US-listed drilling rig owner Diamond Offshore has raised $550m from the bond market in a further sign of warming investor interest in the offshore drilling market.
The seven-year senior secured second lien notes have a coupon of 8.5% and are due to mature on 1 October 2030, the company said.
The offering was upsized to $550m from the original offering size of $500m on the back of strong interest from investors.
Diamond Offshore said it intends to use the net proceeds from the offering to fully repay and terminate its term loan credit facility and repay debt.
Fearnley Securities acted as co-manager in the transaction, according to a posting on social media by the Norwegian investment bank.
Diamond Offshore’s fleet is currently made up of 12 offshore drilling rigs, consisting of eight semisubmersibles and four dynamically positioned drillships.
In a recent investor presentation, the company said drilling rig day rates and utilisation are currently at “their highest levels since the prior peak”.
Since emerging from Chapter 11 bankruptcy protection in April 2021, the company has reduced its indebtedness significantly from $2bn to around $500m.
By year-end 2023, Diamond Offshore expects to have minimal near-term maturities, reduced capital intensity and over half its operated fleet on current market day rates, generating free cash flow, resulting in ample liquidity that should enable it to further pay down its debt.
Improving market conditions have led to recent contract day rates of $430,000 to $480,000 per day for high specification seventh generation ultra-deepwater drillships.
Diamond Offshore’s marketed fleet is nearly sold out for 2023 and over 80% has been contracted for 2024, with the majority said to be at “meaningfully high day rates”.
Last week BTIG analyst Gregory Lewis initiated coverage of Diamond Offshore with a ‘buy’ rating and an initial price target of $20 per share.
Last month fellow drilling rig company Valaris upsized a $350m bond offering to $400m for a similar seven-year senior secured second lien note.
The funds raised are going towards the purchase of two deepwater drillships from South Korean shipbuilder Hanwha Ocean for $337m.
Shares in the major drilling rig operators are up between 40% and 90% so far this year on the back of tighter markets and higher oil prices.
Transocean is the best performer so far this year up over 90% to $8.69, according to figures compiled by Pareto Securities. Diamond Offshore and Seadrill are the next best performers, up over 60% so far this year.
