Diamond Offshore Drilling, Inc. Announces Third-Quarter 2007 Results

Diamond Offshore Drilling, Inc. (NYSE:DO) today reported net income for the third quarter of 2007 of $205.5 million, or $1.48 per share on a diluted basis, compared with net income of $164.5 million, or $1.19 per share on a diluted basis, in the same period a year earlier. Revenue for the third quarter of 2007 was $644.0 million, compared with revenue of $514.5 million for the third quarter of 2006.

For the nine months ended September 30, 2007, the Company reported net income of $681.6 million, or $4.93 per share on a diluted basis, compared with net income of $485.5 million, or $3.52 per share on a diluted basis for the same period in 2006. Revenue for the nine months ended September 30, 2007 was $1.9 billion, compared with revenue of $1.5 billion for the first nine months of 2006.

Diamond Offshore provides contract drilling services to the energy industry around the globe and is a leader in deepwater drilling.

As previously announced, Diamond Offshore will provide a simulcast and rebroadcast of its third-quarter 2007 earnings release conference call. The live broadcast of our quarterly conference call will be available online at www.diamondoffshore.com on October 25, 2007, beginning at 9:00 a.m. CDT. The online replay will follow immediately and continue for the remainder of the fourth calendar quarter after the original call. Please go to the web site at least 15 minutes before the broadcast to register, download and install any necessary audio software.

Statements contained in this press release which are not historical facts are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are inherently uncertain and subject to a variety of risks that could cause actual results to differ materially from those expected by the management of Diamond Offshore. A discussion of the important risk factors and other considerations that could materially impact these matters as well as the Companys overall business and financial performance can be found in the Companys reports filed with the Securities and Exchange Commission and readers of this release are urged to review those reports carefully when considering these forward-looking statements. Copies of these reports are available through the Companys website (www.diamondoffshore.com). Given these risk factors, investors and analysts should not place undue reliance on forward-looking statements. Any such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Companys expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2007200620072006
Revenues:
Contract drilling $ 628,246 $ 498,453 $ 1,854,085 $ 1,431,496
Revenues related to reimbursable expenses 15,716 16,003 46,936 42,878
Total revenues 643,962 514,456 1,901,021 1,474,374
Operating expenses:
Contract drilling 282,100 224,883 719,833 599,271
Reimbursable expenses 13,584 13,982 40,226 37,083
Depreciation 57,565 49,757 171,605 148,858
General and administrative 13,105 9,959 37,245 29,786
(Gain) loss on disposition of assets (363 ) (272 ) (5,418 ) 2,191
Total operating expenses 365,991 298,309 963,491 817,189
Operating income 277,971 216,147 937,530 657,185
Other income (expense):
Interest income 8,735 10,037 26,127 26,843
Interest expense (2,334 ) (6,128 ) (16,959 ) (18,678 )
Gain (loss) on sale of marketable securities 1,763 149 1,755 (53 )
Other, net 2,112 2,842 2,517 6,608
Income before income tax expense 288,247 223,047 950,970 671,905
Income tax expense (82,724 ) (58,597 ) (269,370 ) (186,413 )
Net Income $ 205,523 $ 164,450 $ 681,600 $ 485,492
Income per share:

Basic

$ 1.48 $ 1.27 $ 4.96 $ 3.76
Diluted $ 1.48 $ 1.19 $ 4.93 $ 3.52
Weighted average shares outstanding:
Shares of common stock 138,683 129,172 137,484 129,110
Dilutive potential shares of common stock 307 9,617 1,432 9,664
Total weighted average shares outstanding 138,990 138,789 138,916 138,774

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS

(Unaudited)

(In thousands)

Three Months Ended
September 30,
20072006
REVENUES
High Specification Floaters $ 258,679 $ 191,786
Intermediate Semisubmersibles 255,795 189,521
Jack-ups 113,772 117,146
Total Contract Drilling Revenue $ 628,246 $ 498,453
Revenues Related to Reimbursable Expenses

$

15,716

$

16,003

CONTRACT DRILLING EXPENSE
High Specification Floaters $ 93,812 $ 61,882
Intermediate Semisubmersibles 136,261 111,748
Jack-ups 47,392 41,143
Other 4,635 10,110
Total Contract Drilling Expense $ 282,100 $ 224,883
Reimbursable Expenses $ 13,584 $ 13,982
OPERATING INCOME
High Specification Floaters $ 164,867 $ 129,904
Intermediate Semisubmersibles 119,534 77,773
Jack-ups 66,380 76,003
Other (4,635 ) (10,110 )
Reimbursable expenses, net 2,132 2,021
Depreciation (57,565 ) (49,757 )
General and administrative expense (13,105 ) (9,959 )
Gain on disposition of assets 363 272
Total Operating Income $ 277,971 $ 216,147
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30,December 31,
20072006
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 304,627 $ 524,698
Marketable securities 375,394 301,159
Accounts receivable 545,249 567,474
Rig spare parts and supplies 51,215 48,801
Prepaid expenses and other 77,119 39,415
Total current assets 1,353,604 1,481,547
Drilling and other property and equipment, net of accumulated depreciation
2,864,997 2,628,453
Other assets 26,261 22,839
Total assets $ 4,244,862 $ 4,132,839
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities $ 333,013 $ 333,509
Long-term debt 503,011 964,310
Deferred tax liability 409,136 448,227
Other liabilities 103,623 67,285
Stockholders equity:
Cumulative effect of FIN 48 adoption (28,422 ) --

Other stockholders equity

2,924,501 2,319,508
Total stockholders equity 2,896,079 2,319,508
Total liabilities and stockholders equity $ 4,244,862 $ 4,132,839

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

AVERAGE DAYRATES AND UTILIZATION

Third QuarterSecond QuarterThird Quarter
200720072006
Dayrate

Utili-
zation

Dayrate

Utili-
zation

Dayrate

Utili-
zation

(Dayrate in thousands)

High Specification Floaters$30285% $ 307 86 % $ 222 93 %
Intermediate Semisubmersibles$18678% $ 157 90 % $ 128 85 %
Jack-ups$11281% $ 109 88 % $ 110 88 %

Contacts:

Diamond Offshore Drilling, Inc., Houston
Director, Investor Relations
Les Van Dyke, 281-492-5370

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