Diamond Offshore Drilling, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Diamond Offshore Drilling First Quarter 2024 Earnings Conference Call. At this time, all participants are in 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 would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Kevin Bordosky, Senior Director of Investor Relations. Please go ahead.

Thank you, Michelle. Good morning or afternoon to everyone, and thank you for joining us. With me on the call today are Bernie Wolford, President and Chief Executive Officer, Dominic Savarino, Senior Vice President and Chief Financial Officer, and John Richards, Senior Vice President and Chief Operating 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. Some of the information referenced on our call today is included in a slide presentation that you can find in the Investor Relations section of our website under Calendar of Events. 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 day to everyone, and thank you for your interest in Diamond Offshore as we present our results for the first quarter of 2024. Today I'll provide an update on previously reported Great White Incident, highlights from the first quarter, our perspective on the deepwater drilling market, and opportunities for our fleet. Dominic will then walk through our financial results and guidance for the second quarter and full year before I wrap up and open the floor for questions. I will begin with an update on the Great White. On March 15th, the Great White arrived in Kishon Port where it is now undergoing repairs. Prior to departing the well location, the rig's crew safely recovered the lower marine riser package, or LMRP, from the seabed. Since arriving in Kishore, we have dismantled the LMRP, made repairs to damaged equipment, and significantly progressed the rebuild of the LMRP. Over the next four to five weeks, we expect to complete all repairs, including the rebuild, commissioning, and testing of the LMRP and BOP. As of today, we are more than 90% complete with the shipyard scope and progressing in line with the previously guided estimate for time out of service. We currently expect the rig to be back on the well location in the first half of June. Dominic will provide additional information about the estimated repair costs and insurance recovery in his remarks. Before moving on, I'd like to recognize the extraordinary work by our team in response to the incident and the quality of the ongoing collaboration with our client and local authorities. Turning now to our financial results, total revenue and adjusted EBITDA for the first quarter were $275 million and $64 million, respectively. During the first quarter, we safely handed our Riga back to the rig owner after managing the rig since March of 2021. The villa remains under our management through August while it completes its current contract with an operator in the U.S. Gulf of Mexico. At the contract's end, management of the villa will transfer back to the rig owner. Turning now to backlog, as previously announced, we secured $713 million of new backlog during the quarter, which equates to 4.2 rig years of work spread across three rigs. These include two of our seventh-generation drill ships, the Black Lion and Black Hornet, which were each contracted for two-year extensions in the U.S. Gulf of Mexico at substantially higher day rates, and the Patriot, one of our more harsh environment semis, which was contracted for a 60-day, too-well P&A campaign in the U.K. that commenced in early March. The Black Lion and Black Hornet contract extensions will start in direct continuation of their current contracts and provide firm work through the third quarter of 2026 and the first quarter of 2027 respectively. Under these new contracts, the Black Lion and Black Hornet will each be positioned to generate approximately $115 million in annualized rig-level EBITDA, contributing significantly to our cash flow over the coming years. Since the end of the first quarter, we are pleased to announce that the Black Rhino secured a one-well job in the Ivory Coast with an independent operator. The campaign is estimated to take 30 days and is planned to commence late this year after the rig's Special Periodical Survey, or SPS, and managed pressure drilling upgrade. The total prepaid contract value associated with this job is approximately $18 million, with a day rate in line with recent global drill fixtures, including mobilization and demobilization elements. With our contracting success year to date, we have significantly increased the visibility of our revenues for 2024 and beyond. For the full year 2024, excluding cold stacked rigs, 88% of our marketing capacity is contracted, 91% if you include priced options. Similarly, 49% of our 2025 marketing capacity is contracted, If you include priced option, this number rises to 73%. Now I'll turn to our view on the markets in general and opportunities for Diamond. During the first quarter, 32 rig years of floating rig demand were booked across the industry with an average per rig duration of approximately 1.1 years. This average duration is without priced options extensions sublets, and the recent 10-year JV fixture. We believe the broader trend towards longer-term contracts will continue as the year progresses. According to recent data from S&P Global, as of mid-April, open demand from floating rig tenders was approximately 56 rig years compared to 42 rig years a year earlier, representing an increase of more than 30%. This uptick in tendering activity coupled with concern over future rig availability, has pushed day rates for high-specification ultra-deepwater drilling rigs into the high $400,000 to low $500,000 per day range. For our fleet, we are tracking 53 contract opportunities, totaling 55 rig years of demand, with commencement dates from now through the end of 2025. This demand is split between DP and moored rigs at 66% and 34%, respectively. Demand for floating rigs across the Golden Triangle remains strong, while the UK sector of the North Sea has been more volatile, as some operators are deferring decisions for specific programs due to concerns brought about by the extension of the energy profits levy and anticipated national elections. Some of these deferred programs were 2024 opportunities for the Patriot. It is now likely that the Patriot will be idle following its current contract until late this year or early next when it commences its contracted long-term P&A campaign. Demand in the region ticks up in 2025, and we remain optimistic for the endeavor's opportunities following its current campaign as we pursue four opportunities for work both in and outside the UK. Finally, the Black Rhino is competing for multiple opportunities across the Golden Triangle, commencing after its SPS and short-term job in the Ivory Coast. It is notable that during the SPS, we are installing an MPD system. When that is completed, all four of our black ships will feature owned MPD systems, securing their position at the high end of technical specifications among competing seventh generation drill ships. We are in active discussions on a number of opportunities and expect the Black Rhino to secure additional work without a gap between contracts. Change in subjects. We are well positioned to capture further upside through marketing rights recently secured for three seventh generation stranded new build drill ships. We have entered into an agreement with the owners of the Dorado and Draco to market these rigs in Brazil, Latin America, West Africa, Malaysia, and Indonesia. The Dorado was delivered from the shipyard in April and subsequently moved to Malaysia, while the Draco is expected to be delivered from the shipyard in the third quarter. In addition, we secured marketing rights for the former West Libra, now known as the Title Action, for the U.S. Gulf of Mexico region. The rig is currently expected to be delivered in the first quarter of 2025. These are exciting opportunities that could generate meaningful income and increase our exposure to the seventh generation drill ship market during a period when our own units are likely to be fully committed. If we are successful in securing work for these rigs, we would manage the rigs on behalf of their respective owners and earn fees that would be accretive to our EBITDA projections without an increase in required working capital. And with that, I'll turn the call over to Dominic before returning with some concluding remarks.