Company OverviewDiamond Offshore Drilling, Inc. or Diamond Offshore, founded in 1989, is a global offshore oil and gas drilling contractor. The company’s headquarter is in Houston, Texas and its principal markets are in the U.S., Mexico, South America, Australia, Asia, Europe, Africa, the Mediterranean, and the Middle East. Its mission is to deliver their purpose every day with respect for the lives they touch, and the impact they make… Some of the company’s top competitors include ENSCO plc, Noble Corporation plc, and Transocean Ltd. Furthermore, Diamond Offshore has reported an increase in total revenue of $366,023 million for the third quarter (September) of 2017 compared to 2016’s second quarter of 349,178 million. By the end of 2016, it reported a 33.9 percent decrease in a total revenue of 1.6 billion from $2.4 billion for 2015, which by then reported that it had a decrease compared to its 2014 revenue of $2.8 billion. Based on Diamond Offshore’s financial reports in the past three years, it has proven to have challenging financial growth due to a significant decline in worldwide demand and oil prices. However, the company remains optimistic about its future because of its efforts such as conservative capitalization, ample liquidity, and commitment to driving thought leadership and delivering quality customer service, which it believes have well positioned the company for the eventual rebound.StrengthsDiamond Offshore has a strong and diverse rig fleet making it a competitive advantage/strength. For instance, its total fleet consists of 24 offshore drilling rigs, 19 semisubmersibles, four dynamically positioned drillships, and one jack-up. Therefore, the company has made long-term efforts to enhance their fleet to meet the customer demand for advanced, efficient, high-tech rigs, particularly deep-water semisubmersibles. Next, as previously mentioned, the company operates in various regions, and looking forward, increasing its international presence would allow the company to see an increase in growth. Further, the company has a strong backlog, which in the short-term can indicates secure revenues for the company. For example, it reported that as of January 1, 2017, it had a strong backlog of $3.6 billion and all four of its drillships are currently contracted to work in the Gulf of Mexico with expected operations of $639 million, $653 million, and $554 million for the next three years.WeaknessesThe company has been on the market for over two decades and are well aware of various risk factors, some of which are out of its control. It provides services to a concentrated customer base – major and independent oil and gas companies and government-owned oil companies – and it typically obtains its contracts through a competitive bid process. For the past three years, the company’s top customers that accounted for 10% or more of their annual total consolidated revenues have been Anadarko, Petróleo Brasileiro S.A., and ExxonMobi. Due to a decrease in the number of potential clients, the company is dependent on few clients for revenue and if the company was to lose one of its top customers, there is the risk of loss of revenue. Next, is their reliance on third-party suppliers, which exposes them to volatility in quality, price, and availability, which then not only leads to disrupting, renegotiation or termination of a contract, but also loss of revenue. Another weakness is that in 2016, it reported on its balance sheet a total outstanding debt of $1,981 million, which is dependent on its performance. For example, negative cash flow implies issues of liquidity and flexibility with financing and pursuing future opportunities. In addition, the company would have to allocate substantial portions of its cash flow towards interest and principal payments limiting available funding.
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