Diamond Offshore Drilling, Inc.

Good day, and thank you for standing by. Welcome to the Q2 2022 Diamond Offshore Drilling Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. Please be advised that today's conference call is being recorded. I would now like to turn the conference over to Kevin Bordoski. Please go ahead.

Thank you, Lisa. Good morning, everyone, and thank you for joining us. My name is Kevin Bordoski, Senior Director of Investor Relations. With me on the call today are Bernie Wolford, President and Chief Executive Officer, and Dominic Savarino, Senior Vice President and Chief Financial Officer. Before we begin our remarks, I remind you that information reported on this call speaks only as of today, and therefore time sensitive information may no longer be accurate at the time of any replay of this call. In addition, certain statements made during this call may be forward looking in nature. These statements are based on our current expectations and include known and unknown risks and uncertainties, many of which we are unable to predict or control. These risks and uncertainties may cause our actual results or performance to differ materially from any future results or performance expressed or implied by these statements. These risks and uncertainties include the risk factors disclosed in our 10-K and 10-Q filings with the SEC. Further, we expressly disclaim any obligation to update or revise any forward-looking statements. Refer to the disclosure regarding forward-looking statements incorporated in our press release issued yesterday evening. And please note that the contents of our call today are covered by that disclosure. In addition, please note that we will be referencing non-GAAP figures on our call today. You can find a reconciliation to GAAP financials in our press release issued yesterday. And now I will turn the call over to Bernie.

Thanks, Kevin. Good morning or afternoon to everyone, and thank you for your interest in Diamond Offshore. I'd like to start the call by saying how excited we are to be relisted on the New York Stock Exchange. Since relisting, we have seen significant liquidity with approximately 180 million shares traded to date and average daily volumes exceeding 2 million shares. Now that we have completed the full quarter as a listed company, we plan to have regular quarterly earnings calls to provide updates on the market and the good work we are doing at Diamond. In recent months, the broader markets have seen unusually high levels of volatility, particularly in the commodity markets. Since February of 2022, prices for hydrocarbons have increased dramatically, with spot Brent averaging over $100 per barrel and natural gas hitting highs not seen in more than a decade. These increases have led to significant improvement in the cash flow profile of our global client base. We expect that significant portions of this improved cash flow will make its way into offshore drilling capital expenditures in 2023 and beyond, and are already seeing related demand materialize. Not only do we expect a supportive commodity environment to drive offshore drilling demand, but the underinvestment of past years is finally coming to bear. RASTAD estimates that offshore project sanctioning was approximately $55 billion in 2020 compared to a projected $100 billion in 2023. The historic underinvestment coupled with energy security concerns have been the catalyst for increased demand for our services. Given the lag between investment and energy delivery, we anticipate that our customers will commit significant capex over the coming years and therefore view the offshore drilling market as poised for a meaningful demand-driven recovery. Turning to the second quarter of 2022, Diamond Offshore had a net loss per share of 22 cents. This compares to a net loss per share of 34 cents in the first quarter of 2022. The improvement quarter over quarter was primarily driven by four rigs, the Ocean Apex, the Auriga, the Ocean Endeavor, and the Ocean Patriot. Three of the four rigs were fully operational throughout the second quarter, and the Ocean Patriot resumed operations mid-quarter. Despite this higher level of activity, our costs were relatively flat quarter over quarter. Turning to our operating highlights, I'm pleased to report that in the second quarter of 22, Diamond had revenue efficiency of 96.3% across our fleet. More importantly, our crews deliver these outstanding results while maintaining the highest safety standards, all while dealing with the challenges posed by another wave of COVID infections. I'm pleased to report that our safety performance has improved materially this quarter and want to recognize the Ocean Black Hornet, the Ocean Courage, and the Ocean Endeavor for each completing three years of operations without a single recordable injury. Hats off to these great achievements and to all who deliver safe work every day. In May of 22, the Ocean Blackhawk completed its inaugural contract, which began eight years earlier. Over the course of its contract, the rig drilled 124 miles of wellbore comprised of 39 new wells and worked over or completed an additional 31 wells. The rig has since mobilized to Senegal and commenced its contract for Woodside with an anticipated duration of one year. Diamond remains focused on making our rigs more fuel efficient and reducing our environmental impact. In the second quarter, we were able to reduce fuel consumption by over 15% on the ocean endeavor. This was accomplished by providing the drilling crew with actionable, real-time information to support efficient use of our power plants. We continue to explore both hardware and software-based solutions to further reduce our CO2 emissions. Additionally, we recently appointed a sustainability officer whose sole focus is to facilitate continuous improvement in our ESG performance. Turning to our outlook, the second half of 22 promises to be a busy period for the company. We had the VELA prepping to start work late in the third quarter for a previously announced contract. This work includes BOP upgrades and recertification. The Ocean Endeavor will be going into the shipyard in the fourth quarter to replace eight diagonal braces and conduct a five-year special hull survey to assure high rig availability for the future. Finally, the Ocean Great White is commencing reactivation and ramp-up for its new contract, which commences in the first quarter of 2023. This leads me to a high-level summary of the new backlog announced with this quarter's earnings release. Our focus on delivering superior performance for our customers while not compromising safety has facilitated this success. Yesterday, we announced the award of some $610 million of additional backlog, all recently secured. Starting with the Ocean Great White, we have secured work with BP for this previously warm stacked unit. The RIG was awarded a five-well contract with an estimated duration of 300 days to start in the first quarter of 2023. Total contract value, including a modest mobilization, is expected to be approximately $80 million. With this award, Diamond will have three harsh environment semi-submersibles working in the UK North Sea, all with contracts that run through 2023. These contracts should position us well for the increase in demand anticipated in the coming years. For reference, Ristad estimates that North Sea floater demand will grow by 19% through 2026. A material portion of this demand is likely driven by Europe's push for energy security. Diamond also had contracting success in Australia, with the Ocean Apex securing three new contracts with a combined backlog of approximately $90 million. The first being two additional wells for Woodside with a combined estimated duration of 75 days. Then a new award from Chevron commencing in mid-23 for an estimated 75 days. Finally, a third contract award from Santos beginning in mid-24 with an estimated duration of 150 days. An astute listener may pick up that we could have white space between the Chevron and Santos work. For information, we are in the late stages of negotiations to secure an additional contract to fill this gap. If successful, the Ocean Apex will be committed through late 2024. Turning closer to home, Diamond secured three years of additional drill ship work from BP across two rigs. Firstly, the Ocean Black Hornet had its contract extended by two years with an estimated backlog add of $290 million. This extension secures a leading-edge rate for one of our premier offshore assets through the first quarter of 2025. Secondly, the Diamond managed Auriga secured a one-year extension with BP, which will keep the rig contracted through March of 2024 with an estimated backlog add of $150 million. Clearly, these Backlog additions reflect meaningful improvement in offshore drilling demand across multiple regions. More importantly, with improved day rates and high utilization, we have an opportunity to earn considerably higher margins in 2023 and beyond. I'd like to thank everyone involved in securing this backlog, as these awards are a testament to the class-leading Diamond Offshore brand, our unwavering commitment to HSE, and the hardworking people who contribute to the diamond difference. I could not be prouder of this team. And with that, I will turn the call over to Dominic. Over to you, Dominic.