Diamond Offshore Announces Second Quarter 2005 Results

Diamond Offshore Drilling, Inc. (NYSE: DO) reported net income of $41.3 million, or $0.31 per share on a diluted basis for the second quarter of 2005, compared to a net loss of $10.5 million, or $0.08 per share on a diluted basis, in the same period a year earlier. Revenues for the second quarter of 2005 were $283.4 million, compared to revenues of $184.9 million for the second period in 2004.

For the six months ended June 30, 2005, the Company reported net income of $71.4 million, or $0.53 per share on a diluted basis, compared to a net loss of $21.5 million, or $0.17 per share on a diluted basis for the same period in 2004. Revenue for the six months ended June 30, 2005, was $542.2, compared to $369.1 million for the first six months of 2004.

The improvement in operating results reflects a continuation of higher dayrates and rig utilization across the Company's entire fleet, and is indicative of the strength of the worldwide offshore drilling market. Results for the second quarter also reflect the sale of the cold-stacked semisubmersible Ocean Liberator in mid-June, 2005. The 600-ft. water-depth-rated unit was sold for $14.0 million, for which the Company recognized an after-tax gain of $5.9 million. This gain was largely offset by the after-tax write-off of $5.0 million of previously deferred loan origination fees related to Diamond Offshore's Zero Coupon Convertible debt, 96% of which was redeemed by the Company on June 6, 2005. The previously deferred fees are included as interest expense on the Company's Income Statement for the second quarter ended June 30, 2005.

The Company has entered into a Letter of Intent (LOI) to utilize the Ocean Endeavor in the Gulf of Mexico for a period of between two and four years, commencing when the rig is expected to be delivered from the shipyard in the first quarter of 2007. If a definitive agreement is executed, the rig could earn approximate total revenue of between $198 million and $355 million, depending upon the length of the contract selected by the operator. Actual revenues received could be reduced by various operating factors including utilization rates. The Endeavor, a Victory-class semisubmersible rig, is currently being upgraded in Singapore for ultra-deepwater service. The LOI is subject to customary conditions including execution of a definitive agreement.

Larry Dickerson, President and Chief Operating Officer, said, "Approximately 89% of Diamond Offshore's fleet is contracted or committed for the remainder of 2005, and we are currently booking significant work into 2006, with about 50% of our fleet contracted or committed for next year. Assuming fulfillment of these contracts and commitments, our total potential revenue commitment of $2.8 billion is now the largest dollar backlog we have ever experienced. We remain confident in the strength of our markets, and believe that our exposure to the market in late 2006 and 2007 will allow the Company to participate in any future market improvements."

Diamond Offshore provides contract drilling services to the energy industry around the globe and is a leader in deepwater drilling. The Company's fleet of 44 offshore drilling rigs consists of 29 semisubmersibles, 14 jack-ups and one drillship.

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