Diamond Offshore Drilling Inc (DO) 2010 Q1 法說會逐字稿

Good morning. My name is Brandy and I will be your conference operator today. At this time, I would like to welcome everyone to the Diamond Offshore Drilling first quarter 2010 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I would now like to turn the call over to Les Van Dyke, Director of Investor Relations. Please go ahead, sir.

Good morning. Thank you for joining us. With me on the call today are Larry Dickerson, President and Chief Executive Officer; John Vecchio, Executive Vice President; Gary Krenek, Senior Vice President and Chief Financial Officer; and Bob Blair, Senior Vice President, Contracts and Marketing. Before Larry begins his remarks, I should remind you that statements made during this conference call may constitute forward-looking statements and are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected.

Forward-looking statements include, but are not limited to, discussions about future revenues and earnings, capital expenditures, industry conditions and competition, dates the drilling rigs will enter service, as well as management's plans and objectives for the future. A discussion of the risk factors that could impact these areas and the Company's overall business and financial performance can be found in the Company's reports filed with the Securities and Exchange Commission. Given these concerns, investors and analysts should not place undue reliance on forward-looking statements.

The Company expressly disclaims any obligation to release publicly any updates to any forward-looking statements to reflect any changes in the Company's expectations, or any changes in events, conditions or circumstances on which any forward-looking statement is based. After we have discussed our results, we will have a question-and-answer session, during which we ask that you please limit yourself to one question and one follow-up, so that we can open the floor to as many people as possible. With that, I'll turn the meeting over to Larry.

Thank you and good morning. I want to get right to the news everyone is focused on today, which is the new level of our special quarterly dividend. We know how important the special dividend is to all of our shareholders, and even post this cut, it remains an important part of our effort to enhance shareholder value. However, day rates on renewal contracts for our industry have declined from peak levels, which will impact revenues, earnings and cash flow. With that in mind, the Company's Board of Directors has elected to reduce the special quarterly dividend by $0.50, from $1.875 a share to $1.375 in this particular quarter.

So, the combined special and total dividend, combined -- I'm sorry, regular and special dividend declines from $2.00 a share to $1.50 a share per quarter. In making this decision, the Company also believes it's prudent, at this time, to retain some cash for potential rig acquisition opportunities and other corporate purposes. I remind everybody that since the Company began paying a special dividend in January of 2006, we've paid out total dividends of $23.88 per share, which aggregates to a total of over $3.3 billion. At a $1.50 per share, our combined current level of regular and special dividends continues to lead our industry.

The industry, the Company believes that this new level of special quarterly dividend can be maintained through at least 2010. Subject, of course, to changes in the Company's financial situation, our capital spending plans and other relevant factors, which we disclose in our press release. I think that looking at this, the dividend reduction is not so much a reflection of our future expectations of floater day rates, which happens to be positive as [we'll] comment on where day rates are currently. Again, we are no longer at peak levels and that is being reflected in new contracts that we and others in the industry have signed.

I think one data point would be to look at the midwater semi rates. Transocean has recently reported rates this week, which are in line with the rates which we previously reported, which fall somewhere between $240,000 and $280,000 a day, dependant upon the market and the individual rigs. These are solidly profitable rates and any time, up until the last three or four years, they would have been banner rates for the industry. However, they have declined from peak rates that we were signing in the mid to high 300's and in some cases over $400,000 a day. So I think that's just reflective of a type of day rate that has declined.

Day rates do appear to be relatively stable right now. With oil prices above $80 per barrel, we would expect that. And as the global economy begins to show signs of improvement, then we would expect that that would also yield a greater demand for oil. In this environment, it seems possible that the uncontracted new build floaters can be absorbed without much, if any, negative, impact on the market but we don't have a crystal ball. If industry conditions should deteriorate, we want to be in a position to maintain a given level of special quarterly dividend over a period of time, as well as retaining cash to take advantage of any attractive rig acquisition opportunities that may arise.

As an example, within the past 12 months, we acquired rigs that we have renamed Ocean Courage and Ocean Valor, at very attractive rates. That said, I want to head off your questions regarding potential asset acquisitions. We won't comment on specific M&A type activities. So, you shouldn't read anything into our dividend announcement. We have historically maintained a significant amount of cash on hand, which has allowed us to act rapidly.

We've been very successful in the past. The two rigs I just cited are a great example. Resulting in the highest return on capital employed in the industry. As opportunities present themselves, as always, we want to take them into consideration. So with that, I'm going to let Gary Krenek talk about our financial results, guide you through some of the things that happened during the quarter. And then, Bob Blair and I will be available to take your individual questions on the market. I assume that we will have additional dividend questions as well. So, Gary?

Thanks, Larry. Three things that I'd like to address in my opening remarks. There are a couple of items on the income statement that I believe need additional color. As you can see from the press release, we did report $2.09 of earnings per share for the quarter. And I'll comment on a couple of those items. Secondly, there's something in the balance sheet that I think needs further clarification regarding our cash balances and I'll talk about that. And finally, as Larry said, I'll talk about what we expect to see in the upcoming quarter.

On the current income statement, the two line items that I believe everyone has a question on, are contract drilling expense and our tax expense line. With respect to contract drilling expenses, in our last conference call, we indicated that we expected those expenses to come in at approximately $1.5 billion for the year 2010, and gave the reasons for the increase over our 2009 total amounts, including additional rigs added to our fleet, relocation of a number of rigs to different markets, et cetera. We are still projecting that same $1.5 billion of contract drilling expenses for this year.

First quarter expenses of $305 million were below our guidance of $335 million to $350 million. Partially due to cost controls, which the Company continues to emphasize but more so, due to various timing differences related to major expense projects on our rigs being pushed back and the timing of several rig [mob's]. As a result, we expect to incur the bulk of those delayed expenses in the coming months of 2010. I'll talk about what we expect for the second quarter with respect to contract drilling costs in just a second. While contract drilling expense for the quarter came in under our expectations, our tax expense came in higher, with the tax rate for Q1 being 28.3%, as opposed to the expected 24% to 27% range that we guided to previously.

There were a couple of reasons for this. But by far, the main one was the failure of Congress to extend certain tax laws related to Subpart F for foreign earnings beyond December 31, 2009, that we, along with just about everyone else, assumed would be extended. Congress had previously given indications that those laws would be extended. But with the various things going on in the Congress, they just never got around to extending that in the first quarter. Failure to extend this law, which if extended, would have enabled us to defer certain amounts of foreign earnings from US taxation, accounted for 2.5-point increase in our tax rate during the first quarter.

In addition, the change in our foreign versus domestic earnings mix projections added another 1 point increase to the rate. On a go-forward basis, if the law in question that I've been talking about is ultimately not extended, we expect our tax rate for the year to come in between 28% and 30% now. However, there is still a chance that the US Congress may pass this extension. And if it does so and the extension is retroactive back to January 1, which many people think it will be, our tax rate for 2010 will fall approximately 2 to 2.5 points back to the 26% to 28% range.

Looking at our balance sheet. Normally, in order to compute the cash balance available to Diamond Offshore, there's two lines that you need to add together. One is cash and cash equivalents, which this quarter, we reported $300 million approximately, and then, the marketable securities line, which we reported $650 million. This quarter, we had an anomaly, in that we purchased marketable securities on the last day of the quarter and didn't settle until after the end of the quarter.

As a result, as required by GAAP, we ended up grossing up marketable securities. With the offset going to payable for marketable securities down in the liability section, as opposed to reducing our cash balance. In short, rather than adding the two lines, cash and cash equivalents and marketable securities together, to get the cash balance, you also need to take in account this $100 million that's in the liabilities section. So the short answer is, cash available to the Company is actually $850 million, as opposed to the apparent $950 million. Still a very large cash balance, as Larry said, the Company historically has kept.

Now looking forward to the second quarter. The daily rig operating expense by type and location that I gave out in our last conference call, and the additional costs associated with expected surveys, that guidance still stands. During Q2, we expect to incur some $20 million of costs, as a result of surveys scheduled to be conducted on the Oceans Vanguard, Alliance and Winner. We will also incur some $10 million above and beyond the first quarter's costs for the Ocean Courage. As that rig will now be active for the full quarter in Q2, after having been officially delivered for service midway in Q1, and thus, only having had one half of a quarter's operating costs reported in the first quarter for that rig.

The rig is also currently on the high seas heading for Brazil and will incur [mode] costs, which will be expensed currently in Q2. Combined, this means, as I've said, an additional $10 million of costs for the Ocean Courage in Q2 versus Q1. Similarly the Guardian, Star and Lexington all had portions of their Q1 operating costs deferred as they were relocating to different operating areas in Q1. Those three rigs will all incur a full quarter's worth of operating expense in the second quarter. We expect this to add some $15 million or so to expense.

As always, in upcoming quarters, we will record to expense the amortization of previously deferred [mob] cost. That amount being currently estimated at $24 million in the second and third quarters and $18 million in Q4. That's in comparison to the $16 million that was recognized in the first quarter. As I mentioned before, we had some costs, primarily major expense repair type items on our rigs, that were not incurred as expected in Q1 but are still expected to be expensed, some of which will be spent in the upcoming quarter. When you take all of this information into account, we expect contract drilling expense, which I remind you, as always, excludes reimbursable cost, to total between $365 million and $380 million in the second quarter.

Looking at a few other cost areas for Q2, we expect depreciation expense to be between $100 million and $103 million for the quarter and that will also carry forward to Q3 and Q4. And G&A and interest expense to be relatively flat quarter over quarter. And finally, for capital expenditures, we're increasing our total CapEx forecast for 2010 by some $70 million, from the previously reported $440 million to $510 million. This increase is a result of modifications needed for the Valor, Baroness and Clipper, in conjunction with 11 years worth of contracts totaling some $1.4 billion in revenues that we were awarded for our Brazil work and had announced earlier in the year. And with that, we'll open it up for questions.

(Operator Instructions) Your first question comes from the line of Dan Boyd with Goldman Sachs.

Hi, good morning, guys.

Good morning, Dan.

I had a question on, as we look out on rigs that might need investment, we've seen a number of your competitors either swapping out rigs that required large surveys or investment to continue to work, or even making the decision to stack some because of the investment required. When we look through your fleet, are there any rigs that we should be aware of that might require an investment of greater than say $50 million to continue to work that should just be on the radar screen?

I think, Dan, the one rig that we've done that with, up to this point, was the Ocean Bounty. Where we took the Ocean America out of the Gulf of Mexico and it's on its way currently to Australia to fulfill that job, so that we didn't have to spend something in excess of $50 million. I do not believe that we have anything that tallies that. We do have a couple of jack-ups that may be facing surveys that would be drawing on cash. And if the markets themselves are close to break-even, then we would question whether or not we think we should spend that. But nothing on the floater side, I believe, that approaches a $50 million number.

Okay. And maybe I'll follow-up with you guys offline on the jack-ups, which ones. And then just a separate question on the M&A strategy. I recognize you're not going to comment on any specific opportunities. But overall -- of course, if the economics make sense. But is there a desire to high grade your jack-up fleet and potentially acquire high spec jack-ups, should the opportunities present themselves? Or are you, for the same type of return, more focused on deepwater assets?

I think we've always been a deepwater Company, with the majority of our investments on the floater side of where we're looking at. And we think we've made some great acquisitions in that space. I can't tell you what the prices would be. But certainly looking at the third Petromina rig, prices did rise quite a bit, with more activity coming from more participants. So, we'd also look, I think, at high spec jack-ups, if the values really become compelling. But we certainly, we wouldn't be making those investments saying, "Strategically, we need the high grade jack-ups." It would be more where we did an estimate and saw that perhaps that might be a better return over time for us. And again, just because jack-ups are so small, I wouldn't see them, small in cost, ever being a significant opportunity for us.

Okay. But you could see situations, such as one of the competitors recently did, where they acquired a rig from the shipyard, contingent on securing a contract?

That's always a possibility but certainly, we get hesitant to grab something in a shipyard where there's unknown costs in there, unless, that's all reflected in the price that you acquire it at.

Okay, thanks. I'll turn it back over.

Your next question comes from the line of Angie Sedita with UBS.

Great, thanks, good morning, guys.

Good morning.

Larry, just as a follow-up to that, are you, and again just in generalities, are you seeing more opportunities for -- are more rigs available for purchase, either in a jack-up and deepwater market? And are you seeing any narrowing in the bid and ask, more so in jack-ups for deepwater or neither in either space?

I would say, there's really a shortage of real opportunities to act on right now but that doesn't mean that they're not going to pop up. But as you look forward, you could see the Petromina rigs coming quite a bit. And it's difficult right now to actually see where there may be a new construction or a smaller guy that's going to be available on that end. And on the jack-up space, I don't think there have been that many transactions. We're not hearing of that many. So, that seems to be quite a ways away.

All right. And then also, on the midwater market, you talked about the recent signings of Transocean. Could you give us your thoughts on the outlook for the New Era, which is in Mexico, rolling off I believe in July, and then the Voyager in the Gulf rolling off also in July?

I'll let Bob talk on that. The Voyager, we brought that up from Mexico and there's just a real shortage of any kind of midwater units in the Gulf of Mexico. We have our Saratoga committed for some time and I believe Noble has one rig. So the Voyager seems to, for the moment, have found a short-term niche.

Yes, we're having discussions currently with operators about work for the Voyager at the end of its current commitments. There seems to be continued interest. Also, we are having discussions with Pemex. I think they're trying to sort out, in their organization, what they're allowed to do, as far as up through a pure negotiation or are required to go through a bid process because they do have some interest in the extension of the New Era. If not, we continue the discussions in the US Gulf of Mexico, as well, for the New Era.

Okay. And then, those rigs are generally at the spot market already, which is fair, thus, one would assume those should generally roll over at that spot market?

There could be some effect because of the hurricane season, encouraging operators to take the risk associated with drilling during hurricane season. But basically, they shouldn't be much different.

Okay. Great. Thank you.

Your next question comes from the line of Jim Crandell with Barclays.

Good morning.

Hello, Jim.

Larry, could you comment on the Brazilian market in regards to two items? Number one, how do you see them responding here and how do you see them acting to the requests for the tenders for 28 rigs? And secondly, do you see Petrobras coming into the market to take some of this idle capacity off the market that's going to be delivered in the second half of this year, or early 2011?

It's very difficult to get into their -- know exactly what they're doing. They're very competent people and understand the market really well. And so, I just don't feel I can really add much there. They're also our largest customer. And I certainly don't want to say anything, make a comment about their activity. Certainly, the 28 rigs, I think everybody understands, including Petrobras, how challenging that will be to deliver, given that capacity to build such rigs are really at a startup stage. And then, they also have some aggressive targets for local content, which will also be difficult to achieve. But Petrobras has done a lot of things that have been very difficult and they lead the industry and I think there will be problems but they will work to solve them. I think net-net, at the end of the day, it will take some time to solve the problems, though.

Okay. And just to come back to the dividend issue. Larry, I think you said that there was no real incremental negative -- or it doesn't seem to be an incremental negative change versus your expectations for the business, as of three months ago. And I think you said in response to Angie's question, there was a real shortage of real opportunities to buy rigs. I think those two things would, I guess, question whether the rationale for a dividend reduction at this point.

Well, two parts. We do think, at $80 oil, that there will be some demand that needs to work its way out. But certainly, as we have been seeing replacement day rates that are being signed out, they're below peak. As you put those in, then you are going to -- as those begin filtering through the income statements of us and others, then I think that you will see reduced earnings and cash flow that could come from that. Saying that we want to retain money for acquisition opportunities, the amount of money that we're talking about having available is not going to, in and of itself, buy a rig in one quarter. So, it would take some time to build up for that.

Okay. You also, I think, made the statement in your press release that you feel confident about maintaining the dividend out through 2010. And I think you said early on that your outlook for the business is quite positive. And should we take from that that we can look at the current dividend as being -- as likely to be sustained out through 2011, if your view of the industry is right?

Well, we didn't make a comment on 2011. That does get to be far out there. We cite all of the factors that we consider in setting a level of dividend but we recognized, at a point in time that we reduced the dividend, that there would be an issue for shareholders to know -- try to be able to see what's going to happen, just subsequent to this. Will it go up or down in the subsequent quarters? So we thought that it was appropriate to state that the Board said that, subject to everything else that we could see, sustaining this dividend through 2010.

We like to pay dividends. That's a key part of our strategy. But we need to see how the earnings are going to come in and what renewal rates are going to be. So, there's too much uncertainty really in 2011 to extend our forward visibility on where we think dividends will be. But at the end of the day, we started this significant dividend payment within the industry. It's been a key part of our strategy. And all of those factors still are in place.

Okay. Thank you.

Your next question comes from the line of Ian Macpherson with Simmons and Company.

Good morning. Larry, you made the remark that the Voyager is sort of in the sweet spot of the Gulf of Mexico midwater market, without a lot of competition. But you also have the Victory, I believe, with an open window in the back half of the year. What would be the strategy with that rig? Is there intermediate deepwater work that you could attach that rig? And if not, would you be willing to take it down market or would you prefer not to necessarily set a, maybe an anonymously, low day rate on a fourth gen rig, given maybe the negative pull-through that might have for the rest of your fourth gen fleet?

I would say, we would prefer not to have negative impact from rates. But the Victory, we needed to restructure a peak day rate on that unit that was at 540 to fit our customer's revised needs and to maintain that contract. So we took a net profit interest in some wells, which we think is working out nice for us. And we also agreed to take some window. So, any time you take windows in your program, it is challenging. If we can find opportunities in deeper water, then we think we can get a deeper water day rate, which again, is not going to be at peak rates. But if that's all -- that's not available to us and we need to work in intermediate water depth, then I think we would do that on a short-term basis to fill a window. And I think it all depends on whether there's enough demand to cover both it and the Voyager. We would look at our total marketplaces.

The customers we're talking to right now, some of the activity that we're looking at is in water depths in excess of what the Voyager could drill. So, I think there's a nice split there between the two rigs. But it will be a challenge to fill the year for both of the rigs during the hurricane season.

Okay. And then, kind of maybe an unrelated follow-up, the global midwater market, where do you see the day rates going over two years, if crude, say, stays here at $80 to $85? Would you see activity recovering and rates going higher or vice versa or neither?

I wouldn't -- all of the above. If you can give us that choice, which is probably the correct one? At $80, oil is good for the industry and it's good for our business and it's good for demand. Where that actually translates is going to be impacted by a variety of things. But if rates stayed where they are today, rather than recover, we can make a lot of money. But we will not be earning the kind of levels we did when we were able to price these rigs off the kind of boom type market rates that you would otherwise get.

I think stable oil price and confidence helps the operators plan their activity. And we are seeing that the peak day rates have dropped somewhat but they haven't gone to -- plummeted to extremely low rates. I think that as long as oil price stays stable, that we'll see eventual improvement in the rates.

Okay. Thanks.

Your next question comes from the line of Dave Wilson with Howard Weil.

Good morning, guys. Just real quickly, kind of a follow-up on the Gulf of Mexico and more related to your jack-ups in light of the hurricane activity. Can you talk a little bit about what you're seeing as far as interest in getting some of those contracts extended through the summer months?

Yes. Typically, operators have not ceased all activity during hurricane season in the jack-up markets. We continue to have discussions with operators about ongoing work. There is activity, especially, for the independent leg rigs. The only place where there really is a falloff in activity has been the [mat sector] of the market. We have a lot of bid activity going on right now for the Gulf of Mexico and I think very good prospects for ongoing work.

Okay. Thank you.

Your next question comes from the line of Joe Hill with Tudor, Pickering, Holt and Company.

Good morning. Guys, I had a question about capital allocation and whether or not it's worth trying to upgrade some of your moored semis to DP or whether it's cost prohibitive, given the design? Given the fact that if we look at the influx of deepwater capacity and the potential impact on rates, it may imply that more rigs may come under some pressure. Is that a possibility to upgrade?

It is a possibility to upgrade. However, the question is; What is economic? Certainly, at a point in time when we could buy new capacity on the Courage and Valor, for a shipyard price below $500 million, it doesn't make much sense, in my judgment, to spend a lot of money on a moored rig to put it in a DP mode. And we don't have a total handle on that cost, where that might be in the present market, but it would be significant. At least a couple hundred million dollars, plus some lost opportunity cost, if we could work it. However, there could be the possibility with all of the DP rigs coming to market, that moored rigs may have a challenge that might be reflected in the day rates. We just don't know yet.

Okay. And Larry, just to follow up real quickly, I know the Guardian has been operating in the Falklands and the Argentine government was making some noises awhile back about that. What's the situation there today and are we anticipating the Guardian fulfills its contracts down there?

That is our expectation. We've drilled previously in Argentina and think that we have good relations in the country. I don't know how this impacts us but we are drilling under the auspices of the Falkland Islands and the UK government is also involved in that. And it's our expectation that we'll be permitted to continue. I think a lot of the issues around that were related to our arrival in the area. There may be arguments going forward politically as to who should have the oil but I think it's in everybody's interest to go out and explore and find whether or not there is producible oil in that area of the world.

Okay. Thank you.

Your next question comes from the line of Robin Shoemaker with Citigroup.

Thank you. Good morning. Just if you could comment on the international jack-up market and how you see it? In terms of the recent contract signings that we've all noted, do you see -- are you encouraged by anything you see in the international jack-up arena? And do you have a view as to what the 50-plus new jack-ups entering the market could potentially do in terms of holding back or impacting the rate structure over the balance of the year?

I think that the encouraging signs in the international jack-up market is there's activity in all areas. Not like, we've seen in the past, where activity just ceases in certain areas, where there's no work. We're very active bidding in all areas that we're operating in. We have, I think, excellent prospects for continued work for either existing operators or new operators with our rigs. And the fact that there is activity is good. The big problem is that there's excess supply and therefore, there's pressure on day rates. It's pushed down rates. So, a lot just has to do with during the bid, the negotiation process, just getting your price ideas correct and securing the work.

Okay. And in terms of -- how do you assess your potential with regard to adding or moving more rigs into the Mexico market with the existing tender that they have or future ones?

Well, of course, we're going through the tender process right now. The first submission is due next week for a unit of -- with a little over 1,000 days worth of term. We're looking at that and certainly, have a rig that meets the 10-year requirements that we're looking at the possibility of bidding that rig into Mexico. I think it's going to be quite a competitive tender exercise, that there will be several rigs bidding, including some Mexican owned rigs that are in the area.

There's additional tender out for four jack-ups for shorter duration programs that bid submission has been delayed into May. I think they're re-looking at some of the technical requirements and perhaps the 10-year age restriction. We feel like Mexico continues to be a market that we'll be interested in. It's just Pemex actually getting their tenders out and also deciding with certainty whether or not they're going to require this equipment to be 10 years young or younger or if they're going to waive that requirement.

Okay. So, you have one, I guess, in the US Gulf of Mexico that would be less than 10 years?

Yes, we have the Ocean Scepter that's currently working here in the US Gulf for an operator. It's fairly short-term work.

Right. Okay. Thank you.

Your next question comes from the line of Scott Burke with Oppenheimer.

Good morning, guys. I just wanted to kind of go back to the reason behind the reduction in the dividend. And just wanted to understand, you mentioned the various reasons that the Board considered when looking at that. But was the decision weighted more towards a concern about current rate levels and expectations for future rate levels? Or more towards wanting to keep a high cash balance for potential acquisitions, perhaps next year?

I would say both factors were present but not trying to pick one as worse than the other. But it is a fact that, and has been for awhile, that day rates, although solidly profitable in most classes, are below peak rates. And so, I think that is a -- if we were faced with sustained peak level pricing, then the desire to build cash, it would probably still be present but it just wouldn't be as big of an issue as it is with being able to look out and see that there may be less cash coming in the door.

Okay. And was there any issue about not having enough kind of US tax cash available to continue paying the dividend? Was that an issue at all?

No.

Okay. And then, just one other question. Could you restate the DD&A guidance for the next quarter?

Between $100 million to $103 million. That will be consistent for all three quarters, the rest of the year.

Okay. All right. Thanks. That's all I have.

Your next question comes from the line of Geoff Kieburtz with Weeden & Company.

Thanks very much. Larry, just to clarify on the dividend question, you're making the point that rates have come down from the peak rate. I just want to make sure that we're understanding this, as you -- do you need to get back to peak rates in order for that special dividend to come back up to the $1.87 a quarter?

I don't know. We haven't said that. Certainly, if we had a situation where we had rising earnings, which result from rates, but when we had rising earnings, then we would, among other things, consider increasing the dividend. But I can't give you a scale that says when we reach X price, then we will pay Y dividend.

And somewhat related, it seems that you made the point earlier that the dividend decision is really being driven by what rates are, not by some projection of what they will be. Is that correct?

That is correct. We've said that we remain optimistic but we cannot know where the dividends are going to be.

Okay, all right. And if I could, one more question, just a separate topic altogether. You've got a lot of insight into the Brazilian market. And I understand your reluctance to sort of speak for Petrobras. But is it your -- what do you think the probabilities are that the tenders for both the nine Petrobras rigs and the 19 contractor rigs actually stick with the May submission dates versus having that rescheduled again?

I'm sorry. I'm just --- I don't think --.

You don't want to speak for them. That's okay.

I just can't contribute. It's just my guess. I would suppose that they will receive something in that time frame.

Okay. All right. Great. Thank you very much.

Let me take one more question.

Your final question comes from the line of Philip Dodge with Tuohy Brothers Investments.

Good morning. Thanks for the comments. A question on offshore Brazil, other than Petrobras, there are several other discoveries by other companies and now BP is coming into the picture. Do you expect any increase in activity related to that group of operators, other than Petrobras?

We've been bidding our units into the other operators for some time now and have been short listed, by some, for certain jobs. We just -- at this point in time, we have not been successful with our offers. Certainly, there's going to be other units come into the area to fulfill those requirements. And we hope -- we continue to bid and we hope that maybe one of them will be ours.

And I'll point out that we do have four rigs working for OGX down in Brazil. So, we've been very successful with that customer.

Fair enough. And then, let me just wind up offshore Mexico, whether you think that the poor results that Pemex has had in their deepwater activity will be a deterrent going forward or does it look like they're going to keep trying?

We have, at various times, drilled deepwater prospects for Pemex and I just can't really comment on the results and how they would evaluate those results from either our rigs or other people's rigs.

Okay, understood. Thanks very much.

Okay. Well, thanks, everybody. We will talk again in roughly 90 days. Thank you.

This concludes today's Diamond Offshore Drilling first quarter 2010 results conference call. You may now disconnect.