 shares of its common stock at an aggregate cost of $18.1 million, or $23.11 per share. Depending on market conditions, the Company may, from time to time, purchase shares of its outstanding common stock in the open market or otherwise. 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 is located in the waters of six of the world's seven continents.

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