What does the share price movement tell us?

Diamond Offshore Drilling’s (DO) share price was at its one-year high of $36.95 during February 2015. On February 9, 2015, Diamond Offshore Drilling chose not to declare a special dividend. However, it continued to pay a regular quarterly dividend. Diamond Offshore Drilling’s share price held steady until early May 2015. Since then, it has been trending down, despite its earnings improving quarter-over-quarter until fiscal 3Q15. In the past year until February 1, Diamond Offshore Drilling’s share price fell by 42%.

Importance of Diamond Offshore Drilling’s Share Price Movement

The VanEck Vectors Oil Services ETF (OIH) fell by 29% during the same period. The US rig count decreased more than 60% in the past year. It had a negative impact on the entire oilfield equipment and services industry. OIS (Oil States International) is Diamond Offshore Drilling’s smaller market cap peer. It fell by 36% in the past year. Compared to Diamond Offshore Drilling’s $2.5 billion market capitalization, OIS’s market capitalization currently stands at $1.3 billion. Diamond Offshore Drilling accounts for 1.7% of OIH.

Factors that can impact Diamond Offshore’s performance

Diamond Offshore Drilling’s contract backlog fell 17% from February 2015 to October 2015. The company expects an excess rig capacity in deepwater offshore drilling. This can cause lower day rates. It would cause Diamond Offshore Drilling’s revenue and income to fall. In the report for fiscal 3Q15, the company’s management estimated that its 2015 capex would fall 55% over fiscal 2014 to $920 million. Also, Diamond Offshore Drilling’s contracts for two drillships with Petrobras (PBR) ended during fiscal 3Q15. All of the factors contribute to Diamond Offshore Drilling’s share price performance.

On the other hand, Diamond Offshore Drilling’s contract period extended for another drillship with Petrobras. The contract expansion represents $333 million of additional revenue backlog. This could provide a tailwind for Diamond Offshore Drilling’s growth. Read Could Higher Utilization Improve Diamond Offshore’s Outlook? to learn about Diamond Offshore Drilling in more detail.

Next, we’ll discuss Wall Street analysts’ targets for Diamond Offshore Drilling.

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