Diamond Offshore Bags $350MM BP Contract Extension in GOM

Diamond Offshore Drilling, Inc. has closed a two-year contract extension with a subsidiary of BP plc in the U.S. Gulf of Mexico.

The contract extension is for the Ocean BlackHornet rig, which begins in February 2025 in direct continuation of the rig’s current contract. The extension represents approximately $350 million dollars of additional backlog, Diamond said in a news release Sunday.

“This contract deepens our relationship with a key client in the U.S. Gulf of Mexico and is a testament to the great work the men and women of Diamond do for our customers day in and day out. This award, along with the recent Ocean BlackLion award, contributes significantly to our 2025 and 2026 backlog and future cash flows”, Diamond President and CEO Bernie Wolford, Jr. said.

Diamond also entered into a drilling contract with Serica Energy (UK) Limited to utilize the Ocean Patriot for two plug and abandonment wells in the United Kingdom (UK) North Sea.

The program is expected to start in March and to continue for approximately 60 days, Diamond said in a separate news release. The contract represents over $10 million of additional backlog, excluding mobilization, according to the release.

“These awards reflect the continuing strength of the drillship market and the improving moored floater market in the UK North Sea while highlighting the exceptional work of our crews across these regions”, Wolford said.

Meanwhile, Diamond reported a net loss of $145.7 million for the fourth quarter of 2023, compared to $145 million in the same period in 2022.

Revenue for the fourth quarter totaled $298 million compared to $245 million in the third quarter of 2023. The increase in revenue quarter-over-quarter was primarily driven by the Ocean BlackHawk’s contract start in the Gulf of Mexico in the fourth quarter after completion of a managed pressure drilling (MPD) installation, Special Periodical Survey and contract preparation work and new contracts for the Ocean Patriot and Ocean Apex, the Houston-based company said in a recent earnings release. The revenue gain was partially offset by lower revenue for the Ocean Courage due to contract preparation activities related to its new multiyear contract in Brazil, it said.

Contract drilling expense for the fourth quarter was $189 million, or a $7 million increase from the prior quarter, largely due to higher charter rental costs associated with the managed rigs and the annual bonus expense related to the drillships’ BOP service agreement, Diamond noted.

On the operations side, Diamond’s rigs “continued to perform well”, achieving revenue efficiency of approximately 95 percent across the fleet for the second successive quarter. “This is a notable achievement given the unusually high amount of shipyard activity for the company’s fleet and the start-up of contracts during the quarter”, according to the release.

“2023 was a transformational year for Diamond Offshore”, Wolford said in the release. “We marked our one-year anniversary of re-listing on the New York Stock Exchange, made measurable improvements in our capital structure, secured $485 million dollars in new contract awards throughout the year, safely completed Special Periodical Surveys on five rigs, and completed eight contract start-ups, including four contract commencements in the fourth quarter, one in each of the regions in which we operate”.

“The recent $362 million in contract awards are in addition to our reported backlog of $1.4 billion as of January 1, which will result in notable average dayrate improvement as we transition to new contracts”, he concluded.

Diamond Offshore describes itself as a leader in offshore drilling, providing innovation, thought leadership and contract drilling services to solve complex deepwater challenges around the globe.

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