10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                    

Commission file number 1-13926

DIAMOND OFFSHORE DRILLING, INC.

(Exact name of registrant as specified in its charter)

Delaware	76-0321760
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

15415 Katy Freeway

Houston, Texas 77094

(Address of principal executive offices)

(Zip Code)

(281) 492-5300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of April 28, 2016 Common stock, $0.01 par value per share 137,169,663 shares

DIAMOND OFFSHORE DRILLING, INC.

TABLE OF CONTENTS FOR FORM 10-Q

QUARTER ENDED MARCH 31, 2016

			PAGE NO.
COVER PAGE				1
TABLE OF CONTENTS				2
PART I. FINANCIAL INFORMATION				3
	ITEM 1.	Financial Statements (Unaudited)
		Consolidated Balance Sheets		3
		Consolidated Statements of Operations		4
		Consolidated Statements of Comprehensive Income		5
		Consolidated Statements of Cash Flows		6
		Notes to Unaudited Consolidated Financial Statements		7
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		35
	ITEM 4.	Controls and Procedures		35
PART II. OTHER INFORMATION				36
	ITEM 1.	Legal Proceedings		36
	ITEM 1A.	Risk Factors		36
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
	ITEM 6.	Exhibits		36
SIGNATURES				37
EXHIBIT INDEX				38

2

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

	March 31, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	128,928		$	119,028
Marketable securities		5,067			11,518
Accounts receivable, net of allowance for bad debts		363,597			405,370
Prepaid expenses and other current assets		110,842			119,479
Assets held for sale		6,600			14,200
Total current assets		615,034			669,595
Drilling and other property and equipment, net of accumulated depreciation		6,219,242			6,378,814
Other assets		110,323			101,485
Total assets	$	6,944,599		$	7,149,894
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	51,421		$	70,272
Accrued liabilities		289,209			253,769
Taxes payable		40,357			15,093
Short-term borrowings		—			286,589
Total current liabilities		380,987			625,723
Long-term debt		1,980,049			1,979,778
Deferred tax liability		230,332			276,529
Other liabilities		158,451			155,094
Total liabilities		2,749,819			3,037,124
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock (par value $0.01, 25,000,000 shares authorized, none issued and outstanding)		—			—
Common stock (par value $0.01, 500,000,000 shares authorized; 143,997,757 shares issued and 137,169,663 shares outstanding at March 31, 2016; 143,978,877 shares issued and 137,158,706 shares outstanding at December 31, 2015)		1,440			1,440
Additional paid-in capital		2,000,828			1,999,634
Retained earnings		2,406,693			2,319,136
Accumulated other comprehensive gain (loss)		(11,595	)		(5,035	)
Treasury stock, at cost (6,828,094 and 6,820,171 shares of common stock at March 31, 2016 and December 31, 2015, respectively)		(202,586	)		(202,405	)
Total stockholders’ equity		4,194,780			4,112,770
Total liabilities and stockholders’ equity	$	6,944,599		$	7,149,894

The accompanying notes are an integral part of the consolidated financial statements.

3

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended March 31,
	2016			2015
Revenues:
Contract drilling	$	443,523		$	599,577
Revenues related to reimbursable expenses		27,020			20,479
Total revenues		470,543			620,056
Operating expenses:
Contract drilling, excluding depreciation		212,841			350,658
Reimbursable expenses		26,791			20,092
Depreciation		104,240			137,299
General and administrative		15,398			17,452
Impairment of assets		—			358,528
Restructuring and separation costs		—			6,168
Gain on disposition of assets		(296	)		(611	)
Total operating expenses		358,974			889,586
Operating income (loss)		111,569			(269,530	)
Other income (expense):
Interest income		173			583
Interest expense, net of amounts capitalized		(25,516	)		(23,982	)
Foreign currency transaction (loss) gain		(3,608	)		5,590
Other, net		578			221
Income (loss) before income tax benefit		83,196			(287,118	)
Income tax benefit		4,229			31,409
Net income (loss)	$	87,425		$	(255,709	)
Earnings (loss) per share, Basic and Diluted	$	0.64		$	(1.86	)
Weighted-average shares outstanding:
Shares of common stock		137,162			137,151
Dilutive potential shares of common stock		44			—
Total weighted-average shares outstanding		137,206			137,151
Cash dividends declared per share of common stock	$	—		$	0.125

The accompanying notes are an integral part of the consolidated financial statements.

4

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2016			2015
Net income (loss)	$	87,425		$	(255,709	)
Other comprehensive (losses) gains, net of tax:
Derivative financial instruments:
Unrealized holding loss		—			(1,827	)
Reclassification adjustment for (gain) loss included in net income		(1	)		3,587
Investments in marketable securities:
Unrealized holding loss		(6,559	)		(2,123	)
Reclassification adjustment for gain included in net income		—			—
Total other comprehensive loss		(6,560	)		(363	)
Comprehensive income (loss)	$	80,865		$	(256,072	)

The accompanying notes are an integral part of the consolidated financial statements.

5

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2016			2015
Operating activities:
Net income (loss)	$	87,425		$	(255,709	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		104,240			137,299
Loss on impairment of assets		—			358,528
Restructuring and separation costs		—			6,168
Gain on disposition of assets		(296	)		(611	)
Loss on foreign currency forward exchange contracts		—			6,390
Deferred tax provision		(45,254	)		(118,332	)
Stock-based compensation expense		1,194			856
Deferred income, net		13,810			(3,874	)
Deferred expenses, net		2,591			(46,027	)
Other assets, noncurrent		92			506
Other liabilities, noncurrent		1,835			(2,262	)
Payments for settlement of foreign currency forward exchange contracts designated as accounting hedges		—			(6,390	)
Bank deposits denominated in nonconvertible currencies		293			561
Other		438			484
Changes in operating assets and liabilities:
Accounts receivable		41,773			18,177
Prepaid expenses and other current assets		6,026			11,997
Accounts payable and accrued liabilities		(1,798	)		(18,006	)
Taxes payable		28,961			70,811
Net cash provided by operating activities		241,330			160,566
Investing activities:
Capital expenditures (including rig construction)		(58,114	)		(197,032	)
Proceeds from disposition of assets, net of disposal costs		113,295			4,763
Proceeds from sale and maturities of marketable securities		11			11
Net cash provided by (used in) investing activities		55,192			(192,258	)
Financing activities:
Net repayment of short-term borrowings		(286,589	)		—
Payment of dividends		—			(17,144	)
Other		(33	)		(12	)
Net cash used in financing activities		(286,622	)		(17,156	)
Net change in cash and cash equivalents		9,900			(48,848	)
Cash and cash equivalents, beginning of period		119,028			233,623
Cash and cash equivalents, end of period	$	128,928		$	184,775

The accompanying notes are an integral part of the consolidated financial statements.

6

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. General Information

The unaudited consolidated financial statements of Diamond Offshore Drilling, Inc. and subsidiaries, which we refer to as “Diamond Offshore,” “we,” “us” or “our,” should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 1-13926).

As of April 28, 2016, Loews Corporation owned approximately 53% of the outstanding shares of our common stock.

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S., or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, pursuant to such rules and regulations, they do not include all disclosures required by GAAP for complete financial statements. The consolidated financial information has not been audited but, in the opinion of management, includes all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated balance sheets, statements of operations, statements of comprehensive income and statements of cash flows at the dates and for the periods indicated. Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated.

Assets Held For Sale

At December 31, 2015, we reported the $14.2 million carrying value of five marketed-for-sale jack-up rigs as “Assets held for sale” in our Consolidated Balance Sheets. One of these rigs was sold for $8.0 million in February 2016. In March 2016, one of our previously impaired mid-water semisubmersible rigs completed its drilling contract and was sold for scrap in the second quarter of 2016. We have reported the $6.6 million aggregate carrying value of our remaining marketed-for-sale jack-up rigs and the mid-water semisubmersible rig to be sold for scrap as “Assets held for sale” in our Consolidated Balance Sheets at March 31, 2016.

Drilling and Other Property and Equipment

We carry our drilling and other property and equipment at cost, less accumulated depreciation. Maintenance and routine repairs are charged to income currently while replacements and betterments that upgrade or increase the functionality of our existing equipment and that significantly extend the useful life of an existing asset are capitalized. During the three months ended March 31, 2016 and the year ended December 31, 2015, we capitalized $30.7 million and $262.4 million, respectively, in replacements and betterments of our drilling fleet.

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Capitalized Interest

We capitalize interest cost for qualifying construction and upgrade projects. See Note 8. A reconciliation of our total interest cost to “Interest expense, net of amounts capitalized” as reported in our Consolidated Statements of Operations is as follows:

	Three Months Ended March 31,
	2016			2015
	(In thousands)
Total interest cost, including amortization of debt issuance costs	$	28,825		$	29,996
Capitalized interest		(3,309	)		(6,014	)
Total interest expense as reported	$	25,516		$	23,982

Debt Issuance Costs

Historically, we have presented deferred costs associated with the issuance of long-term debt as “Other Assets” in our unaudited consolidated balance sheets and have amortized such costs over the respective terms of the related debt. In April 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30); Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03, which requires debt issuance costs associated with our senior notes to be presented in the balance sheet as a reduction in the related long-term debt. We have adopted the provisions of ASU 2015-03 effective January 1, 2016 and have retrospectively applied its provisions to all periods presented in our Consolidated Financial Statements. The retrospective effect of our adoption of ASU 2015-03, which affected only the presentation of deferred debt issuance costs in our Consolidated Balance Sheets at December 31, 2015, is as follows:

	Other Assets			Long-term Debt
	(In thousands)
Amount as previously presented, before adoption of ASU 2015-03	$	116,480		$	1,994,773
Deferred debt issuance costs		(14,995	)		(14,995	)
Amount as restated, after adoption of ASU 2015-03	$	101,485		$	1,979,778

Recent Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation (Topic 718), or ASU 2016-09, which simplifies several aspects of the accounting for share-based payment transactions. The new guidance makes several modifications to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. In addition, ASU 2016-09 clarifies the statement of cash flows presentation for certain components of share-based awards. The guidance of ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2017. Earlier adoption is permitted. We are currently evaluating the provisions of ASU 2016-09 and have not yet determined the impact on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09. The new standard supersedes the industry-specific standards that currently exist under GAAP and provides a framework to address revenue recognition issues comprehensively for all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Under the new guidance, companies recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also provides for additional disclosure requirements. In July 2015, the FASB issued ASU 2015-14, which

8

deferred the effective date of ASU 2014-09. The guidance of ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and may be adopted using a retrospective or modified retrospective approach.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or ASU 2016-02, which requires an entity to separate the lease components from the nonlease components in a contract. The lease components are to be accounted for under ASU 2016-02, which, under the guidance, may require recognition of lease assets and lease liabilities by lessees for most leases and derecognition of the leased asset and recognition of a net investment in the lease by the lessor. ASU 2016-02 also provides for additional disclosure requirements for both lessees and lessors. Nonlease components would be accounted for under ASU 2014-09. The guidance of ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption of ASU 2016-02 is permitted.

We are evaluating the provisions of ASU 2016-02 concurrently with the provisions of ASU 2014-09. We have not yet determined the impact of these ASUs on our financial position, results of operations or cash flows.

2. Asset Impairments

2016 — During the first quarter of 2016, in response to continued deterioration of the market fundamentals in the oil and gas industry, significant cutbacks in customer capital spending plans and contract cancelations by customers, as well as recently announced regulatory requirements in the U.S. Gulf of Mexico, we evaluated ten of our drilling rigs with indications that their carrying amounts may not be recoverable Using an undiscounted, projected probability-weighted cash flow analysis,, we determined that the carrying values of these rigs were not impaired.

If market fundamentals in the oil and gas industry deteriorate or if we are unable to extend or secure new contracts for our current, actively-marketed drilling fleet or reactivate any of our cold-stacked rigs or if we experience unfavorable changes to our actual dayrates and rig utilization, we may be required to recognize additional impairment losses in future periods.

2015 Impairments — During the first quarter of 2015, we evaluated 17 of our drilling rigs with indications that their carrying amounts may not be recoverable. Using an undiscounted, projected probability-weighted cash flow analysis, we determined that the carrying value of eight of these rigs, consisting of seven mid-water floaters and our older 7,875-foot water depth rated drillship, were impaired (collectively referred to as the 2015 Impaired Rigs).

We estimated the fair value of five of the 2015 Impaired Rigs that were cold stacked utilizing a market approach, which required us to estimate the value that would be received for each rig in the principal or most advantageous market for that rig in an orderly transaction between market participants. Such estimates were based on various inputs, including historical contracted sales prices for similar rigs in our fleet, nonbinding quotes from rig brokers and/or indicative bids, where applicable. We estimated the fair value of the three remaining 2015 Impaired Rig using an income approach, as they were contracted to customers at that time. The fair value of each of these rigs was estimated based on a calculation of the rig’s discounted future net cash flows over its remaining economic life, which utilized significant unobservable inputs, including, but not limited to, assumptions related to estimated dayrate revenue, rig utilization, estimated equipment upgrade and regulatory survey costs, as well as estimated proceeds that may be received on ultimate disposition of the rig. Our fair value estimates were representative of Level 3 fair value measurements due to the significant level of estimation involved and the lack of transparency as to the inputs used.

During the first quarter of 2015, we recognized an impairment loss of $358.5 million to write down these rigs to their estimated recoverable amounts. Subsequent to the first quarter of 2015, we evaluated an additional eight drilling rigs, as well those rigs initially evaluated in the first quarter of 2015 that we had determined not to be impaired, for impairment. As a result of these evaluations, we determined that the carrying value of an additional nine drilling rigs, consisting of one ultra-deepwater, one deepwater and two mid-water semisubmersible rigs and five jack-up rigs, was not recoverable and recorded additional impairment losses of $2.6 million and $499.4 million in the third and fourth quarters of 2015, respectively.

9

Of the 17 rigs impaired during 2015, six mid-water semisubmersible rigs, our older drillship and one marketed-for-sale jack-up rig have been sold. At March 31, 2016, five of the remaining impaired rigs were cold stacked and four jack-up rigs are marketed for sale.

3. Supplemental Financial Information

Consolidated Balance Sheets Information

Accounts receivable, net of allowance for bad debts, consist of the following:

	March 31, 2016			December 31, 2015
	(In thousands)
Trade receivables	$	341,440		$	390,429
Value added tax receivables		17,221			14,475
Amounts held in escrow		9,231			4,966
Related party receivables		355			167
Other		1,074			1,057
		369,321			411,094
Allowance for bad debts		(5,724	)		(5,724	)
Total	$	363,597		$	405,370

Prepaid expenses and other current assets consist of the following:

	March 31, 2016		December 31, 2015
	(In thousands)
Rig spare parts and supplies	$	36,794	$	42,804
Deferred mobilization costs		48,438		52,965
Prepaid insurance		2,964		4,483
Prepaid taxes		16,969		14,969
Other		5,677		4,258
Total	$	110,842	$	119,479

Accrued liabilities consist of the following:

	March 31, 2016		December 31, 2015
	(In thousands)
Rig operating expenses	$	55,852	$	47,426
Payroll and benefits		45,145		59,787
Deferred revenue		50,337		31,542
Accrued capital project/upgrade costs		83,310		84,146
Interest payable		44,130		18,365
Personal injury and other claims		5,741		8,320
Other		4,694		4,183
Total	$	289,209	$	253,769

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Consolidated Statements of Cash Flows Information

Noncash investing activities excluded from the Consolidated Statements of Cash Flows and other supplemental cash flow information is as follows:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Accrued but unpaid capital expenditures at period end	$	83,310	$	34,439
Common stock withheld for payroll tax obligations (1)		181		236
Cash interest payments (2)		908		—
Cash income taxes paid, net of (refunds):
U.S. federal		—		(3,344	)
Foreign		16,683		21,281
State		—		—

⁽¹⁾ Represents the cost of 7,923 shares and 7,810 shares of common stock withheld to satisfy payroll tax obligation incurred as a result of the vesting of restricted stock units in the three months ended March 31, 2016 and 2015, respectively. These costs are presented as a deduction from stockholders’ equity in “Treasury stock” in our Consolidated Balance Sheets at March 31, 2016 and 2015.

⁽²⁾ Interest payments, net of amounts capitalized, were $0.8 million and $0 for the three-month periods ended March 31, 2016 and 2015, respectively.

4. Earnings Per Share

A reconciliation of the numerators and the denominators of our basic and diluted per-share computations follows:

	Three Months Ended March 31,
	2016		2015
	(In thousands, except per share data)
Net income (loss) — basic and diluted numerator	$	87,425	$	(255,709	)
Weighted average shares — basic (denominator):		137,162		137,151
Dilutive effect of stock-based awards		44		—
Weighted average shares including conversions — diluted (denominator)		137,206		137,151
Earnings (loss) per share:
Basic	$	.64	$	(1.86	)
Diluted	$	.64	$	(1.86	)

The following table sets forth the share effects of stock-based awards excluded from our computations of diluted earnings per share, or EPS, as the inclusion of such potentially dilutive shares would have been antidilutive for the periods presented:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Employee and director:
Stock options		10		35
Stock appreciation rights		1,527		1,624
Restricted stock units		169		50

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5. Marketable Securities

We report our investments as current assets in our Consolidated Balance Sheets in “Marketable securities,” representing the investment of cash available for current operations. See Note 7.

Our investments in marketable securities are classified as available for sale and are summarized as follows:

	March 31, 2016
	Amortized Cost		Unrealized Gain (Loss)			Market Value
	(In thousands)
Corporate bonds	$	16,600	$	(11,601	)	$	4,999
Mortgage-backed securities		67		1			68
Total	$	16,667	$	(11,600	)	$	5,067

	December 31, 2015
	Amortized Cost		Unrealized Gain (Loss)			Market Value
	(In thousands)
Corporate bonds	$	16,480	$	(5,042	)	$	11,438
Mortgage-backed securities		77		3			80
Total	$	16,557	$	(5,039	)	$	11,518

Based on current facts and circumstances, we believe that the unrealized losses on our investments in corporate bonds presented in the tables above are not indicative of the ultimate collectability of these investments, but are primarily related to the financial market’s perception of the current downturn in the bond issuer’s industry (oil and gas market and contract drilling industry). We have no current intent to sell these securities, nor is it more likely than not that we will be required to sell these investments prior to their maturity. Therefore, we do not consider the unrealized losses at March 31, 2016 and December 31, 2015 associated with our investments in corporate bonds to be other than temporary.

Proceeds from maturities and sales of marketable securities and the related gains and losses during each of the three-month periods ended March 31, 2016 and 2015 were not significant.

6. Derivative Financial Instruments

Foreign Currency Forward Exchange Contracts

During the three months ended March 31, 2015, we settled foreign currency forward exchange, or FOREX, contracts with aggregate notional values of approximately $57.5 million, of which the entire aggregate amounts were designated as a cash flow accounting hedge. We did not settle any FOREX contracts during the three months ended March 31, 2016, and we had no FOREX contracts outstanding at March 31, 2016 or December 31, 2015.

During the three months ended March 31, 2015, we recognized an aggregate loss of $6.4 million related to our FOREX contracts designated as accounting hedges, which we presented within “Contract drilling expense, excluding depreciation” in our Consolidated Statements of Operations.

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The following table presents the amounts recognized in our Consolidated Balance Sheets and Consolidated Statements of Operations related to our derivative financial instruments designated as cash flow hedges for the three-month period ended March 31, 2015.

	Three Months Ended March 31,
	2015
	(In thousands)
FOREX contracts:
Amount of (loss) gain recognized in AOCGL on derivative (effective portion)	$	(2,810	)
Location of (loss) gain reclassified from AOCGL into income (effective portion)		Contract drilling expense
Amount of (loss) gain reclassified from AOCGL into income (effective portion)	$	(5,520	)
Location of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)		Foreign currency transaction gain (loss)
Amount of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	$	(9	)

During the three-month period ended March 31, 2015, we did not reclassify any amounts from AOCGL due to the probability of an underlying forecasted transaction not occurring.

7. Financial Instruments and Fair Value Disclosures

Financial instruments that potentially subject us to significant concentrations of credit or market risk consist primarily of periodic temporary investments of excess cash, trade accounts receivable and investments in debt securities, including residential mortgage-backed securities. We generally place our excess cash investments in U.S. government-backed short-term money market instruments through several financial institutions. At times, such investments may be in excess of the insurable limit. We periodically evaluate the relative credit standing of these financial institutions as part of our investment strategy.

Most of our investments in debt securities are securitized corporate bonds whereby our credit risk is mitigated by the collateral. However, we are exposed to market risk due to price volatility associated with interest rate fluctuations.

Concentrations of credit risk with respect to our trade accounts receivable are limited primarily due to the entities comprising our customer base. Since the market for our services is the offshore oil and gas industry, this customer base consists primarily of major and independent oil and gas companies and government-owned oil companies. Based on our current customer base and the geographic areas in which we operate, as well as the number of rigs currently working in a geographic area, we do not believe that we have any significant concentrations of credit risk at March 31, 2016.

In general, before working for a customer with whom we have not had a prior business relationship and/or whose financial stability may be uncertain to us, we perform a credit review on that company. Based on that analysis, we may require that the customer present a letter of credit, prepay or provide other credit enhancements. We record a provision for bad debts on a case-by-case basis when facts and circumstances indicate that a customer receivable may not be collectible and, historically, losses on our trade receivables have been infrequent occurrences.

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Fair Values

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices for identical instruments in active markets. Level 1 assets include short-term investments such as money market funds, U.S. Treasury Bills and Treasury notes. Our Level 1 assets at March 31, 2016 consisted of cash held in money market funds of $93.4 million and time deposits of $20.4 million. Our Level 1 assets at December 31, 2015 consisted of cash held in money market funds of $85.2 million and time deposits of $20.4 million.
Level 2	Quoted market prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 assets and liabilities include residential mortgage-backed securities, corporate bonds purchased in a private placement offering and over-the-counter FOREX contracts. Our residential mortgage-backed securities and corporate bonds were valued using a model-derived valuation technique based on the quoted closing market prices received from a financial institution. The inputs used in our valuation are obtained from a Bloomberg curve analysis which uses par coupon swap rates to calculate implied forward rates so that projected floating rate cash flows can be calculated. The valuation techniques underlying the models are widely accepted in the financial services industry and do not involve significant judgment.
Level 3	Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Level 3 assets and liabilities generally include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation or for which there is a lack of transparency as to the inputs used. Our Level 3 assets at March 31, 2016 consisted of nonrecurring measurements of certain of our drilling rigs for which we recorded an impairment loss during 2015. See Note 2.

Market conditions could cause an instrument to be reclassified among Levels 1, 2 and 3. Our policy regarding fair value measurements of financial instruments transferred into and out of levels is to reflect the transfers as having occurred at the beginning of the reporting period. There were no transfers between fair value levels during the three-month periods ended March 31, 2016 and 2015.

Certain of our assets and liabilities are required to be measured at fair value on a recurring basis in accordance with GAAP. In addition, certain assets and liabilities may be recorded at fair value on a nonrecurring basis. Generally, we record assets at fair value on a nonrecurring basis as a result of impairment charges. We recorded impairment charges related to certain of our drilling rigs, which were measured at fair value on a nonrecurring basis during the three-month periods ended March 31, 2015, September 30, 2015 and December 31, 2015 of $358.5 million, $2.6 million and $499.4 million, respectively.

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Assets and liabilities measured at fair value are summarized below:

	March 31, 2016
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value
	(In thousands)
Recurring fair value measurements:
Assets:
Short-term investments	$	113,843	$	—	$	—	$	113,843
Corporate bonds		—		4,999		—		4,999
Mortgage-backed securities		—		68		—		68
Total assets	$	113,843	$	5,067	$	—	$	118,910
Nonrecurring fair value measurements:
Assets:
Impaired assets (1)(2)	$	—	$	—	$	178,415	$	178,415

⁽¹⁾  Represents the book value as of March 31, 2016 of 11 drilling rigs, which were written down to their estimated recoverable amounts in 2015, of which $6.6 million and $171.8 million were reported as “Assets held for sale” and “Drilling and other property and equipment, net of accumulated depreciation,” respectively, in our Consolidated Balance Sheets at March 31, 2016. See Note 2.

⁽²⁾  Excludes the fair value of one marketed-for-sale jack-up rig sold in February 2016.

	December 31, 2015
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value		Total Losses for Year Ended (1)
	(In thousands)
Recurring fair value measurements:
Assets:
Short-term investments	$	105,659	$	—	$	—	$	105,659
Corporate bonds		—		11,438		—		11,438
Mortgage-backed securities		—		80		—		80
Total assets	$	105,659		11,518	$	—	$	117,177
Nonrecurring fair value measurements:
Assets:
Impaired assets (2)(3)	$	—	$	—	$	189,600	$	189,600	$	860,441

⁽¹⁾  Represents the aggregate impairment loss recognized for the year ended December 31, 2015 related to our 2015 Impaired Rigs.

⁽²⁾  Represents the book value of our 2015 Impaired Rigs, which were written down to their estimated recoverable amounts during 2015, of which $14.2 million and $175.4 million were reported as “Assets held for sale” and “Drilling and other property and equipment, net of accumulated depreciation,” respectively, in our Consolidated Balance Sheets at December 31, 2015.

⁽³⁾  Excludes five rigs with an aggregate fair value of $2.4 million, which were impaired in 2015, but were subsequently sold for scrap prior to December 31, 2015.

We believe that the carrying amounts of our other financial assets and liabilities (excluding long-term debt), which are not measured at fair value in our Consolidated Balance Sheets, approximate fair value based on the following assumptions:

• Cash and cash equivalents — The carrying amounts approximate fair value because of the short maturity of these instruments.

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• Accounts receivable and accounts payable — The carrying amounts approximate fair value based on the nature of the instruments.

• Commercial paper — The carrying amounts approximate fair value because of the short maturity of these instruments.

We consider our senior notes to be Level 2 liabilities under the GAAP fair value hierarchy and, accordingly, the fair value of our senior notes was derived using a third-party pricing service at March 31, 2016 and December 31, 2015. We perform control procedures over information we obtain from pricing services and brokers to test whether prices received represent a reasonable estimate of fair value. These procedures include the review of pricing service or broker pricing methodologies and comparing fair value estimates to actual trade activity executed in the market for these instruments occurring generally within a 10-day period of the report date. Fair values and related carrying values of our senior notes are shown below.

	March 31, 2016				December 31, 2015
	Fair Value		Carrying Value		Fair Value		Carrying Value
	(In millions)
5.875% Senior Notes due 2019	$	472.1	$	499.7	$	506.8	$	499.7
3.45% Senior Notes due 2023		177.9		249.2		208.0		249.2
5.70% Senior Notes due 2039		343.6		497.0		360.0		497.0
4.875% Senior Notes due 2043		493.8		748.9		455.3		748.9

We have estimated the fair value amounts by using appropriate valuation methodologies and information available to management. Considerable judgment is required in developing these estimates, and accordingly, no assurance can be given that the estimated values are indicative of the amounts that would be realized in a free market exchange.

8. Drilling and Other Property and Equipment

Cost and accumulated depreciation of drilling and other property and equipment are summarized as follows:

	March 31, 2016			December 31, 2015
	(In thousands)
Drilling rigs and equipment	$	9,187,672		$	9,345,484
Construction work-in-progress		288,900			269,605
Land and buildings		64,928			64,775
Office equipment and other		71,650			71,537
Cost		9,613,150			9,751,401
Less: accumulated depreciation		(3,393,908	)		(3,372,587	)
Drilling and other property and equipment, net	$	6,219,242		$	6,378,814

Construction work-in-progress, including capitalized interest, at March 31, 2016 and December 31, 2015 was $288.9 million and $269.6 million, respectively, attributable to the Ocean GreatWhite, which is expected to be completed in the second half of 2016.

See Note 13 for a discussion of two sale and leaseback transactions that were executed in March 2016.

9. Credit Agreement, Commercial Paper and Credit Ratings

In February 2016, Moody’s Investors Service, or Moody’s, downgraded our senior unsecured credit rating to Ba2 from Baa2, with a stable outlook, and also downgraded our short-term credit rating to sub-Prime. Our current corporate credit rating for Standard & Poor’s Ratings Services is BBB+ and our short-term credit rating is A2.

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As a result of the Moody’s downgrade, we canceled our commercial paper program due to our inability to access the commercial paper market in the foreseeable future. In addition, based on our current credit ratings, the applicable interest rate for alternate base rate loans under our revolving credit agreement is 0.25% over the greater of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) the daily one-month Eurodollar Rate plus 1.00%. The applicable interest rate for Eurodollar loans under our revolving credit agreement is currently 1.25% over British Bankers’ Association Libor. The applicable commitment fee is 0.20%, and the participation fee for performance letters of credit is 0.625%.

In January 2016, we repaid the $286.6 million in commercial paper notes outstanding at December 31, 2015 with proceeds from Eurodollar loans under our revolving credit agreement. As of March 31, 2016, there were no Eurodollar loans or other amounts outstanding under our revolving credit agreement. As of April 28, 2016, we had $1.5 billion available under our revolving credit agreement.

10. Commitments and Contingencies

Various claims have been filed against us in the ordinary course of business, including claims by offshore workers alleging personal injuries. With respect to each claim or exposure, we have made an assessment, in accordance with GAAP, of the probability that the resolution of the matter would ultimately result in a loss. When we determine that an unfavorable resolution of a matter is probable and such amount of loss can be determined, we record a liability for the amount of the estimated loss at the time that both of these criteria are met. Our management believes that we have recorded adequate accruals for any liabilities that may reasonably be expected to result from these claims.

Asbestos Litigation. We are one of several unrelated defendants in lawsuits filed in Mississippi, Louisiana and Missouri state courts alleging that defendants manufactured, distributed or utilized drilling mud containing asbestos and, in our case, allowed such drilling mud to have been utilized aboard our drilling rigs. The plaintiffs seek, among other things, an award of unspecified compensatory and punitive damages. The manufacture and use of asbestos-containing drilling mud had already ceased before we acquired any of the drilling rigs addressed in these lawsuits. We believe that we are not liable for the damages asserted and we expect to receive complete defense and indemnity from Murphy Exploration & Production Company with respect to many of the lawsuits pursuant to the terms of our 1992 asset purchase agreement with them. We also believe that we are not liable for the damages asserted in the remaining lawsuits pursuant to the terms of our 1989 asset purchase agreement with Diamond M Corporation. We are unable to estimate our potential exposure, if any, to these lawsuits at this time but do not believe that our ultimate liability, if any, resulting from this litigation will have a material effect on our consolidated financial condition, results of operations or cash flows.

Other Litigation. We have been named in various other claims, lawsuits or threatened actions that are incidental to the ordinary course of our business, including a claim by one of our customers in Brazil, Petróleo Brasileiro S.A., or Petrobras, that it will seek to recover from its contractors, including us, any taxes, penalties, interest and fees that it must pay to the Brazilian tax authorities for our applicable portion of withholding taxes related to Petrobras’ charter agreements with its contractors. We intend to defend these matters vigorously; however, litigation is inherently unpredictable, and the ultimate outcome or effect of these claims, lawsuits and actions cannot be predicted with certainty. As a result, there can be no assurance as to the ultimate outcome of these matters. Any claims against us, whether meritorious or not, could cause us to incur costs and expenses, require significant amounts of management time and result in the diversion of significant operational resources. In the opinion of our management, no pending or known threatened claims, actions or proceedings against us are expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

NPI Arrangement. We received customer payments measured by a percentage net profits interest (primarily of 27%) under an overriding royalty interest in certain developmental oil-and-gas producing properties, or NPI, which we believe is a real property interest. Our drilling program related to the NPI was completed in 2011, and

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the balance of the amounts due to us under the NPI was received in 2013. However, in August 2012, the customer that conveyed the NPI to us filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Certain parties (including the debtor) in the bankruptcy proceedings questioned whether our NPI, and certain amounts we received under it after the filing of the bankruptcy, should be included in the debtor’s estate under the bankruptcy proceeding. In 2013, we filed a declaratory judgment action in the bankruptcy court seeking a declaration that our NPI, and payments that we received from it since the filing of the bankruptcy, are not part of the bankruptcy estate. We agreed to a settlement with the company that purchased most of the debtor’s assets (including the debtor’s claims against our NPI) whereby the nature of our NPI will not be challenged by that party and our declaratory judgment action was dismissed. Following the settlement, the bankruptcy was converted to a Chapter 7 liquidation proceeding. Several lienholders who had previously intervened in the declaratory judgment action filed motions in the bankruptcy contending that their liens have priority and seeking disgorgement of $3.25 million of payments made to us after the bankruptcy was filed. We believe that our rights to the payments at issue are superior to these liens, and we have filed appropriate motions to dismiss these claims. In addition, the bankruptcy trustee filed counterclaims seeking disgorgement of a total of $30.0 million of pre- and post-bankruptcy payments made to us under the original NPI. The bankruptcy court has dismissed all but one of the trustee’s disgorgement claims, which is limited in amount to $17.0 million. We continue to pursue all available defenses and available protections, and still expect the bankruptcy proceedings to be concluded with no further material impact to us.

Personal Injury Claims. Under our current insurance policies, which renewed effective May 1, 2016, our deductibles for marine liability insurance coverage with respect to personal injury claims not related to named windstorms in the U.S. Gulf of Mexico , which primarily result from Jones Act liability in the Gulf of Mexico, are $10.0 million for the first occurrence, with no aggregate deductible, and vary in amounts ranging between $5.0 million and, if aggregate claims exceed certain thresholds, up to $100.0 million for each subsequent occurrence, depending on the nature, severity and frequency of claims that might arise during the policy year. Our deductible for personal injury claims arising due to named windstorms in the U.S. Gulf of Mexico is $25.0 million for the first occurrence, with no aggregate deductible, and vary in amounts ranging between $25.0 million and, if aggregate claims exceed certain thresholds, up to $100.0 million for each subsequent occurrence, depending on the nature, severity and frequency of claims that might arise during the policy year.

The Jones Act is a federal law that permits seamen to seek compensation for certain injuries during the course of their employment on a vessel and governs the liability of vessel operators and marine employers for the work-related injury or death of an employee. We engage outside consultants to assist us in estimating our aggregate liability for personal injury claims based on our historical losses and utilizing various actuarial models. We allocate a portion of the aggregate liability to “Accrued liabilities” based on an estimate of claims expected to be paid within the next twelve months with the residual recorded as “Other liabilities.” At March 31, 2016 our estimated liability for personal injury claims was $38.0 million, of which $5.5 million and $32.5 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Consolidated Balance Sheets. At December 31, 2015 our estimated liability for personal injury claims was $40.4 million, of which $8.2 million and $32.2 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Consolidated Balance Sheets. The eventual settlement or adjudication of these claims could differ materially from our estimated amounts due to uncertainties such as:

• the severity of personal injuries claimed;

• significant changes in the volume of personal injury claims;

• the unpredictability of legal jurisdictions where the claims will ultimately be litigated;

• inconsistent court decisions; and

• the risks and lack of predictability inherent in personal injury litigation.

Purchase Obligations. The Ocean GreatWhite, a 10,000 foot dynamically positioned, harsh environment semisubmersible drilling rig, is under construction in South Korea at an estimated cost of $764 million, including

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shipyard costs, capital spares, commissioning, project management and shipyard supervision. The contracted price to Hyundai Heavy Industries Co., Ltd. totaling $628.5 million is payable in two installments, of which the first installment of $188.6 million has been paid. The final installment of $439.9 million is due upon delivery of the rig, which is expected to occur in the second half of 2016.

At March 31, 2016, we had no other purchase obligations for major rig upgrades or any other significant obligations, except for those related to our direct rig operations, which arise during the normal course of business. See Note 13.

Letters of Credit and Other. We were contingently liable as of March 31, 2016 in the amount of $69.0 million under certain performance, supersedeas, bid, tax and customs bonds and letters of credit. Agreements relating to approximately $63.9 million of performance, tax, supersedeas, court and customs bonds can require collateral at any time. As of March 31, 2016, we had not been required to make any collateral deposits with respect to these agreements. The remaining agreements cannot require collateral except in events of default. On our behalf, banks have issued letters of credit securing certain of these bonds.

11. Accumulated Other Comprehensive Gain (Loss)

The components of our AOCGL and related changes thereto are as follows:

	Unrealized (Loss) Gain on
	Derivative Financial Instruments			Marketable Securities			Total AOCGL
	(In thousands)
Balance at January 1, 2016	$	6		$	(5,041	)	$	(5,035	)
Change in other comprehensive loss before reclassifications, after tax of $0 and $2		—			(6,559	)		(6,559	)
Reclassification adjustments for items included in Net Income, after tax of $1 and $0		(1	)		—			(1	)
Balance at March 31, 2016	$	5		$	(11,600	)	$	(11,595	)

The following table presents the line items in our Consolidated Statements of Operations affected by reclassification adjustments out of AOCGL.

Major Category of AOCGL	Three Months Ended March 31,						Consolidated Statements of Operations Line Items
	2016			2015
	(In thousands)
Derivative Financial Instruments:
Unrealized loss on FOREX contracts	$	—		$	5,520		Contract drilling, excluding depreciation
Unrealized gain on treasury lock agreements		(2	)		(2	)	Interest expense
		1			(1,931	)	Income tax expense
	$	(1	)	$	3,587		Net of tax

12. Restructuring and Separation Costs

In early 2015, in response to the continuing decline in the offshore drilling market, we reviewed our cost and organization structure, and, as a result, our management approved and initiated a reduction in workforce at our onshore bases and corporate facilities, also referred to as the Corporate Reduction Plan. We recognized $6.2 million during the three-month period ended March 31, 2015 in restructuring and employee separation costs related to the Corporate Reduction Plan.

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13. Sale and Leaseback Transaction

In February 2016, we entered into a ten-year agreement with a subsidiary of GE Oil & Gas, or GE, to provide services with respect to certain blowout preventer and related well control equipment, or Well Control Equipment, on our four newly-built drillships. Such services include management of maintenance, certification and reliability with respect to such equipment. In connection with the contractual services agreement with GE, we agreed to sell the Well Control Equipment to another GE affiliate and subsequently lease back such equipment over separate ten-year operating leases.

During March 2016, we executed two sale and leaseback transactions with respect to the Well Control Equipment on the Ocean BlackHawk and Ocean BlackHornet. As a result of these transactions, we received an aggregate $105.0 million in proceeds from the sale of the Well Control Equipment on these rigs and executed two ten-year operating lease and contractual services agreements. No gain or loss was recognized on the transactions. Future commitments under the operating leases and contractual services agreements for the Ocean BlackHawk and Ocean BlackHornet are estimated to be approximately $33.0 million per annum or an aggregate $327.0 million over the term of the agreements. We expect to complete the remaining sale and leaseback transactions for the Ocean BlackLion and Ocean BlackRhino in the second and fourth quarters of 2016, respectively.

14. Segments and Geographic Area Analysis

Although we provide contract drilling services with different types of offshore drilling rigs and also provide such services in many geographic locations, we have aggregated these operations into one reportable segment based on the similarity of economic characteristics due to the nature of the revenue earning process as it relates to the offshore drilling industry over the operating lives of our drilling rigs.

Revenues from contract drilling services by equipment type are listed below:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Floaters:
Ultra-Deepwater	$	325,961	$	251,396
Deepwater		59,117		138,770
Mid-Water		47,672		176,357
Total Floaters		432,750		566,523
Jack-ups		10,773		33,054
Total contract drilling revenues		443,523		599,577
Revenues related to reimbursable expenses		27,020		20,479
Total revenues	$	470,543	$	620,056

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Geographic Areas

Our drilling rigs are highly mobile and may be moved to other markets throughout the world in response to market conditions or customer needs. At March 31, 2016, our actively-marketed drilling rigs were en route to or located offshore five countries in addition to the United States. Revenues by geographic area are presented by attributing revenues to the individual country or areas where the services were performed.

	Three Months Ended March 31,
	2016		2015
	(In thousands)
United States	$	161,582	$	77,158
International:
South America		121,488		193,075
Europe		102,619		151,270
Australia/Asia		64,973		137,135
Mexico		19,881		61,418
Total revenues	$	470,543	$	620,056

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our unaudited consolidated financial statements (including the notes thereto) included elsewhere in this report and our audited consolidated financial statements and the notes thereto, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2015. References to “Diamond Offshore,” “we,” “us” or “our” mean Diamond Offshore Drilling, Inc., a Delaware corporation, and its subsidiaries.

We are a leader in offshore drilling, providing contract drilling services to the energy industry around the globe with a fleet of 30 offshore drilling rigs, which includes four jack-up rigs that we are marketing for sale. Our fleet consists of 21 semisubmersibles, including the Ocean GreatWhite, which is under construction, five jack-up rigs and four dynamically positioned drillships. We expect our harsh environment, ultra-deepwater semisubmersible rig, the Ocean GreatWhite, to be delivered in the second half of 2016.

Market Overview

Market fundamentals in the oil and gas industry have continued to deteriorate in 2016. Oil prices, which had fallen to a 12-year low below $30 per barrel in January, have rebounded slightly but continue to exhibit day-to-day volatility, due to multiple factors, including fluctuations in the current and expected level of global oil inventories and the lack of a supply response by the Organization of Petroleum Exporting Countries (OPEC). These factors, as well as other geopolitical and economic issues, combined with significant operating losses incurred by some independent and national oil companies and exploration and production companies during 2015, have resulted in significantly reduced capital spending plans for 2016 and possibly beyond, as operators struggle to stay cash neutral in the current oil price environment. There have been very few rig tenders thus far in 2016, primarily limited to short-term or well-to-well work not commencing until 2017 or later.

Since 2014, approximately 50 floater rigs have been retired and others have been cold stacked, slightly abating the current oversupply of drilling rigs. The number of available rigs continues to grow as contracted rigs come off contract and newly-built rigs are delivered. Competition for the limited number of drilling jobs continues to be intense. In some cases, dayrates have been negotiated at near break-even levels to provide for the recovery of operating costs for rigs that would otherwise be uncontracted or cold stacked. Many industry analysts have predicted that the offshore contract drilling market may remain depressed with further declines in dayrates and utilization likely in 2016 and 2017.

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As a result of the depressed market conditions and continued pessimistic outlook for the near term, certain of our customers, as well as those of our competitors, have attempted to renegotiate or terminate existing drilling contracts. Such renegotiations could include requests to lower the contract dayrate, lowering of a dayrate in exchange for additional contract term, shortening the term on one contracted rig in exchange for additional term on another rig, early termination of a contract in exchange for a lump sum margin payout and many other possibilities. In addition to the potential for renegotiations, some of our drilling contracts permit the customer to terminate the contract early after specified notice periods, usually resulting in a contractually specified termination amount, which may not fully compensate us for the loss of the contract. Particularly during depressed market conditions, the early termination of a contract may result in a rig being idle for an extended period of time, which could adversely affect our financial condition, results of operations and cash flows. When a customer terminates our contract prior to the contract’s scheduled expiration, our contract backlog is also adversely impacted.

Our results of operations and cash flows for the quarter ended March 31, 2016 have been negatively impacted by depressed market conditions in the offshore drilling industry. We currently expect that these adverse market conditions will continue for the foreseeable future. The continuation of these conditions for an extended period could result in more of our rigs being without contracts and/or cold stacked or scrapped and could further materially and adversely affect our financial condition, results of operations and cash flows. When we cold stack or elect to scrap a rig, we evaluate the rig for impairment. During 2015, we recognized an aggregate impairment loss of $860.4 million to write down 17 of our drilling rigs to their estimated recoverable amounts. During the first quarter of 2016, we evaluated ten of our drilling rigs with indications that their carrying amounts may not be recoverable and determined that no additional rigs were impaired at this time. See “— Results of Operations —Overview — Three Months Ended March 31, 2016 and 2015 — Impairment of Assets” and Note 2 to our unaudited consolidated financial statements included in Item 1 of Part I this report.

On April 28, 2016, our subsidiary’s agent in Mexico received a letter from PEMEX — Exploración y Producción, or PEMEX, purporting to exercise its contractual right to terminate its drilling contract on the Ocean Scepter with 30 days’ advance notice. We are in discussions with PEMEX regarding the matter. As of May 2, 2016, 15 rigs in our fleet were cold stacked, including four jack-up rigs that are currently being marketed for sale. See “— Contract Drilling Backlog” for future commitments of our rigs during 2016 through 2020.

Although these general market conditions impact all segments of the offshore drilling market, the following discussion addresses market conditions within segments of the floater market.

Floater Markets

Ultra-Deepwater and Deepwater Floaters. Globally, the ultra-deepwater and deepwater floater markets continue to be depressed. Diminished or nonexistent demand, combined with an oversupply of rigs has caused floater dayrates to decline significantly. Industry analysts expect offshore drillers to continue to scrap older, lower specification rigs; however, newer and higher specification rigs have also been impacted by the recycling trend.

In an effort to manage the oversupply of rigs and potentially avoid the cost of cold stacking newly-built rigs, which, in the case of dynamically-positioned rigs, can be significant, several drilling contractors have exercised options to delay the delivery of rigs by the shipyard or have exercised their right to cancel orders due to the late delivery of rigs. As of the date of this report, industry data indicates that there are approximately 55 competitive, or non-owner-operated, newbuild floaters on order, including 16 rigs scheduled for delivery in 2016 of which 12 units are not yet contracted for future work. An additional 39 rigs are currently scheduled to be delivered between 2017 and 2021, over half of which are not yet contracted for future work. Industry analysts predict that delivery dates may shift further as newbuild owners negotiate with their respective shipyards.

Mid-Water Floaters. While conditions in the mid-water market vary slightly by region, mid-water rigs have been adversely impacted by (i) lower demand, (ii) declining dayrates, (iii) increased regulatory requirements,

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including more stringent design requirements for well control equipment, which could significantly increase the capital needed to comply with design requirements that would permit such rigs to work in the U.S. Gulf of Mexico, or GOM, (iv) the challenges experienced by lower specification units in this segment as a result of more complex customer specifications and (v) the intensified competition resulting from the migration of some deepwater and ultra-deepwater units to compete against mid-water units. To date, the mid-water market has seen the highest number of cold-stacked and scrapped rigs. Since 2012, we have sold 12 of our mid-water rigs for scrap. As market conditions remain challenging, we expect higher-specification rigs to take the place of lower-specification units, where possible, leading to additional lower-specification rigs being cold stacked or ultimately scrapped.

GOM Floaters. On April 14, 2016, the Bureau of Safety and Environmental Enforcement, or BSEE, issued its final well control regulations, nearly six years after the Macondo well blowout in the GOM. This final rule addresses the full range of systems and equipment associated with well control operations, focusing on requirements for blowout preventers, or BOPs, well design, well control casing, cementing, real-time monitoring and subsea containment. The regulations combine prescriptive and performance-based measures to cultivate a greater culture of safety for both oil and gas companies and offshore rig operators that minimizes risk. Key features of the well control regulations include requirements for BOPs, double shear rams, third-party reviews of equipment, real-time monitoring data, safe drilling margins, centralizers, inspections and other reforms related to well design and control, casing, cementing and subsea containment. Most of these requirements will become effective three months after publication of the final rule in the Federal Register; however, several requirements have more extended timeframes for compliance.

The issuance of these rules could result in the future retirement of older, less capable rigs, for which compliance with the new requirements is not physically or economically feasible. Additionally, some analysts predict that the new rules will drive the continued preference for modern floaters. See “— Important Factors That May Impact Our Operating Results, Financial Condition or Cash Flows.”

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Contract Drilling Backlog

The following table reflects our contract drilling backlog as of April 1, 2016 (based on contract information known at that time), February 16, 2016 (the date reported in our Annual Report on Form 10-K for the year ended December 31, 2015), and April 20, 2015 (the date reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). Contract drilling backlog as presented below includes only firm commitments (typically represented by signed contracts) and is calculated by multiplying the contracted operating dayrate by the firm contract period and adding one-half of any potential rig performance bonuses. Our calculation also assumes full utilization of our drilling equipment for the contract period (excluding scheduled shipyard and survey days); however, the amount of actual revenue earned and the actual periods during which revenues are earned will be different than the amounts and periods shown in the tables below due to various factors. Utilization rates, which generally approach 92-98% during contracted periods, can be adversely impacted by downtime due to various operating factors including, but not limited to, weather conditions and unscheduled repairs and maintenance. Contract drilling backlog excludes revenues for mobilization, demobilization, contract preparation and customer reimbursables. No revenue is generally earned during periods of downtime for regulatory surveys. Changes in our contract drilling backlog between periods are generally a function of the performance of work on term contracts, as well as the extension or modification of existing term contracts and the execution of additional contracts. In addition, under certain circumstances, our customers may seek to terminate or renegotiate our contracts.

	April 1, 2016		February 16, 2016		April 20, 2015
	(In thousands)
Contract Drilling Backlog
Floaters:
Ultra-Deepwater (1)	$	4,137,000	$	4,415,000	$	5,167,000
Deepwater		327,000		375,000		617,000
Mid-Water		307,000		356,000		438,000
Total Floaters		4,771,000		5,146,000		6,222,000
Jack-ups (2)		7,000		49,000		49,000
Total	$	4,778,000	$	5,195,000	$	6,271,000

⁽¹⁾  Contract drilling backlog as of April 1, 2016 for our ultra-deepwater floaters includes $641.0 million for the years 2016 to 2019 attributable to future work for the semisubmersible Ocean GreatWhite, which is under construction.

⁽²⁾  On April 28, 2016, our subsidiary’s agent in Mexico received a letter from PEMEX purporting to exercise its contractual right to terminate its drilling contract on the Ocean Scepter with 30 days’ advance notice. We are in discussions with PEMEX regarding the matter.

The following table reflects the amount of our contract drilling backlog by year as of April 1, 2016.

	For the Years Ending December 31,
	Total		2016 (1)		2017		2018		2019 - 2020
	(In thousands)
Contract Drilling Backlog
Floaters:
Ultra-Deepwater (2)	$	4,137,000	$	794,000	$	1,201,000	$	1,142,000	$	1,000,000
Deepwater		327,000		191,000		136,000		—		—
Mid-Water		307,000		171,000		136,000		—		—
Total Floaters		4,771,000		1,156,000		1,473,000		1,142,000		1,000,000
Jack-ups (3)		7,000		7,000		—		—		—
Total	$	4,778,000	$	1,163,000	$	1,473,000	$	1,142,000	$	1,000,000

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⁽¹⁾  Represents the nine-month period beginning April 1, 2016.

⁽²⁾  Contract drilling backlog as of April 1, 2016 for our ultra-deepwater floaters includes $54.0 million for the year 2016, $214.0 million for each of the years 2017 and 2018, and $159.0 million for the year 2019 attributable to future work for the Ocean GreatWhite, which is under construction.

⁽³⁾  On April 28, 2016, our subsidiary’s agent in Mexico received a letter from PEMEX purporting to exercise its contractual right to terminate its drilling contract on the Ocean Scepter with 30 days’ advance notice. We are in discussions with PEMEX regarding the matter.

The following table reflects the percentage of rig days committed by year as of April 1, 2016. The percentage of rig days committed is calculated as the ratio of total days committed under contracts, as well as scheduled shipyard, survey and mobilization days for all rigs in our fleet, to total available days (number of rigs multiplied by the number of days in a particular year). Total available days have been calculated based on the expected final commissioning date for the Ocean GreatWhite, which is under construction.

	For the Years Ending December 31,
	2016 (1)			2017			2018			2019 - 2020
Rig Days Committed (2)
Floaters:
Ultra-Deepwater		47	%		58	%		57	%		26	%
Deepwater		24	%		17	%		—			—
Mid-Water		19	%		13	%		—			—
All Floaters		32	%		34	%		25	%		11	%
Jack-ups (3)		3	%		—			—			—

⁽¹⁾  Represents the nine-month period beginning April 1, 2016.

⁽²⁾ As of April 1, 2016, includes approximately 285 currently known, scheduled shipyard days for rig commissioning, contract preparation, surveys and extended maintenance projects, as well as rig mobilization days, for the year 2016.

⁽³⁾  On April 28, 2016, our subsidiary’s agent in Mexico received a letter from PEMEX purporting to exercise its contractual right to terminate its drilling contract on the Ocean Scepter with 30 days’ advance notice. We are in discussions with PEMEX regarding the matter.

Important Factors That May Impact Our Operating Results, Financial Condition or Cash Flows

Regulatory Surveys, Planned Downtime and Regulatory Compliance. Our operating income is negatively impacted when we perform certain regulatory inspections, which we refer to as a 5-year survey, or special survey, that are due every five years for each of our rigs. During the remainder of 2016, we expect to spend an additional approximately 285 days for the mobilization of rigs and contract acceptance testing, including days associated with mobilization and acceptance testing for the Ocean GreatWhite (approximately 90 days), which is under construction and expected to be delivered in the second half of 2016 and rig modifications and acceptance testing for the Ocean BlackRhino, which is scheduled to begin operating under a new contract in January 2017 (approximately 105 days). We expect the Ocean Endeavor to be unavailable through mid-2016 (approximately 55 days) as it demobilizes out of the Black Sea. We can provide no assurance as to the exact timing and/or duration of downtime associated with regulatory inspections, planned rig mobilizations and other shipyard projects. See “— Contract Drilling Backlog.”

In April 2016, BSEE issued its final well control regulations, which address the full range of systems and equipment associated with well control operations, focusing on requirements for blowout preventers, well design, well control casing, cementing, real-time monitoring and subsea containment. We are currently assessing the final rules and have not yet determined the costs to comply with the additional requirements to enable our drilling rigs to be eligible to operate in U.S. waters.

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Physical Damage and Marine Liability Insurance. We are self-insured for physical damage to rigs and equipment caused by named windstorms in the GOM. If a named windstorm in the GOM causes significant damage to our rigs or equipment, it could have a material adverse effect on our financial condition, results of operations and cash flows. Under our current insurance policy, which renewed effective May 1, 2016, we carry physical damage insurance for certain losses other than those caused by named windstorms in the GOM for which our deductible for physical damage is $25.0 million per occurrence. We do not typically retain loss-of-hire insurance policies to cover our rigs.

In addition, under our current insurance policy, which renewed effective May 1, 2016, we carry marine liability insurance covering certain legal liabilities, including coverage for certain personal injury claims, and generally covering liabilities arising out of or relating to pollution and/or environmental risk. We believe that the policy limit for our marine liability insurance is within the range that is customary for companies of our size in the offshore drilling industry and is appropriate for our business. Our deductibles for marine liability coverage related to insurable events arising due to named windstorms in the U.S. Gulf of Mexico is $25.0 million for the first occurrence, with no aggregate deductible, and vary in amounts ranging between $25.0 million and, if aggregate claims exceed certain thresholds, up to $100.0 million for each subsequent occurrence, depending on the nature, severity and frequency of claims that might arise during the policy year. Our deductibles for other marine liability coverage, including personal injury claims not related to named windstorms in the U.S. Gulf of Mexico, are $10.0 million for the first occurrence and vary in amounts ranging between $5.0 million and, if aggregate claims exceed certain thresholds, up to $100.0 million for each subsequent occurrence, depending on the nature, severity and frequency of claims that might arise during the policy year.

Construction and Capital Upgrade Projects. We capitalize interest cost for the construction and upgrade of qualifying assets in accordance with accounting principles generally accepted in the U.S., or GAAP. The period of interest capitalization covers the duration of the activities required to make the asset ready for its intended use, and the capitalization period ends when the asset is substantially complete and ready for its intended use, which is expected to continue after delivery of the rigs from the shipyard and until the user acceptance phase of each project is completed. During the first quarter of 2016, we capitalized interest of $3.3 million related to the construction of the Ocean GreatWhite and will continue capitalizing interest on this project until its completion, which we expect to occur in the second half of 2016.

Critical Accounting Policies

Our significant accounting policies are discussed in Note 1 of our notes to audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. There were no material changes to these policies during the three months ended March 31, 2016.

Results of Operations

Although we perform contract drilling services with different types of drilling rigs and in many geographic locations, there is a similarity of economic characteristics among all our divisions and locations, including the nature of services provided and the type of customers for our services. We believe that the combination of our drilling rigs into one reportable segment is the appropriate aggregation in accordance with applicable accounting standards on segment reporting. However, for purposes of this discussion and analysis of our results of operations, we provide greater detail with respect to the types of rigs in our fleet to enhance the reader’s understanding of our financial condition, changes in financial condition and results of operations.

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Key performance indicators by equipment type are listed below.

	Three Months Ended March 31,
	2016			2015
REVENUE EARNING DAYS (1)
Floaters:
Ultra-Deepwater		612			506
Deepwater		177			285
Mid-Water		181			663
Jack-ups		91			358
UTILIZATION (2)
Floaters:
Ultra-Deepwater		61	%		51	%
Deepwater		28	%		45	%
Mid-Water		25	%		49	%
Jack-ups		18	%		66	%
AVERAGE DAILY REVENUE (3)
Floaters:
Ultra-Deepwater	$	533,000		$	496,800
Deepwater		334,500			486,500
Mid-Water		263,100			265,900
Jack-ups		118,400			92,400

⁽¹⁾  A revenue earning day is defined as a 24-hour period during which a rig earns a dayrate after commencement of operations and excludes mobilization, demobilization and contract preparation days.

⁽²⁾  Utilization is calculated as the ratio of total revenue-earning days divided by the total calendar days in the period for all specified rigs in our fleet (including cold-stacked rigs, but excluding rigs under construction). As of March 31, 2016, our cold-stacked rigs included three ultra-deepwater semisubmersibles, four deepwater semisubmersible, five mid-water semisubmersibles and four jack-up rigs.

⁽³⁾  Average daily revenue is defined as total contract drilling revenue for all of the specified rigs in our fleet per revenue earning day.

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Comparative data relating to our revenues and operating expenses by equipment type are listed below.

	Three Months Ended March 31,
	2016			2015
	(In thousands)
CONTRACT DRILLING REVENUE
Floaters:
Ultra-Deepwater	$	325,961		$	251,396
Deepwater		59,117			138,770
Mid-Water		47,672			176,357
Total Floaters		432,750			566,523
Jack-ups		10,773			33,054
Total Contract Drilling Revenue	$	443,523		$	599,577
REVENUES RELATED TO REIMBURSABLE EXPENSES	$	27,020		$	20,479
CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater	$	123,736		$	154,539
Deepwater		47,509			63,675
Mid-Water		23,884			99,320
Total Floaters		195,129			317,534
Jack-ups		6,055			21,570
Other		11,657			11,554
Total Contract Drilling Expense	$	212,841		$	350,658
REIMBURSABLE EXPENSES	$	26,791		$	20,092
OPERATING INCOME (LOSS)
Floaters:
Ultra-Deepwater	$	202,225		$	96,857
Deepwater		11,608			75,095
Mid-Water		23,788			77,037
Total Floaters		237,621			248,989
Jack-ups		4,718			11,484
Other		(11,657	)		(11,554	)
Reimbursable expenses, net		229			387
Depreciation		(104,240	)		(137,299	)
General and administrative expense		(15,398	)		(17,452	)
Gain on disposition of assets		296			611
Impairment of assets		—			(358,528	)
Restructuring and separation costs		—			(6,168	)
Total Operating Income (Loss)	$	111,569		$	(269,530	)
Other income (expense):
Interest income		173			583
Interest expense, net of amounts capitalized		(25,516	)		(23,982	)
Foreign currency transaction (loss) gain		(3,608	)		5,590
Other, net		578			221
Income (loss) before income tax benefit		83,196			(287,118	)
Income tax benefit		4,229			31,409
NET INCOME (LOSS)	$	87,425		$	(255,709	)

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Overview

Three Months Ended March 31, 2016 and 2015

Operating Income. Operating income for the first quarter of 2016 increased $381.1 million compared to the same period of 2015, primarily due to the absence of a $358.5 million impairment loss recognized in the first quarter of 2015 combined with the favorable impact of lower depreciation expense. Depreciation expense for the first quarter of 2016 decreased $33.0 million primarily due to a lower depreciable asset base in 2016, compared to the first quarter of 2015, as a result of asset impairments taken in 2015.

Contract drilling revenue decreased $156.1 million, or 26%, during the first quarter of 2016, compared to the same quarter of 2015, primarily as a result of an aggregate of 857 fewer revenue earning days for our deepwater, mid-water and jack-up fleets, reflecting continued low demand for contract drilling services in those markets, partially offset by the favorable impact of a 106-day increase in revenue earning days for our ultra-deepwater fleet, which included the operation of three newbuild drillships that commenced drilling operations subsequent to the first quarter of 2015 and an increase in average daily revenue for our ultra-deepwater fleet, primarily due to the inclusion of $40.0 million in demobilization revenue for the Ocean Endeavor.

Total contract drilling expense decreased $137.8 million, or 39%, during the first quarter of 2016, compared to the same quarter of 2015, reflecting lower overall operating costs, primarily for labor and personnel ($64.6 million), repairs and maintenance ($22.8 million), freight ($6.5 million), inspections ($5.3 million) and an aggregate decrease in other rig operating and overhead costs ($38.5 million). The reduction in contract drilling expense during the first quarter of 2016 reflected reduced costs associated with rigs idled, cold stacked or retired subsequent to the first quarter of 2015, as well as cost control initiatives implemented during 2015.

Impairment of Assets. During the first quarter of 2015, we evaluated all of our mid-water semisubmersibles, as well as one drillship, for impairment. Based on this evaluation, we determined that the carrying value of our 7,875-foot water depth rated drillship, the Ocean Clipper, and seven of mid-water floaters, was impaired. We recorded an aggregate impairment loss of $358.5 million in the first quarter of 2015. During the first quarter of 2016, we evaluated ten of our drilling rigs with indications that their carrying amounts may not be recoverable. Based on this evaluation, we determined that the carrying values of these rigs were not impaired. See Note 2 to our unaudited consolidated financial statements included in Item 1 of Part I of this report.

Restructuring and Separation Costs. During the first quarter of 2015, in response to the continued decline in the offshore drilling market, our management approved and initiated a reduction in workforce at our onshore bases and corporate facilities, which resulted in the recognition of $6.2 million in restructuring and other employee separation related costs.

Income Tax Expense. Our effective tax rate for the three months ended March 31, 2016 was (5.1) %, compared to a 10.9% effective tax rate for the three months ended March 31, 2015. The effective tax rate in the 2016 period was lower than in the same period of 2015 primarily due to the mix of our domestic and international pre-tax earnings and losses, including asset impairments taken in various jurisdictions in 2015.

Contract Drilling Revenue and Expense by Equipment Type

Three Months Ended March 31, 2016 and 2015

Ultra-Deepwater Floaters. Revenue generated by our ultra-deepwater floaters increased $74.6 million during the first quarter of 2016, compared to the same quarter of 2015, primarily as a result of 106 incremental revenue earning days ($52.4 million) and higher average daily revenue earned ($22.2 million). Revenue earning days for the first quarter of 2016 increased, compared to the first quarter of 2015, primarily due to 204 incremental revenue earning days for our newbuild drillships and 91 incremental operating days for the Ocean Monarch, which was warm stacked during the first quarter of 2015. The increase in revenue earning days was

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partially offset by an aggregate of 99 fewer revenue earning days for the Ocean Endeavor and Ocean Rover, both of which completed contracts in the first quarter of 2016, and an aggregate 98 fewer revenue earning days for the cold-stacked Ocean Baroness and the Ocean Clipper, which was sold in November 2015. Average daily revenue increased during the first quarter of 2016, compared to the first quarter of 2015, primarily due to the inclusion of $40.0 million in demobilization revenue for the Ocean Endeavor, which completed its contract in the Black Sea in January 2016.

Contract drilling expense for our ultra-deepwater floaters decreased $30.8 million during the first quarter of 2016, compared to the same period of 2015. Incremental contract drilling expense for our three additional drillships operating in the GOM ($36.9 million) was more than offset by lower operating costs for our other ultra-deepwater floaters, including labor and personnel ($30.9 million), maintenance and inspections ($20.4 million), freight ($4.1 million) and other rig operating and overhead costs ($12.3 million) due to reduced costs for our cold-stacked rigs and the retired Ocean Clipper, as well as cost reduction initiatives implemented in 2015.

Deepwater Floaters. Revenue generated by our deepwater floaters decreased $79.7 million in the first quarter of 2016, compared to the same quarter in 2015, primarily due to 108 fewer revenue earning days. The decrease in revenue earning days for the first quarter of 2016 resulted primarily from additional downtime associated with the cold stacking and idling of rigs that had operated during the first quarter of 2015 (285 fewer days), partially offset by incremental revenue earning days for the Ocean Victory and Ocean Valiant, neither of which were under contract during the first quarter of 2015 (177 incremental days).

Contract drilling expense incurred by our deepwater floaters decreased $16.2 million during the first quarter of 2016, compared to the same period of 2015, primarily due to a net reduction in labor and personnel costs ($7.4 million), maintenance, repairs and other related costs ($3.9 million), shorebase support and overhead ($3.6 million) and other costs ($1.3 million) as a result of the cold stacking or idling of rigs.

Mid-Water Floaters. Revenue generated by our mid-water floaters during the first quarter of 2016 decreased $128.7 million compared to the same quarter in 2015, primarily due to 482 fewer revenue earning days ($128.2 million), reflecting a significant reduction in demand in the mid-water drilling market. Comparing the periods, only two of our mid-water floaters operated during both periods. Subsequent to the first quarter of 2015, we have sold nine mid-water floaters, reducing our mid-water fleet to five drilling rigs, three of which are currently cold stacked.

Contract drilling expense for our mid-water floaters decreased $75.4 million in the first quarter of 2016, compared to the prior year quarter, primarily due to reduced operating costs for our non-operating rigs.

Jack-ups. Contract drilling revenue for our jack-up fleet decreased $22.3 million during the first quarter of 2016, compared to the prior year quarter, primarily due to the cold stacking of three rigs, all of which were operating under contract in the first quarter of 2015. On April 28, 2016, our subsidiary’s agent in Mexico received a letter from PEMEX purporting to exercise its contractual right to terminate its drilling contract on the Ocean Scepter, our sole working jack-up rig, with 30 days’ advance notice. We are in discussions with PEMEX regarding the matter.

Liquidity and Capital Resources

We have historically relied principally on our cash flows from operations and cash reserves to meet liquidity needs and fund our cash requirements. However, we have also utilized short-term borrowings under our $1.5 billion syndicated revolving credit agreement, or Credit Agreement, and issued commercial paper to meet our short-term liquidity needs. See “— Credit Agreement and Commercial Paper.”

Based on our cash available for current operations and contractual backlog of $4.8 billion as of April 1, 2016, of which $1.2 billion is expected to be realized during the remainder of 2016, we believe our 2016 capital

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expenditures, including the final installment due on the Ocean GreatWhite, will be funded from our cash and cash equivalents, future operating cash flows and borrowings under our Credit Agreement, as needed. See “— Cash Flow, Capital Expenditures and Contractual Obligations — Contractual Cash Obligations — Rig Construction”

Certain of our international rigs are owned and operated, directly or indirectly, by Diamond Foreign Asset Company, or DFAC, and, as a result of our intention to indefinitely reinvest the earnings of DFAC and its foreign subsidiaries to finance our foreign activities, we do not expect such earnings to be available for distribution to our stockholders or to finance our domestic activities. To the extent available, we expect to utilize the operating cash flows generated by and cash reserves of DFAC and the operating cash flows available to and cash reserves of Diamond Offshore Drilling, Inc., or DODI, to meet each entity’s respective working capital requirements and capital commitments.

At March 31, 2016 and December 31, 2015, we had cash available for current operations as follows:

	March 31,		December 31,
	2016		2015
	(In thousands)
Cash and equivalents	$	128,928	$	119,028
Marketable securities		5,067		11,518
Total cash available for current operations	$	133,995	$	130,546

A substantial portion of our cash flows has been invested in the enhancement of our drilling fleet. We determine the amount of cash required to meet our capital commitments by evaluating our rig construction obligations, the need to upgrade rigs to meet specific customer requirements and our ongoing rig equipment enhancement/replacement programs. We also make periodic assessments of our capital spending programs based on current and expected industry conditions and make adjustments thereto if required. See “— Cash Flow, Capital Expenditures and Contractual Obligations — Capital Expenditures.”

We pay dividends at the discretion of our Board of Directors, or Board. Any determination to declare a dividend, as well as the amount of any dividend that may be declared, will be based on the Board’s consideration of our financial position, earnings, earnings outlook, capital spending plans, outlook on current and future market conditions and business needs and other factors that our Board of Directors considers relevant at that time. On February 8, 2016, we announced that we were discontinuing our quarterly regular cash dividend. As a result, we did not pay a dividend during the three-month period ended March 31, 2016. During the three-month period ended March 31, 2015, we paid regular cash dividends totaling $17.1 million.

Depending on market and other conditions, we may, from time to time, purchase shares of our common stock in the open market or otherwise. We did not purchase any shares of our outstanding common stock during the three-month periods ended March 31, 2016 and 2015.

During the three-month period ended March 31, 2016, our primary source of cash, was an aggregate $241.3 million generated by operating activities and $113.3 million from the disposition of assets, including $105.0 million from the completion of two sale and leaseback transactions with respect to certain equipment on two of our drillships and $8.0 million in proceeds from the sale of one marketed-for-sale jack-up rig. See “Cash Flow, Capital Expenditures and Contractual Obligations — Contractual Cash Obligations — Pressure Control by the Hour.” Cash usage during the same period was primarily for capital expenditures of $58.1 million and repayment of commercial paper notes totaling $286.6 million.

During the three-month period ended March 31, 2015, our primary source of cash, was an aggregate $160.6 million generated by operating activities and $4.8 million from the disposition of assets. Cash usage during the

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same period was primarily $197.0 million towards the construction of new rigs and our ongoing rig equipment enhancement/replacement program and $17.1 million for the payment of dividends.

We may, from time to time, issue debt or equity securities, or a combination thereof, to finance capital expenditures, the acquisition of assets and businesses or for general corporate purposes. Our ability to access the capital markets by issuing debt or equity securities will be dependent on our results of operations, our current financial condition, current credit ratings, current market conditions and other factors beyond our control.

Cash Flow, Capital Expenditures and Contractual Obligations

Our cash flow from operations and capital expenditures for the three-month periods ended March 31, 2016 and 2015 were as follows:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Cash flow from operations	$	241,330	$	160,566
Cash capital expenditures:
Drillship construction	$	—	$	31,796
Major upgrade of deepwater floaters		—		33,774
Construction of ultra-deepwater floater		19,295		7,892
Ocean Patriot enhancement project		—		719
Ocean Confidence service-life extension project		—		43,078
Rig equipment and replacement programs		38,819		79,773
Total capital expenditures	$	58,114	$	197,032

Cash Flow. Cash flow from operations increased approximately $80.8 million during the first three months of 2016, compared to the first three months of 2015, primarily due to a net decrease in cash payments for contract drilling and general and administrative expenses, including personnel-related, repairs and maintenance, and other rig operating costs ($188.2 million), partially offset by lower cash receipts for contract drilling services ($108.6 million). The decline in both cash receipts and cash payments related to the performance of contract drilling services reflects a reduction in contract drilling activity during the three month period ended March 31, 2016 as well as our continuing efforts to control costs.

Capital Expenditures. We currently expect total capital expenditures for the remainder of 2016 to aggregate approximately $620.0 million, of which we expect to spend approximately $510.0 million towards construction of the Ocean GreatWhite and the remainder on our ongoing capital maintenance and replacement programs. As of March 31, 2016, we had incurred capital expenditures of $57.3 million, including accrued expenditures. See “— Contractual Cash Obligations — Rig Construction.”

Contractual Cash Obligations — Rig Construction. As of the date of this report, we have one rig, the Ocean GreatWhite, under construction in Ulsan, South Korea, for which we are obligated under a construction agreement with Hyundai Heavy Industries Co., Ltd, or HHI. Construction of the Ocean GreatWhite continues with delivery expected in the second half of 2016. The estimated total project cost, including shipyard costs, capital spares, commissioning, project management and shipyard supervision, is $764.0 million, of which $256.2 million has been incurred as of March 31, 2016. The final installment due HHI under the construction agreement of $439.9 million is due upon delivery of the rig.

Contractual Cash Obligations — Pressure Control by the Hour. During March 2016, we executed two sale and leaseback transactions with respect to the Ocean BlackHawk and Ocean BlackHornet. Future commitments under the operating leases and contractual services agreements for the Ocean BlackHawk and Ocean

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BlackHornet are estimated to aggregate approximately $33.0 million per annum or an aggregate $327.0 million over the term of the agreements. We expect to complete the remaining sale and leaseback transactions for the Ocean BlackLion and Ocean BlackRhino in the second and fourth quarters of 2016, respectively. See Note 10 to our unaudited consolidated financial statements included in Item 1 of Part I of this report.

We had no other purchase obligations for major rig upgrades or any other significant obligations at March 31, 2016, except for those related to our direct rig operations, which arise during the normal course of business.

Other Obligations. As of March 31, 2016, the total unrecognized tax benefits related to uncertain tax positions was $97.6 million. In addition, we have recorded a liability, as of March 31, 2016, for potential penalties and interest of $41.9 million and $3.2 million, respectively. Due to the high degree of uncertainty regarding the timing of future cash outflows associated with the liabilities recognized in these balances, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Credit Agreement and Commercial Paper

All short-term borrowings were repaid during the first quarter of 2016. In February 2016, as a result of a downgrade in our short-term credit rating, we canceled our commercial paper program due to our inability to access the commercial paper market in the foreseeable future. See “— Credit Ratings.”

As of March 31, 2016, there were no loans or letters of credit outstanding under our Credit Agreement, and we were in compliance with all covenants thereunder. As of April 28, 2016, we had $1.5 billion available under our Credit Agreement to provide short-term liquidity for our payment obligations.

Credit Ratings

In February 2016, Moody’s Investors Service downgraded our senior unsecured credit rating to Ba2 from Baa2, with a stable outlook, and also downgraded our short-term credit rating to sub-prime. Our current corporate credit rating for Standard & Poor’s Ratings Services is BBB+ and our short-term credit rating is A2. Market conditions and other factors, many of which are outside of our control, could cause our credit ratings to be lowered. A downgrade in our credit ratings could adversely impact our cost of issuing additional debt and the amount of additional debt that we could issue, and could further restrict our access to capital markets and our ability to raise additional debt or rollover existing maturities. As a consequence, we may not be able to issue additional debt in amounts and/or with terms that we consider to be reasonable. One or more of these occurrences could limit our ability to pursue other business opportunities.

Other Commercial Commitments — Letters of Credit

We were contingently liable as of March 31, 2016 in the amount of $69.0 million under certain performance, bid, security, tax, supersedeas and customs bonds and letters of credit. Agreements relating to approximately $63.9 million of performance, security, tax, supersedeas and customs bonds can require collateral at any time. As of March 31, 2016, we had not been required to make any collateral deposits with respect to these agreements. The remaining agreements cannot require collateral except in events of default. Banks have issued letters of credit on our behalf securing certain of these bonds. The table below provides a list of these obligations in U.S. dollar equivalents and their time to expiration.

			For the Years Ending December 31,
	Total		2016		2017		2018		2020
	(In thousands)
Other Commercial Commitments
Performance bonds	$	51,357	$	5,122	$	16,748	$	10,362	$	19,125
Supersedeas bond		9,189		9,189		—		—		—
Tax bond		5,795		5,795		—		—		—
Other		2,646		2,302		—		344		—
Total obligations	$	68,987	$	22,408	$	16,748	$	10,706	$	19,125

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Off-Balance Sheet Arrangements

At March 31, 2016 and December 31, 2015, we had no off-balance sheet debt or other off-balance sheet arrangements.

New Accounting Pronouncements

See Note 1 “General Information” to our unaudited consolidated financial statements included in Item 1 of Part I of this report for a discussion of recently issued accounting pronouncements.

Forward-Looking Statements

We or our representatives may, from time to time, either in this report, in periodic press releases or otherwise, make or incorporate by reference certain written or oral statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain or be identified by the words “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” “believe,” “should,” “could,” “may,” “might,” “will,” “will be,” “will continue,” “will likely result,” “project,” “forecast,” “budget” and similar expressions. In addition, any statement concerning future financial performance (including, without limitation, future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions taken by or against us, which may be provided by management, are also forward-looking statements. Statements made by us in this report that contain forward-looking statements may include, but are not limited to, information concerning our possible or assumed future results of operations and statements about the following subjects:

• market conditions and the effect of such conditions on our future results of operations;

• sources and uses of and requirements for financial resources and sources of liquidity;

• interest rate and foreign exchange risk;

• contractual obligations and future contract negotiations;

• business strategy;

• competitive position, including without limitation, competitive rigs entering the market;

• expected financial position;

• cash flows and contract backlog;

• declaration and payment of regular or special dividends;

• financing plans;

• market outlook;

• tax planning;

• debt levels and the impact of changes in the credit markets and credit ratings for our debt;

• timing and duration of required regulatory inspections for our drilling rigs;

• timing and cost of completion of rig upgrades, construction projects and other capital projects;

• delivery dates and drilling contracts related to rig conversion or upgrade projects, construction projects, other capital projects or rig acquisitions;

• idling drilling rigs or reactivating stacked rigs;

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• scrapping retired rigs;

• assets held for sale;

• asset impairments and impairment evaluations;

• outcomes of legal proceedings;

• purchases of our securities;

• compliance with applicable laws; and

• availability, limits and adequacy of insurance or indemnification.

These types of statements are based on current expectations about future events and inherently are subject to a variety of assumptions, risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those expected, projected or expressed in forward-looking statements. These risks and uncertainties include, among others, those described or referenced under “Risk Factors” in Item 1A.

The risks and uncertainties referenced above are not exhaustive. Other sections of this report and our other filings with the SEC include additional factors that could adversely affect our business, results of operations and financial performance. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Forward-looking statements included in this report speak only as of the date of this report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations or beliefs with regard to the statement or any change in events, conditions or circumstances on which any forward-looking statement is based. In addition, in certain places in this report, we may refer to reports published by third parties that purport to describe trends or developments in energy production or drilling and exploration activity. We do so for the convenience of our investors and potential investors and in an effort to provide information available in the market intended to lead to a better understanding of the market environment in which we operate. We specifically disclaim any responsibility for the accuracy and completeness of such information and undertake no obligation to update such information.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

There were no material changes in our market risk components for the three months ended March 31, 2016. See “Quantitative and Qualitative Disclosures About Market Risk” included in Item 7A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2015 for further information.

ITEM 4. Controls and Procedures.

We maintain a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by us in reports that we file or submit under the federal securities laws, including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us under the federal securities laws is accumulated and communicated to our management on a timely basis to allow decisions regarding required disclosure.

Our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, participated in an evaluation by our management of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2016. Based on their participation in that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2016.

There were no changes in our internal control over financial reporting identified in connection with the foregoing evaluation that occurred during our first fiscal quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

Information related to Item 1. Legal Proceedings is included in Note 10 to the condensed consolidated financial statements.

ITEM 1A. Risk Factors.

Our Annual Report on Form 10-K for the year ended December 31, 2015 includes a detailed discussion of certain material risk factors facing our company. No material changes have been made to such risk factors as of March 31, 2016.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Items 2(a) and 2(b) are not applicable.

(c) During the three months ended March 31, 2016, in connection with the vesting of restricted stock units held by our chief executive officer, we acquired shares of our common stock in satisfaction of tax withholding obligations that were incurred on the vesting date. The date of acquisition, number of shares and average effective acquisition price per share were as follows:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Acquired		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2016 through January 31, 2016		—			—		N/A		N/A
February 1, 2016 through February 29, 2016		—			—		N/A		N/A
March 1, 2016 through March 31, 2016		7,923		$	22.74		N/A		N/A
Total		7,923		$	22.74		N/A		N/A

ITEM 6. Exhibits.

See the Exhibit Index for a list of those exhibits filed or furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DIAMOND OFFSHORE DRILLING, INC.                              (Registrant)
Date     May 2, 2016		By:	\s\ Gary T. Krenek
			Gary T. Krenek
			Senior Vice President and Chief Financial Officer
Date     May 2, 2016			\s\ Beth G. Gordon
			Beth G. Gordon
			Controller (Chief Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation of Diamond Offshore Drilling, Inc. (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003) (SEC File No. 1-13926).
3.2	Amended and Restated By-laws (as amended through October 4, 2013) of Diamond Offshore Drilling, Inc. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed October 8, 2013).
10.1*	Separation Agreement, dated February 22, 2016, between Diamond Offshore Management Company and Gary T. Krenek.
31.1*	Rule 13a-14(a) Certification of the Chief Executive Officer.
31.2*	Rule 13a-14(a) Certification of the Chief Financial Officer.
32.1*	Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Calculation Linkbase Document.
101.LAB*	XBRL Taxonomy Label Linkbase Document.
101.PRE*	XBRL Presentation Linkbase Document.
101.DEF*	XBRL Definition Linkbase Document.

* Filed or furnished herewith.

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EX-10.1

Exhibit 10.1

SEPARATION AGREEMENT

This Separation Agreement (this “Agreement”) is entered into by Gary T. Krenek (“Employee”) and Diamond Offshore Management Company (the “Company”). Employee and the Company are referred to individually herein as a “Party” and collectively as the “Parties.”

WHEREAS, Employee and the Company entered into that certain Employment Agreement dated December 15, 2006 (“Employment Agreement”); and

WHEREAS, the Parties have agreed that Employee’s employment with the Company shall terminate effective on May 3, 2016;

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employee and the Company agree as follows:

1. Separation of Employment. Employee’s employment with the Company shall end at the close of business on May 3, 2016 (the “Separation Date”). Employee shall resign all officer positions with the Company effective on the Separation Date.

2. Benefits. Subject to any applicable requirements of Sections 3 and 16 below, the Company shall pay or provide Employee the following:

(a) Commencing on the Company’s first payroll period following the later of the Separation Date or effective date of the release described in Section 3 below (the “Effective Date”), and continuing on subsequent regularly-scheduled payroll periods, but no less frequently than on a monthly basis, the Company will pay Employee 12 months of his current base salary (for a total of $458,609.00), less withholdings and deductions in accordance with applicable law. In the event of Employee’s death prior to the full payment of such amount, the remaining unpaid amount shall be paid to Employee’s estate in a lump sum.

(b) After the Separation Date, Employee’s eligibility for continuation of coverage under the Company’s group medical, dental and vision insurance plans normally would be governed exclusively by the continuation coverage provisions of such plans and the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Pursuant to this Agreement, however, during any portion of the period, beginning on the first day of the month immediately following the Separation Date and ending two years later, that Employee and his spouse/family participate in a Company group medical, dental or vision insurance plan through COBRA, the full COBRA premium for such medical, dental and vision insurance coverage for Employee and his spouse/family dependents will be paid by the Company promptly to insure that such insurance coverage continues without interruption or lapse of coverage; provided, however, that if the continued medical, dental and vision benefits are discriminatory so that such benefit would be taxable to Employee, then the premium will be paid by Employee on an after-tax basis and the Company shall reimburse Employee for such payments in each following month so that such benefits will not be taxable to the Employee under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s obligation to make COBRA payments shall be discontinued to the extent Employee is eligible to receive comparable coverage from a subsequent employer and/or except to the extent the

subsequent employer’s plan does not cover the pre-existing conditions of the Employee or a previously covered member of the Employee’s family. The Company and Employee agree that Employee’s “qualifying event” for the purposes of COBRA coverage occurs on the Separation Date.

(c) On the Separation Date, all unvested Stock Appreciation Rights (“SARs”) awarded to Employee shall vest, and all of Employee’s vested stock options and SARs shall be exercisable by him as provided for in the Diamond Offshore Drilling, Inc. Equity Incentive Compensation Plan (the “Option Plan”) and the award certificates related thereto.

(d) Within 30 days after the later of the Separation Date and Effective Date, the Company will pay Employee a one-time payment of $37,500.00, less withholdings and deductions in accordance with applicable law, as accrued special cash dividends applicable to unvested SARs that vest pursuant to Section 2(c).

(e) Any amounts to which Employee is eligible under the Company’s Supplemental Executive Retirement Plan shall be paid to Employee in accordance with the terms of that plan.

(f) The Company shall pay Employee a one-time payment, less withholdings and deductions in accordance with applicable law, as a prorated bonus payment for fiscal year 2016 under the Diamond Offshore Drilling, Inc. Incentive Compensation Plan for Executive Officers (the “Bonus Plan”), to be paid on the same basis and at the same time that incentive payments for fiscal year 2016 are paid to other executive officers of the Company under the Bonus Plan.

(g) The Company shall pay Employee one-time payments, less withholdings and deductions in accordance with applicable law, as set forth below, upon and subject to the accomplishment of the respective milestone event by Employee prior to the Separation Date. Each such payment earned by Employee shall be paid by the Company within 30 days after the later of the Separation Date and Effective Date.

(i) $140,000.00 upon the Company’s Annual Report on Form 10-K for its fiscal year ending December 31, 2015 (the “Annual Report”) being completed and timely filed with the Securities and Exchange Commission on or before February 29, 2016, in compliance in all material respects with the requirements of the Securities Exchange Act of 1934, as amended, and applicable rules and regulations.

(ii) $140,000.00 upon completion of the following:

(1) The Company’s independent registered public accounting firm timely completing its audit of the Company’s consolidated balance sheets as of December 31, 2015 and 2014, and its related consolidated statements of operation, comprehensive income, stockholders’ equity and cash flows

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for each of the three years ended December 31, 2015, for inclusion in the Annual Report, and delivering to the Company’s Board of Directors the firm’s report on such audit, expressing the firm’s unqualified opinion, containing no exceptions, that the Company’s consolidated financial statements present fairly in all material respects the consolidated financial position of the Company and its subsidiaries at such balance sheet dates and the consolidated results of their operations and their cash flows for each of the three years ended December 31, 2015, in conformity with U.S. generally accepted accounting principles; and

(2) The Company’s independent registered public accounting firm timely completing its audit, in accordance with the standards of the U.S. Public Company Accounting Oversight Board, of the Company’s internal control over financial reporting as of December 31, 2015, and the firm timely delivering to the Company’s Board of Directors its report thereon that expresses an unqualified opinion, for inclusion in the Annual Report.

(iii) $50,000.00 upon the Company securing, in a manner reasonably satisfactory to the Chief Executive Officer, renewal of the Company’s commercial insurance policies currently in force with its existing insurers, or new commercial insurance policies with the same or different insurers that provide for coverage reasonably comparable to the coverage under its existing policies and rates reasonably comparable to such policies under the circumstances.

(iv) $50,000.00 upon Employee being available to (1) instruct, mentor and transition his responsibilities to Employee’s successor as the new chief financial officer of the Company (“Successor”), to the reasonable satisfaction of the Chief Executive Officer, such that Successor will be reasonably capable of functioning as the Company’s chief financial officer, including effectively participating in the Company’s quarterly earnings conference calls; and (2) introduce Successor to at least seven of the Company’s top sell-side analysts at investment banking firms as the Company’s new chief financial officer.

(v) $50,000.00 upon Employee having attended (with Successor, if Successor is available) the Scotia Howard Weil Annual Energy Conference in New Orleans in March 2016, and being available to introduce Successor to key buy-side analysts as the Company’s new chief financial officer.

(vi) $50,000.00 upon Employee being available to introduce Successor as the Company’s new chief financial officer to applicable credit ratings analysts at Moody’s Investors Services and Standard & Poor’s Rating Services.

(h) Nothing in this Agreement adversely affects any right Employee may have to: (i) base wages earned by Employee through the Separation Date, and Employee shall be paid all such wages regardless of whether Employee signs this Agreement; (ii) earned, unused vacation, which will be paid by the Company after the Separation Date; (iii)

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reimbursement for documented and approved business expenses incurred by Employee through the Separation Date for which Employee has not been reimbursed; and (iv) continuation insurance coverage pursuant to the terms of Company-provided insurance plans or applicable law. Employee acknowledges that, except as set forth in this Agreement, the Company does not have, and will not have, any obligation to provide Employee at any time in the future with any payments, benefits or considerations other than those recited in Section 2 of this Agreement. Employee agrees that some of the payments and benefits described in this Section 2 are not required under the Company’s normal policies and procedures, and they provide adequate consideration for this Agreement.

3. Condition of Full General Release. Employee acknowledges and agrees that, except for payments and benefits required to made as provided by law or pursuant to the terms of a plan, the Company’s obligation to pay Employee the amounts and to make the arrangements provided in Section 2 shall be conditioned upon Employee (or, if deceased or disabled, his estate or legal guardian) executing and delivering to the Company a complete and global valid waiver and release of claims relating to or arising out of his employment with, and termination of employment from, the Company substantially in the form attached hereto as Exhibit A or such other form acceptable to the Company (“Release”). Employee further acknowledges and agrees that, in the absence of Employee’s execution and delivery to the Company of the Release, the Company shall have no obligation to Employee to make any payment or arrangement of such benefits as provided for in Section 2.

4. No Admission of Wrongdoing. The existence and execution of this Agreement shall not be considered as an admission of any wrongdoing, liability, violation, error, or omission by Employee or the Company.

5. Knowing and Voluntary Agreement. Employee acknowledges and agrees that:

(a) This Agreement is written in a manner that he understands. Under this Agreement, Employee is receiving things of value to which he would not otherwise be entitled to receive.

(b) He has been permitted and offered 21 days to consider and to sign this Agreement and he is hereby advised by the Company to consult with an attorney prior to executing this Agreement.

(c) Notwithstanding the other provisions of this Agreement, Employee is not agreeing, or being requested to agree, to release or waive any claims under the Age Discrimination in Employment Act that may arise after the Effective Date.

(d) He has received the opportunity to review and reflect on all terms of this Agreement, and has not been subject to any undue or improper influence interfering with the exercise of his free will to execute this Agreement. He knowingly and voluntarily agrees to all of the terms set forth in this Agreement, and knowingly and voluntarily intends to be legally bound by them.

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6. Return of Property. Employee represents that on or before the Separation Date, he shall return all Company property and documents (including copies of any documents) in his possession or control, including any building keys, laptop computer, personal digital assistant, telephone calling card(s), credit card(s), forms, files, manuals, correspondence, memoranda, notes, e-mail, plans, business records, reports, financial data or records, personnel data, contracts, contract information, training materials, product mix or recipes, lists of employees, salary and benefits information (except relating to Employee), lists of suppliers and vendors, brochures, catalogs, computer tapes and diskettes or other portable media, computer-readable files and data stored on any hard drive anywhere or other installed or portable device, passwords, data processing reports, reports or recordings in any electronic or physical format, and any and all other documents or property which Employee has obtained pursuant to or by virtue of his employment with the Company. Notwithstanding the foregoing, the Company agrees that Employee shall be entitled to: (1) keep his cell phone and current cell phone number and (2) retain personal mementos. Employee will take reasonable steps to return all paper files and delete all electronic files containing non-public Company documents, but the Company acknowledges that, given Employee’s tenure with the Company, Employee might later discover documents or data at his residence and/or on his personal computer(s), which he agrees not to use for any purpose and to immediately destroy or delete.

7. Nondisparagement.

(a) Employee agrees that he will not make or cause to be made any oral or written statements that are derogatory, defamatory, disparaging or harmful concerning the Company, its policies or programs, or its past or present officers, directors, employees, agents, or business associates, including its past or present suppliers or vendors, or take any actions that are harmful to the business affairs of the Company and/or its employees. Employee further agrees that he will not make or cause to be made any oral or written statements regarding the Company’s Confidential Information to any third party, including the general public (for example, via postings or publications on the internet), the media, financial analysts, auditors, institutional investors, consultants, suppliers, vendors, or business associates, or agents and/or representatives of any of the foregoing, unless such statement is: (i) expressly authorized by the Company in writing, or (ii) required by law. This provision is a material and substantial term of this Agreement.

(b) Employee shall direct any third parties seeking an employment reference for Employee to the Company’s Vice President — Human Resources, who shall only provide Employee’s dates of employment and position held and the information contained in any public release, unless Employee directs that the Company can furnish additional information.

8. Cooperation/Transition.

(a) Employee agrees to reasonably cooperate with the Company and any of the other Released Parties (as defined below) in any matter related to the Company’s business or activities, as follows: (i) to be available at mutually agreeable times, personally or by telephone, as necessary, at such reasonable times and without unreasonable interference with Employee’s employment or personal activities, to provide such information and services as may be from time to time requested by the Company in connection with various matters in which Employee was involved during his employment with the

5

Company or matters about which Employee has knowledge and expertise; except that no such services shall exceed four hours in any week and Employee’s obligation to be available for such information and services shall expire six months after the Separation Date; and (ii) in all pending and future litigation (including claims asserted with administrative agencies) involving the Company or any of the other Released Parties, which obligation includes Employee promptly meeting with counsel for the Company or the other Released Parties at mutually agreeable and reasonable times upon their request and providing testimony in court or upon deposition that is truthful, accurate, and complete, according to information known to Employee. Employee further agrees to reasonably cooperate with the Company in connection with any investigation or review by any federal, state or local regulatory authority relating to events or occurrences that transpired while Employee was employed with the Company. As used in this Agreement, the term “Released Parties” means Diamond Offshore Management Company, Diamond Offshore Drilling, Inc. and its/their past and present parent, subsidiary and affiliate companies and its and their respective: (i) predecessors and successors; and (ii) past and present employees, owners, partners, shareholders, members, directors, officers, attorneys, assigns, agents, and representatives, both individually and in their official capacities.

(b) If Employee receives a subpoena seeking testimony, documents or information Employee may have related to the Company or any of its affiliates, Employee or Employee’s attorney shall provide the Company with a copy of the subpoena prior to the date specified for compliance and no later than four business days following Employee’s receipt of it. In addition, as soon as possible prior to the date of compliance required by such a subpoena, Employee shall notify the Company of the content of any information to be provided pursuant to such a subpoena and give the Company copies of all documents to be produced.

(c) The Company shall reimburse Employee, upon receipt of proper documentation, for all reasonable and necessary expenses for air fare, accommodations, transportation, meals and other out-of-pocket expenses incurred by Employee in providing the cooperation requested of him pursuant to this Section 8.

9. Confidential Information. Employee agrees that, unless otherwise required by law, Employee will forever keep secret and inviolate all Confidential Information which has come into Employee’s possession, and Employee will not use the same for Employee’s own private benefit, or directly or indirectly for the benefit of others, and Employee will not disclose such Confidential Information to any other person. If Employee is legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information, Employee shall provide the Company with prompt prior written notice of such legal requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Section 9. In any event, Employee may furnish only that portion of the Confidential Information which Employee is advised by legal counsel is required, and Employee shall exercise Employee’s best efforts to obtain an order or assurance that confidential treatment will be accorded such Confidential Information that is disclosed. For purposes of this Agreement, all confidential or proprietary information concerning the business and affairs of the Company, including all trade secrets,

6

knowhow and other information generally retained on a confidential basis by the Company concerning its products, methods, know-how, techniques, systems, software codes and specifications, formulae, inventions and discoveries, business plans, pricing, product plans and the identities of and the nature of the Company’s dealings with its employees, suppliers and customers, whether or not such information shall, in whole or in part, be subject to or capable of being protected by patent, copyright or trademark laws, shall constitute “Confidential Information.” Notwithstanding anything contained herein which may be to the contrary, the term “Confidential Information” does not include any information which is excluded or excepted from the Employee’s obligations in Article 4.6 of the Employment Agreement. Employee will not disclose to any person (other than his tax, legal and financial advisers who have a need to know) the terms of this Agreement without the prior written consent of the Company.

10. Agreement Not to Solicit Employees/Former Employees. Employee acknowledges and re-affirms his agreement in Article 4.7 of his Employment Agreement that for a period of two years after his Separation Date, Employee shall not, directly or knowingly indirectly, either as an executive, employer, independent contractor, consultant, agent, principal, partner, stockholder, officer, director, or in any other individual or representative capacity, either for his own benefit or the benefit of any other person or entity: (a) solicit, recruit, induce, entice, encourage or in any way cause any officer, or manager reporting to such officer, holding such position at the time Employee ceases to be an employee of Company and who is or was an employee of Company (or affiliate) within the six months prior to Employee’s Separation Date or thereafter to terminate his/her employment with Company (or such affiliate); or (b) directly solicit for hire, directly entice for hire, hire, or directly recruit any officer, or manager reporting to such officer, toolpusher, rig superintendent or offshore installation manager (OIM) holding such position at the time Employee ceases to be an employee of Company and who is or was an employee of Company within the six months prior to Employee’s Separation Date or thereafter.

11. Agreement Not to Compete. Employee covenants and agrees that for a period of one year after his Separation Date, Employee shall not, individually or jointly with others, directly or indirectly, perform services for, prepare or take steps to prepare to perform services for, or otherwise have any involvement with, in each case, whether as an officer, director, partner, consultant, security holder, owner, employee, independent contractor or otherwise, any entity that competes (whether directly or indirectly) with the Company or its Subsidiaries in the Business (as hereinafter defined) in the world as of the date of the Separation Date (any such entity, a “Competitor”); provided, however, that Employee may in any event own up to a 2% passive ownership interest in any public entity or through a private, non-operating investment vehicle and may become employed by or otherwise affiliated with a Competitor if Employee works in a business unit thereof that does not compete with the Company or any Subsidiary in connection with the Business and Employee does not communicate about the Business with any employee in a business unit of such Competitor that does so compete with the Company or any of its Subsidiaries. For purposes hereof, the term “Business” shall mean the offshore oil and gas drilling business. Upon the written request of Employee, the Company’s President will reasonably determine whether a business or other entity constitutes a “Competitor” for purposes of this Section 11; provided that the President may require Employee to provide such information as the Company reasonably determines to be necessary to make such determination; and provided, further that the current and continuing effectiveness of such determination may be conditioned upon the accuracy of such information, and upon such other factors as the Company may reasonably determine.

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12. Breach Causing Irreparable Harm. The terms of this Agreement are contractual and not merely recitals. Employee agrees that a breach by Employee of Sections 9, 10 or 11 of this Agreement will result in irreparable harm to the Company, and as such, upon such breach, without limiting the Company’s right to seek injunctive relief allowed by law in a court of competent jurisdiction, the Company may pursue a claim against Employee for any damages suffered by the Company as a result of such breach. Employee’s agreements in Section 10 and 11 shall be extended for the period of time which Employee violates one or more of these agreements and/or during any period during which the Company appeals from an order refusing to enforce any of these agreements or covenants. The tolling or extension period shall not exceed 12 months under any circumstances.

13. Reliance; Complete Agreement; Modification. Employee and the Company acknowledge that in executing this Agreement they have not relied on any statements, promises or representations made by the other Party except as specifically memorialized in this Agreement. This Agreement constitutes the complete agreement of the Parties on or in any way related to the subject matter addressed herein. The Parties further agree that this Agreement supersedes the Employment Agreement unless otherwise stated herein. Additionally, Article 5.11 of the Employment Agreement is incorporated by reference into this Agreement only insofar as it prohibits employee from seeking employment with the Company in the future. This Agreement cannot be modified or rescinded except upon the written consent of both Employee and the Company.

14. Severability. If any provision of this Agreement is held to be unenforceable, such provision shall be considered to be distinct and severable from the other provisions of this Agreement, and such unenforceability shall not affect the validity and enforceability of the remaining provisions. If any provision of this Agreement is held to be unenforceable as written but may be made enforceable by limitation, then such provision shall be enforceable to the maximum extent permitted by applicable law. No failure by either Party at any time to give notice of any breach by the other Party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

15. Governing Law; Venue; Jury Waiver. The Company and Employee agree that the law of Texas, without regard to conflicts of law principles, shall exclusively govern any disputes between the Parties, including the validity, interpretation, and effect of this Agreement, as well as any other disputes arising out of or relating to the employment of Employee by the Company or the termination of Employee’s employment. In the event of any such dispute between them, including any disputes arising out of this Agreement, Employee’s employment with the Company or work for the Company or the termination of Employee’s employment, the Parties agree to exclusive, mandatory and sole jurisdiction and venue in Houston, Texas. The Parties agree and consent to have all such disputes resolved by a judge in the courts of Harris County, Texas. The Parties hereby waive all challenges to personal jurisdiction and venue of such courts, including the claim or defense that such courts or locale constitute an inconvenient forum. The Parties agree that any disputes between them shall be adjudicated by a judge and, therefore, the Parties waive a trial by jury.

16. Section 409A.

(a) Deferred Compensation. To the extent any payments or benefits under this Agreement constitute deferred compensation subject to Section 409A of the Code and the regulations

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thereunder (collectively “Section 409A”), this Agreement shall be administered, interpreted and construed to comply with the requirements of Section 409A. The portion of any payment or benefit under this Agreement that is paid within the short-term deferral period or is otherwise exempt from Section 409A will not be treated as nonqualified deferred compensation and will not be aggregated with other nonqualified deferred compensation plans or payments to the extent permitted under Section 409A.

(b) Separate Payments and Payment Timing. Payment dates provided for in this Agreement will be deemed to incorporate grace periods that are treated as made upon a designated payment date within the meaning of Section 409A and Treas. Regs. §1.409A-3(d).

(c) General Section 409A Provisions. If Employee or the Company determines that any payments or benefits payable under this Agreement intended to comply with Section 409A do not comply with Section 409A, Employee and the Company agree to amend this Agreement, or take such other actions as Employee and the Company deem reasonably necessary or appropriate, to comply with the requirements of Section 409A (and any applicable relief provisions), while preserving the economic agreement of the Parties. If any provision of the Agreement would cause such payments or benefits to fail to so comply, such provision will not be effective and will be null and void with respect to such payments or benefits, and such provision will otherwise remain in full force and effect.

All payments considered nonqualified deferred compensation under Section 409A and the regulations thereunder will be made on the date(s) provided herein and no request to accelerate or defer any payment under this Section will be considered or approved for any reason whatsoever, except as permitted under Section 409A. Notwithstanding the foregoing, amounts payable hereunder which are not nonqualified deferred compensation, or which may be accelerated pursuant to Section 409A, such as distributions for applicable tax payments, may be accelerated, but not deferred, at the sole discretion of the Company.

To the extent required to comply with Section 409A, all references in this Agreement to “separation of employment” or “separation” mean Employee’s “separation from service” as that term is defined in Section 1.409A-1(h) of the Treasury Regulations.

(d) Reimbursements and In-Kind Benefits. If any coverage (whether provided before or after Employee’s separation of employment) under medical, dental, disability and/or life insurance plan, or the provision of any other benefit or perquisite, results in in-kind benefits or reimbursements to Employee that are (x) taxable for federal income tax purposes and (y) deferred compensation subject to Section 409A, then such in-kind benefits or reimbursements shall be subject to the following rules:

(i) The in-kind benefits to be provided, or the amounts to be reimbursed, shall be determined pursuant to the terms of the applicable benefit plan, and shall be limited, in addition to any other applicable limitations, to Employee’s lifetime and the lifetime of Employee’s eligible dependents.

9

(ii) The amounts eligible for reimbursement, or the in-kind benefits provided, during any calendar year may not affect the expenses eligible for reimbursement, or the in-kind benefits provided, in any other calendar year.

(iii) Any reimbursement of an eligible expense shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred.

(iv) Employee’s right to an in-kind benefit or reimbursement is not subject to liquidation or exchange for cash or another benefit.

(e) Specified Employee Status. If Employee is a specified employee (within the meaning of Section 409A) on the date of his separation from service, any payments made with respect to such separation from service under this Agreement, and other payments or benefits under this Agreement that are subject to Section 409A, will be delayed in order to comply with Section 409A(a)(2)(B)(i) of the Code, and such delayed payments or benefits will be paid in a lump sum upon expiration of such six-month period with all accrued interest calculated from the Separation Date until such lump sum payment and equal to the average six-month U.S. Treasury Rate for the six-month period measured from the date of Employee’s separation from service. Any remaining payments and benefits due under the Agreement will be paid as otherwise provided in the Agreement.

(f) Amounts Subject to Release. To the extent any amount payable hereunder is considered nonqualified deferred compensation subject to Section 409A and the period during which Employee has discretion to execute or revoke the Release straddles two taxable years of Employee, then the Company will commence the payments and/or benefits in the second of such taxable years, and Employee may not, directly or indirectly, designate the calendar year of any such payment.

Each of the undersigned acknowledges that he/it (a) has read and fully understands all the terms and conditions of this Agreement, (b) has had sufficient time to consider this Agreement and to consult about it with an attorney, and (c) is signing it knowingly, voluntarily and willingly. This Agreement is effective once signed by both Parties and can be executed in multiple identical counterparts and via email and fax. Unless the context expressly requires otherwise, when used in this Agreement, the words “includes” and “including” are not limiting and shall be interpreted as if the phrase “without limitation” immediately followed any such word.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the date specified below.

Date: 22 Feb 2016	/s/ Gary T. Krenek
	Gary T. Krenek Employee

10

DIAMOND OFFSHORE MANAGEMENT COMPANY

/s/ Marc Edwards

Name: Marc Edwards

Title: President

11

Exhibit A

RELEASE

This Release (this “Release”) is entered into by Gary T. Krenek (“Employee”) and Diamond Offshore Management Company, on behalf of itself and its parent, subsidiaries and affiliated companies (collectively the “Company”).

WHEREAS, Employee and Company entered into that certain Settlement Agreement dated                      (“Settlement Agreement”), and all defined terms used in this Release that are not expressly defined herein shall have the meaning assigned such terms in the Settlement Agreement;

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employee and Company agree as follows:

1. Full General Release. In accordance with Section 3 of the Settlement Agreement, and as a condition to Company’s obligation to pay Employee the amounts and to make the arrangements provided in Section 2 of the Settlement Agreement (except for payments and benefits required to made as provided by law or pursuant to the terms of a plan), Employee makes the following promises, commitments and representations to the Company:

Employee, on behalf of himself and his spouse, family members, heirs, successors, and assigns, hereby voluntarily, irrevocably, and unconditionally releases and forever discharges the Released Parties (as defined below), individually and collectively, from any and all claims, complaints, demands, liabilities, or causes of action, of whatever kind or character, whether known or unknown or whether in law or in equity, which he now has or ever had against any of the Released Parties, in their individual, corporate of official capacities, including: (i) those claims arising out of or in any way connected with his employment by the Company and/or the separation of that employment, (ii) those claims arising prior to the date of this Release, regardless of whether such claims relate to Employee’s employment by the Company, and (iii) those claims arising out of or in any way connected with any employment relationship that he now has or ever had with any of the other Released Parties and/or the separation of any such employment relationship. Without limiting the generality of the foregoing, the claims being released by Employee include the following: any claim against any of the Released Parties under the Civil Rights Act of 1866, the Civil Rights Act of 1871, the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Worker Adjustment and Retraining Notification Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the Fair Labor Standards Act, the Texas Labor Code, any other federal, state or local statute, regulation, ordinance, law, or common law relating to employment or employment discrimination, any alleged violation of any federal, state or local statutes, ordinances or common laws, tortious or contractual wrongful discharge or conduct, fraud, negligence, gross negligence, breach of express or implied contract, vicarious liability for the torts of others. breach of the covenant of good faith and fair dealing, violation of public policy, tortious interference with contract or prospective

12

business relations, intentional or negligent infliction of emotional distress, fraud or misrepresentation, battery or assault, invasion of privacy, failure to pay wages, stock awards, bonuses, commissions, incentive pay, benefits, vacation pay, profit sharing, severance or other compensation of any sort, and harassment, retaliation or discrimination on the basis of race, color, national original, religion, sex, sexual preference/orientation, age, handicap or disability.

This Release is not intended to apply to any pension or insured benefits, or any other equity grant for which Employee is eligible, pursuant to the terms of any employee benefit plan or stock/share option plan in which Employee is, or has been, a participant. The claims released in this Section 1 include any that Employee may have or assert against the Released Parties in any jurisdiction whatsoever.

By signing this Release, it is Employee’s intent to waive and release all claims and potential claims against the Released Parties, save and except a claim for unemployment benefits or any other claim that Employee cannot waive or release as a matter of law. In the unlikely event that a claim or potential claim (save and except a claim that cannot be waived or released) has been omitted from this Release, Employee hereby assigns and conveys said claims and potential claims to the Company in exchange for the Company’s obligations in the Settlement Agreement.

As used in this Release, the term “Released Parties” means Diamond Offshore Management Company, Diamond Offshore Drilling, Inc. and its/their past and present parent, subsidiary and affiliate companies and its and their respective: (i) predecessors and successors; and (ii) past and present employees, owners, partners, shareholders, members, directors, officers, attorneys, assigns, agents, and representatives, both individually and in their official capacities.

2. No Admission of Wrongdoing. The existence and execution of this Release shall not be considered as an admission of any wrongdoing, liability, violation, error, or omission by Employee or the Company.

3. Knowing and Voluntary. Employee acknowledges and agrees that:

(a) This Release is written in a manner that he understands. By executing and delivering this Release to the Company, Employee will receive things of value to which he would not otherwise be entitled to receive.

(b) He has been permitted and offered 21 days to consider and to sign this Release and he is hereby advised by the Company to consult with an attorney prior to executing this Release.

(c) Notwithstanding the other provisions of this Release, Employee is not agreeing, or being requested to agree, to release or waive any claims under the Age Discrimination in Employment Act that may arise after the Effective Date of this Release.

13

(d) He has received the opportunity to review and reflect on all terms of this Release, and has not been subject to any undue or improper influence interfering with the exercise of his free will to execute this Release. He knowingly and voluntarily agrees to all of the terms set forth in this Release, and knowingly and voluntarily intends to be legally bound by them.

4. Effective Date. Employee has seven days following his execution of this Release to revoke this Release. This Release will not become effective or enforceable until the seven-day revocation period has expired (the “Effective Date”). In the event that Employee exercises the right to revoke this Release, the Company will not have any obligations to pay Employee the amounts and to make the arrangements provided in Section 2 of the Settlement Agreement (except for payments and benefits required to be made as provided by law or pursuant to the terms of a plan). If Employee chooses to revoke this Release, he must do so in writing addressed and delivered by email to Aaron Sobel at asobel@dodi.com and by certified mail, return receipt requested to him at the Company’s corporate address in Houston, Texas.

This Release can be executed in multiple identical counterparts and via email and fax. Unless the context expressly requires otherwise, when used in this Agreement, the words “includes” and “including” are not limiting and shall be interpreted as if the phrase “without limitation” immediately followed any such word.

Employee acknowledges that he (a) has read and fully understands all the terms and conditions of this Release, (b) has had sufficient time to consider this Release and to consult about it with an attorney, and (c) is signing it knowingly, voluntarily and willingly.

IN WITNESS WHEREOF, the parties have executed this Release on the date specified below.

Date:
	Gary T. Krenek
	Employee
	DIAMOND OFFSHORE MANAGEMENT COMPANY
	Name:
	Title:

14

EX-31.1

Exhibit 31.1

I, Marc Edwards, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 of Diamond Offshore Drilling, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2016

/s/ Marc Edwards

Marc Edwards

Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Gary T. Krenek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 of Diamond Offshore Drilling, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2016

/s/ Gary T. Krenek

Gary T. Krenek

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED BY SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, pursuant to 18 U.S.C. § 1350, in his capacity as an officer of Diamond Offshore Drilling, Inc. (the “Company”), that, to his knowledge:

(1) the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 2, 2016

/s/ Marc Edwards

Marc Edwards

Chief Executive Officer of the Company

/s/ Gary T. Krenek

Gary T. Krenek

Chief Financial Officer of the Company

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 28, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	DO
Entity Registrant Name	DIAMOND OFFSHORE DRILLING INC
Entity Central Index Key	0000949039
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		137,169,663

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 128,928	$ 119,028
Marketable securities	5,067	11,518
Accounts receivable, net of allowance for bad debts	363,597	405,370
Prepaid expenses and other current assets	110,842	119,479
Assets held for sale	6,600	14,200
Total current assets	615,034	669,595
Drilling and other property and equipment, net of accumulated depreciation	6,219,242	6,378,814
Other assets	110,323	101,485
Total assets	6,944,599	7,149,894
Current liabilities:
Accounts payable	51,421	70,272
Accrued liabilities	289,209	253,769
Taxes payable	40,357	15,093
Short-term borrowings		286,589
Total current liabilities	380,987	625,723
Long-term debt	1,980,049	1,979,778
Deferred tax liability	230,332	276,529
Other liabilities	158,451	155,094
Total liabilities	$ 2,749,819	$ 3,037,124
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock (par value $0.01, 25,000,000 shares authorized, none issued and outstanding)
Common stock (par value $0.01, 500,000,000 shares authorized; 143,997,757 shares issued and 137,169,663 shares outstanding at March 31, 2016; 143,978,877 shares issued and 137,158,706 shares outstanding at December 31, 2015)	$ 1,440	$ 1,440
Additional paid-in capital	2,000,828	1,999,634
Retained earnings	2,406,693	2,319,136
Accumulated other comprehensive gain (loss)	(11,595)	(5,035)
Treasury stock, at cost (6,828,094 and 6,820,171 shares of common stock at March 31, 2016 and December 31, 2015, respectively)	(202,586)	(202,405)
Total stockholders' equity	4,194,780	4,112,770
Total liabilities and stockholders' equity	$ 6,944,599	$ 7,149,894

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	143,997,757	143,978,877
Common stock, shares outstanding	137,169,663	137,158,706
Treasury stock, shares	6,828,094	6,820,171

XML

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Contract drilling	$ 443,523	$ 599,577
Revenues related to reimbursable expenses	27,020	20,479
Total revenues	470,543	620,056
Operating expenses:
Contract drilling, excluding depreciation	212,841	350,658
Reimbursable expenses	26,791	20,092
Depreciation	104,240	137,299
General and administrative	15,398	17,452
Impairment of assets		358,528
Restructuring and separation costs		6,168
Gain on disposition of assets	(296)	(611)
Total operating expenses	358,974	889,586
Operating income (loss)	111,569	(269,530)
Other income (expense):
Interest income	173	583
Interest expense, net of amounts capitalized	(25,516)	(23,982)
Foreign currency transaction (loss) gain	(3,608)	5,590
Other, net	578	221
Income (loss) before income tax benefit	83,196	(287,118)
Income tax benefit	4,229	31,409
Net income (loss)	$ 87,425	$ (255,709)
Earnings (loss) per share, Basic and Diluted	$ 0.64	$ (1.86)
Weighted-average shares outstanding:
Shares of common stock	137,162	137,151
Dilutive potential shares of common stock	44
Total weighted-average shares outstanding	137,206	137,151
Cash dividends declared per share of common stock		$ 0.125

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 87,425	$ (255,709)
Derivative financial instruments:
Unrealized holding loss		(1,827)
Reclassification adjustment for (gain) loss included in net income	(1)	3,587
Investments in marketable securities:
Unrealized holding loss	(6,559)	(2,123)
Reclassification adjustment for gain included in net income	0	0
Total other comprehensive loss	(6,560)	(363)
Comprehensive income (loss)	$ 80,865	$ (256,072)

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating activities:
Net income (loss)	$ 87,425	$ (255,709)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	104,240	137,299
Loss on impairment of assets		358,528
Restructuring and separation costs		6,168
Gain on disposition of assets	(296)	(611)
Loss on foreign currency forward exchange contracts		6,390
Deferred tax provision	(45,254)	(118,332)
Stock-based compensation expense	1,194	856
Deferred income, net	13,810	(3,874)
Deferred expenses, net	2,591	(46,027)
Other assets, noncurrent	92	506
Other liabilities, noncurrent	1,835	(2,262)
Payments for settlement of foreign currency forward exchange contracts designated as accounting hedges		(6,390)
Bank deposits denominated in nonconvertible currencies	293	561
Other	438	484
Changes in operating assets and liabilities:
Accounts receivable	41,773	18,177
Prepaid expenses and other current assets	6,026	11,997
Accounts payable and accrued liabilities	(1,798)	(18,006)
Taxes payable	28,961	70,811
Net cash provided by operating activities	241,330	160,566
Investing activities:
Capital expenditures (including rig construction)	(58,114)	(197,032)
Proceeds from disposition of assets, net of disposal costs	113,295	4,763
Proceeds from sale and maturities of marketable securities	11	11
Net cash provided by (used in) investing activities	55,192	(192,258)
Financing activities:
Net repayment of short-term borrowings	(286,589)
Payment of dividends		(17,144)
Other	(33)	(12)
Net cash used in financing activities	(286,622)	(17,156)
Net change in cash and cash equivalents	9,900	(48,848)
Cash and cash equivalents, beginning of period	119,028	233,623
Cash and cash equivalents, end of period	$ 128,928	$ 184,775

XML

General Information

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

General Information

1. General Information

The unaudited consolidated financial statements of Diamond Offshore Drilling, Inc. and subsidiaries, which we refer to as “Diamond Offshore,” “we,” “us” or “our,” should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 1-13926).

As of April 28, 2016, Loews Corporation owned approximately 53% of the outstanding shares of our common stock.

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S., or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, pursuant to such rules and regulations, they do not include all disclosures required by GAAP for complete financial statements. The consolidated financial information has not been audited but, in the opinion of management, includes all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated balance sheets, statements of operations, statements of comprehensive income and statements of cash flows at the dates and for the periods indicated. Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated.

Assets Held For Sale

At December 31, 2015, we reported the $14.2 million carrying value of five marketed-for-sale jack-up rigs as “Assets held for sale” in our Consolidated Balance Sheets. One of these rigs was sold for $8.0 million in February 2016. In March 2016, one of our previously impaired mid-water semisubmersible rigs completed its drilling contract and was sold for scrap in the second quarter of 2016. We have reported the $6.6 million aggregate carrying value of our remaining marketed-for-sale jack-up rigs and the mid-water semisubmersible rig to be sold for scrap as “Assets held for sale” in our Consolidated Balance Sheets at March 31, 2016.

Drilling and Other Property and Equipment

We carry our drilling and other property and equipment at cost, less accumulated depreciation. Maintenance and routine repairs are charged to income currently while replacements and betterments that upgrade or increase the functionality of our existing equipment and that significantly extend the useful life of an existing asset are capitalized. During the three months ended March 31, 2016 and the year ended December 31, 2015, we capitalized $30.7 million and $262.4 million, respectively, in replacements and betterments of our drilling fleet.

Capitalized Interest

We capitalize interest cost for qualifying construction and upgrade projects. See Note 8. A reconciliation of our total interest cost to “Interest expense, net of amounts capitalized” as reported in our Consolidated Statements of Operations is as follows:

	Three Months Ended March 31,
	2016			2015
	(In thousands)
Total interest cost, including amortization of debt issuance costs	$	28,825		$	29,996
Capitalized interest		(3,309	)		(6,014	)
Total interest expense as reported	$	25,516		$	23,982

Debt Issuance Costs

Historically, we have presented deferred costs associated with the issuance of long-term debt as “Other Assets” in our unaudited consolidated balance sheets and have amortized such costs over the respective terms of the related debt. In April 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30); Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03, which requires debt issuance costs associated with our senior notes to be presented in the balance sheet as a reduction in the related long-term debt. We have adopted the provisions of ASU 2015-03 effective January 1, 2016 and have retrospectively applied its provisions to all periods presented in our Consolidated Financial Statements. The retrospective effect of our adoption of ASU 2015-03, which affected only the presentation of deferred debt issuance costs in our Consolidated Balance Sheets at December 31, 2015, is as follows:

	Other Assets			Long-term Debt
	(In thousands)
Amount as previously presented, before adoption of ASU 2015-03	$	116,480		$	1,994,773
Deferred debt issuance costs		(14,995	)		(14,995	)
Amount as restated, after adoption of ASU 2015-03	$	101,485		$	1,979,778

Recent Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation (Topic 718), or ASU 2016-09, which simplifies several aspects of the accounting for share-based payment transactions. The new guidance makes several modifications to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. In addition, ASU 2016-09 clarifies the statement of cash flows presentation for certain components of share-based awards. The guidance of ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2017. Earlier adoption is permitted. We are currently evaluating the provisions of ASU 2016-09 and have not yet determined the impact on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09. The new standard supersedes the industry-specific standards that currently exist under GAAP and provides a framework to address revenue recognition issues comprehensively for all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Under the new guidance, companies recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also provides for additional disclosure requirements. In July 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09. The guidance of ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and may be adopted using a retrospective or modified retrospective approach.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or ASU 2016-02, which requires an entity to separate the lease components from the nonlease components in a contract. The lease components are to be accounted for under ASU 2016-02, which, under the guidance, may require recognition of lease assets and lease liabilities by lessees for most leases and derecognition of the leased asset and recognition of a net investment in the lease by the lessor. ASU 2016-02 also provides for additional disclosure requirements for both lessees and lessors. Nonlease components would be accounted for under ASU 2014-09. The guidance of ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption of ASU 2016-02 is permitted.

We are evaluating the provisions of ASU 2016-02 concurrently with the provisions of ASU 2014-09. We have not yet determined the impact of these ASUs on our financial position, results of operations or cash flows.

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Asset Impairments

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Asset Impairments

2. Asset Impairments

2016 — During the first quarter of 2016, in response to continued deterioration of the market fundamentals in the oil and gas industry, significant cutbacks in customer capital spending plans and contract cancelations by customers, as well as recently announced regulatory requirements in the U.S. Gulf of Mexico, we evaluated ten of our drilling rigs with indications that their carrying amounts may not be recoverable Using an undiscounted, projected probability-weighted cash flow analysis, we determined that the carrying values of these rigs were not impaired.

If market fundamentals in the oil and gas industry deteriorate or if we are unable to extend or secure new contracts for our current, actively-marketed drilling fleet or reactivate any of our cold-stacked rigs or if we experience unfavorable changes to our actual dayrates and rig utilization, we may be required to recognize additional impairment losses in future periods.

2015 Impairments — During the first quarter of 2015, we evaluated 17 of our drilling rigs with indications that their carrying amounts may not be recoverable. Using an undiscounted, projected probability-weighted cash flow analysis, we determined that the carrying value of eight of these rigs, consisting of seven mid-water floaters and our older 7,875-foot water depth rated drillship, were impaired (collectively referred to as the 2015 Impaired Rigs).

We estimated the fair value of five of the 2015 Impaired Rigs that were cold stacked utilizing a market approach, which required us to estimate the value that would be received for each rig in the principal or most advantageous market for that rig in an orderly transaction between market participants. Such estimates were based on various inputs, including historical contracted sales prices for similar rigs in our fleet, nonbinding quotes from rig brokers and/or indicative bids, where applicable. We estimated the fair value of the three remaining 2015 Impaired Rig using an income approach, as they were contracted to customers at that time. The fair value of each of these rigs was estimated based on a calculation of the rig’s discounted future net cash flows over its remaining economic life, which utilized significant unobservable inputs, including, but not limited to, assumptions related to estimated dayrate revenue, rig utilization, estimated equipment upgrade and regulatory survey costs, as well as estimated proceeds that may be received on ultimate disposition of the rig. Our fair value estimates were representative of Level 3 fair value measurements due to the significant level of estimation involved and the lack of transparency as to the inputs used.

During the first quarter of 2015, we recognized an impairment loss of $358.5 million to write down these rigs to their estimated recoverable amounts. Subsequent to the first quarter of 2015, we evaluated an additional eight drilling rigs, as well those rigs initially evaluated in the first quarter of 2015 that we had determined not to be impaired, for impairment. As a result of these evaluations, we determined that the carrying value of an additional nine drilling rigs, consisting of one ultra-deepwater, one deepwater and two mid-water semisubmersible rigs and five jack-up rigs, was not recoverable and recorded additional impairment losses of $2.6 million and $499.4 million in the third and fourth quarters of 2015, respectively.

Of the 17 rigs impaired during 2015, six mid-water semisubmersible rigs, our older drillship and one marketed-for-sale jack-up rig have been sold. At March 31, 2016, five of the remaining impaired rigs were cold stacked and four jack-up rigs are marketed for sale.

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Supplemental Financial Information

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Supplemental Financial Information

3. Supplemental Financial Information

Consolidated Balance Sheets Information

Accounts receivable, net of allowance for bad debts, consist of the following:

	March 31, 2016			December 31, 2015
	(In thousands)
Trade receivables	$	341,440		$	390,429
Value added tax receivables		17,221			14,475
Amounts held in escrow		9,231			4,966
Related party receivables		355			167
Other		1,074			1,057
		369,321			411,094
Allowance for bad debts		(5,724	)		(5,724	)
Total	$	363,597		$	405,370

Prepaid expenses and other current assets consist of the following:

	March 31, 2016		December 31, 2015
	(In thousands)
Rig spare parts and supplies	$	36,794	$	42,804
Deferred mobilization costs		48,438		52,965
Prepaid insurance		2,964		4,483
Prepaid taxes		16,969		14,969
Other		5,677		4,258
Total	$	110,842	$	119,479

Accrued liabilities consist of the following:

	March 31, 2016		December 31, 2015
	(In thousands)
Rig operating expenses	$	55,852	$	47,426
Payroll and benefits		45,145		59,787
Deferred revenue		50,337		31,542
Accrued capital project/upgrade costs		83,310		84,146
Interest payable		44,130		18,365
Personal injury and other claims		5,741		8,320
Other		4,694		4,183
Total	$	289,209	$	253,769

Consolidated Statements of Cash Flows Information

Noncash investing activities excluded from the Consolidated Statements of Cash Flows and other supplemental cash flow information is as follows:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Accrued but unpaid capital expenditures at period end	$	83,310	$	34,439
Common stock withheld for payroll tax obligations (1)		181		236
Cash interest payments(2)		908		—
Cash income taxes paid, net of (refunds):
U.S. federal		—		(3,344	)
Foreign		16,683		21,281
State		—		—

⁽¹⁾ Represents the cost of 7,923 shares and 7,810 shares of common stock withheld to satisfy payroll tax obligation incurred as a result of the vesting of restricted stock units in the three months ended March 31, 2016 and 2015, respectively. These costs are presented as a deduction from stockholders’ equity in “Treasury stock” in our Consolidated Balance Sheets at March 31, 2016 and 2015.

⁽²⁾ Interest payments, net of amounts capitalized, were $0.8 million and $0 for the three-month periods ended March 31, 2016 and 2015, respectively.

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Earnings Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

4. Earnings Per Share

A reconciliation of the numerators and the denominators of our basic and diluted per-share computations follows:

	Three Months Ended March 31,
	2016		2015
	(In thousands, except per share data)
Net income (loss) — basic and diluted numerator	$	87,425	$	(255,709	)
Weighted average shares — basic (denominator):		137,162		137,151
Dilutive effect of stock-based awards		44		—
Weighted average shares including conversions — diluted (denominator)		137,206		137,151
Earnings (loss) per share:
Basic	$	.64	$	(1.86	)
Diluted	$	.64	$	(1.86	)

The following table sets forth the share effects of stock-based awards excluded from our computations of diluted earnings per share, or EPS, as the inclusion of such potentially dilutive shares would have been antidilutive for the periods presented:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Employee and director:
Stock options		10		35
Stock appreciation rights		1,527		1,624
Restricted stock units		169		50

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Marketable Securities

3 Months Ended

Mar. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

5. Marketable Securities

We report our investments as current assets in our Consolidated Balance Sheets in “Marketable securities,” representing the investment of cash available for current operations. See Note 7.

Our investments in marketable securities are classified as available for sale and are summarized as follows:

	March 31, 2016
	Amortized Cost		Unrealized Gain (Loss)			Market Value
	(In thousands)
Corporate bonds	$	16,600	$	(11,601	)	$	4,999
Mortgage-backed securities		67		1			68
Total	$	16,667	$	(11,600	)	$	5,067

	December 31, 2015
	Amortized Cost		Unrealized Gain (Loss)			Market Value
	(In thousands)
Corporate bonds	$	16,480	$	(5,042	)	$	11,438
Mortgage-backed securities		77		3			80
Total	$	16,557	$	(5,039	)	$	11,518

Based on current facts and circumstances, we believe that the unrealized losses on our investments in corporate bonds presented in the tables above are not indicative of the ultimate collectability of these investments, but are primarily related to the financial market’s perception of the current downturn in the bond issuer’s industry (oil and gas market and contract drilling industry). We have no current intent to sell these securities, nor is it more likely than not that we will be required to sell these investments prior to their maturity. Therefore, we do not consider the unrealized losses at March 31, 2016 and December 31, 2015 associated with our investments in corporate bonds to be other than temporary.

Proceeds from maturities and sales of marketable securities and the related gains and losses during each of the three-month periods ended March 31, 2016 and 2015 were not significant.

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

6. Derivative Financial Instruments

Foreign Currency Forward Exchange Contracts

During the three months ended March 31, 2015, we settled foreign currency forward exchange, or FOREX, contracts with aggregate notional values of approximately $57.5 million, of which the entire aggregate amounts were designated as a cash flow accounting hedge. We did not settle any FOREX contracts during the three months ended March 31, 2016, and we had no FOREX contracts outstanding at March 31, 2016 or December 31, 2015.

During the three months ended March 31, 2015, we recognized an aggregate loss of $6.4 million related to our FOREX contracts designated as accounting hedges, which we presented within “Contract drilling expense, excluding depreciation” in our Consolidated Statements of Operations.

The following table presents the amounts recognized in our Consolidated Balance Sheets and Consolidated Statements of Operations related to our derivative financial instruments designated as cash flow hedges for the three-month period ended March 31, 2015.

	Three Months Ended March 31,
	2015
	(In thousands)
FOREX contracts:
Amount of (loss) gain recognized in AOCGL on derivative (effective portion)	$	(2,810	)
Location of (loss) gain reclassified from AOCGL into income (effective portion)		Contract drilling expense
Amount of (loss) gain reclassified from AOCGL into income (effective portion)	$	(5,520	)
Location of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)		Foreign currency transaction gain (loss)
Amount of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	$	(9	)

During the three-month period ended March 31, 2015, we did not reclassify any amounts from AOCGL due to the probability of an underlying forecasted transaction not occurring.

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Financial Instruments and Fair Value Disclosures

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Financial Instruments and Fair Value Disclosures

7. Financial Instruments and Fair Value Disclosures

Financial instruments that potentially subject us to significant concentrations of credit or market risk consist primarily of periodic temporary investments of excess cash, trade accounts receivable and investments in debt securities, including residential mortgage-backed securities. We generally place our excess cash investments in U.S. government-backed short-term money market instruments through several financial institutions. At times, such investments may be in excess of the insurable limit. We periodically evaluate the relative credit standing of these financial institutions as part of our investment strategy.

Most of our investments in debt securities are securitized corporate bonds whereby our credit risk is mitigated by the collateral. However, we are exposed to market risk due to price volatility associated with interest rate fluctuations.

Concentrations of credit risk with respect to our trade accounts receivable are limited primarily due to the entities comprising our customer base. Since the market for our services is the offshore oil and gas industry, this customer base consists primarily of major and independent oil and gas companies and government-owned oil companies. Based on our current customer base and the geographic areas in which we operate, as well as the number of rigs currently working in a geographic area, we do not believe that we have any significant concentrations of credit risk at March 31, 2016.

In general, before working for a customer with whom we have not had a prior business relationship and/or whose financial stability may be uncertain to us, we perform a credit review on that company. Based on that analysis, we may require that the customer present a letter of credit, prepay or provide other credit enhancements. We record a provision for bad debts on a case-by-case basis when facts and circumstances indicate that a customer receivable may not be collectible and, historically, losses on our trade receivables have been infrequent occurrences.

Fair Values

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices for identical instruments in active markets. Level 1 assets include short-term investments such as money market funds, U.S. Treasury Bills and Treasury notes. Our Level 1 assets at March 31, 2016 consisted of cash held in money market funds of $93.4 million and time deposits of $20.4 million. Our Level 1 assets at December 31, 2015 consisted of cash held in money market funds of $85.2 million and time deposits of $20.4 million.
Level 2	Quoted market prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 assets and liabilities include residential mortgage-backed securities, corporate bonds purchased in a private placement offering and over-the-counter FOREX contracts. Our residential mortgage-backed securities and corporate bonds were valued using a model-derived valuation technique based on the quoted closing market prices received from a financial institution. The inputs used in our valuation are obtained from a Bloomberg curve analysis which uses par coupon swap rates to calculate implied forward rates so that projected floating rate cash flows can be calculated. The valuation techniques underlying the models are widely accepted in the financial services industry and do not involve significant judgment.
Level 3	Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Level 3 assets and liabilities generally include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation or for which there is a lack of transparency as to the inputs used. Our Level 3 assets at March 31, 2016 consisted of nonrecurring measurements of certain of our drilling rigs for which we recorded an impairment loss during 2015. See Note 2.

Market conditions could cause an instrument to be reclassified among Levels 1, 2 and 3. Our policy regarding fair value measurements of financial instruments transferred into and out of levels is to reflect the transfers as having occurred at the beginning of the reporting period. There were no transfers between fair value levels during the three-month periods ended March 31, 2016 and 2015.

Certain of our assets and liabilities are required to be measured at fair value on a recurring basis in accordance with GAAP. In addition, certain assets and liabilities may be recorded at fair value on a nonrecurring basis. Generally, we record assets at fair value on a nonrecurring basis as a result of impairment charges. We recorded impairment charges related to certain of our drilling rigs, which were measured at fair value on a nonrecurring basis during the three-month periods ended March 31, 2015, September 30, 2015 and December 31, 2015 of $358.5 million, $2.6 million and $499.4 million, respectively.

Assets and liabilities measured at fair value are summarized below:

	March 31, 2016
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value
	(In thousands)
Recurring fair value measurements:
Assets:
Short-term investments	$	113,843	$	—	$	—	$	113,843
Corporate bonds		—		4,999		—		4,999
Mortgage-backed securities		—		68		—		68
Total assets	$	113,843	$	5,067	$	—	$	118,910
Nonrecurring fair value measurements:
Assets:
Impaired assets (1)(2)	$	—	$	—	$	178,415	$	178,415

⁽¹⁾  Represents the book value as of March 31, 2016 of 11 drilling rigs, which were written down to their estimated recoverable amounts in 2015, of which $6.6 million and $171.8 million were reported as “Assets held for sale” and “Drilling and other property and equipment, net of accumulated depreciation,” respectively, in our Consolidated Balance Sheets at March 31, 2016. See Note 2.

⁽²⁾  Excludes the fair value of one marketed-for-sale jack-up rig sold in February 2016.

	December 31, 2015
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value		Total Losses for Year Ended (1)
	(In thousands)
Recurring fair value measurements:
Assets:
Short-term investments	$	105,659	$	—	$	—	$	105,659
Corporate bonds		—		11,438		—		11,438
Mortgage-backed securities		—		80		—		80
Total assets	$	105,659		11,518	$	—	$	117,177
Nonrecurring fair value measurements:
Assets:
Impaired assets (2)(3)	$	—	$	—	$	189,600	$	189,600	$	860,441

⁽¹⁾  Represents the aggregate impairment loss recognized for the year ended December 31, 2015 related to our 2015 Impaired Rigs.

⁽²⁾  Represents the book value of our 2015 Impaired Rigs, which were written down to their estimated recoverable amounts during 2015, of which $14.2 million and $175.4 million were reported as “Assets held for sale” and “Drilling and other property and equipment, net of accumulated depreciation,” respectively, in our Consolidated Balance Sheets at December 31, 2015.

⁽³⁾  Excludes five rigs with an aggregate fair value of $2.4 million, which were impaired in 2015, but were subsequently sold for scrap prior to December 31, 2015.

We believe that the carrying amounts of our other financial assets and liabilities (excluding long-term debt), which are not measured at fair value in our Consolidated Balance Sheets, approximate fair value based on the following assumptions:

• Cash and cash equivalents — The carrying amounts approximate fair value because of the short maturity of these instruments.

• Accounts receivable and accounts payable — The carrying amounts approximate fair value based on the nature of the instruments.

• Commercial paper — The carrying amounts approximate fair value because of the short maturity of these instruments.

We consider our senior notes to be Level 2 liabilities under the GAAP fair value hierarchy and, accordingly, the fair value of our senior notes was derived using a third-party pricing service at March 31, 2016 and December 31, 2015. We perform control procedures over information we obtain from pricing services and brokers to test whether prices received represent a reasonable estimate of fair value. These procedures include the review of pricing service or broker pricing methodologies and comparing fair value estimates to actual trade activity executed in the market for these instruments occurring generally within a 10-day period of the report date. Fair values and related carrying values of our senior notes are shown below.

	March 31, 2016				December 31, 2015
	Fair Value		Carrying Value		Fair Value		Carrying Value
	(In millions)
5.875% Senior Notes due 2019	$	472.1	$	499.7	$	506.8	$	499.7
3.45% Senior Notes due 2023		177.9		249.2		208.0		249.2
5.70% Senior Notes due 2039		343.6		497.0		360.0		497.0
4.875% Senior Notes due 2043		493.8		748.9		455.3		748.9

We have estimated the fair value amounts by using appropriate valuation methodologies and information available to management. Considerable judgment is required in developing these estimates, and accordingly, no assurance can be given that the estimated values are indicative of the amounts that would be realized in a free market exchange.

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Drilling and Other Property and Equipment

3 Months Ended

Mar. 31, 2016

Property, Plant and Equipment [Abstract]

Drilling and Other Property and Equipment

8. Drilling and Other Property and Equipment

Cost and accumulated depreciation of drilling and other property and equipment are summarized as follows:

	March 31, 2016			December 31, 2015
	(In thousands)
Drilling rigs and equipment	$	9,187,672		$	9,345,484
Construction work-in-progress		288,900			269,605
Land and buildings		64,928			64,775
Office equipment and other		71,650			71,537
Cost		9,613,150			9,751,401
Less: accumulated depreciation		(3,393,908	)		(3,372,587	)
Drilling and other property and equipment, net	$	6,219,242		$	6,378,814

Construction work-in-progress, including capitalized interest, at March 31, 2016 and December 31, 2015 was $288.9 million and $269.6 million, respectively, attributable to the Ocean GreatWhite, which is expected to be completed in the second half of 2016.

See Note 13 for a discussion of two sale and leaseback transactions that were executed in March 2016.

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Credit Agreement, Commercial Paper and Credit Ratings

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Credit Agreement, Commercial Paper and Credit Ratings

9. Credit Agreement, Commercial Paper and Credit Ratings

In February 2016, Moody’s Investors Service, or Moody’s, downgraded our senior unsecured credit rating to Ba2 from Baa2, with a stable outlook, and also downgraded our short-term credit rating to sub-Prime. Our current corporate credit rating for Standard & Poor’s Ratings Services is BBB+ and our short-term credit rating is A2.

As a result of the Moody’s downgrade, we canceled our commercial paper program due to our inability to access the commercial paper market in the foreseeable future. In addition, based on our current credit ratings, the applicable interest margin for alternate base rate loans under our revolving credit agreement is 0.25% over the greater of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) the daily one-month Eurodollar Rate plus 1.00%. The applicable interest margin for Eurodollar loans under our revolving credit agreement is currently 1.25% over British Bankers’ Association Libor. The applicable commitment fee is 0.20%, and the participation fee for performance letters of credit is 0.625%.

In January 2016, we repaid the $286.6 million in commercial paper notes outstanding at December 31, 2015 with proceeds from Eurodollar loans under our revolving credit agreement. As of March 31, 2016, there were no Eurodollar loans or other amounts outstanding under our revolving credit agreement. As of April 28, 2016, we had $1.5 billion available under our revolving credit agreement.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

Various claims have been filed against us in the ordinary course of business, including claims by offshore workers alleging personal injuries. With respect to each claim or exposure, we have made an assessment, in accordance with GAAP, of the probability that the resolution of the matter would ultimately result in a loss. When we determine that an unfavorable resolution of a matter is probable and such amount of loss can be determined, we record a liability for the amount of the estimated loss at the time that both of these criteria are met. Our management believes that we have recorded adequate accruals for any liabilities that may reasonably be expected to result from these claims.

Asbestos Litigation. We are one of several unrelated defendants in lawsuits filed in Mississippi, Louisiana and Missouri state courts alleging that defendants manufactured, distributed or utilized drilling mud containing asbestos and, in our case, allowed such drilling mud to have been utilized aboard our drilling rigs. The plaintiffs seek, among other things, an award of unspecified compensatory and punitive damages. The manufacture and use of asbestos-containing drilling mud had already ceased before we acquired any of the drilling rigs addressed in these lawsuits. We believe that we are not liable for the damages asserted and we expect to receive complete defense and indemnity from Murphy Exploration & Production Company with respect to many of the lawsuits pursuant to the terms of our 1992 asset purchase agreement with them. We also believe that we are not liable for the damages asserted in the remaining lawsuits pursuant to the terms of our 1989 asset purchase agreement with Diamond M Corporation. We are unable to estimate our potential exposure, if any, to these lawsuits at this time but do not believe that our ultimate liability, if any, resulting from this litigation will have a material effect on our consolidated financial condition, results of operations or cash flows.

Other Litigation. We have been named in various other claims, lawsuits or threatened actions that are incidental to the ordinary course of our business, including a claim by one of our customers in Brazil, Petróleo Brasileiro S.A., or Petrobras, that it will seek to recover from its contractors, including us, any taxes, penalties, interest and fees that it must pay to the Brazilian tax authorities for our applicable portion of withholding taxes related to Petrobras’ charter agreements with its contractors. We intend to defend these matters vigorously; however, litigation is inherently unpredictable, and the ultimate outcome or effect of these claims, lawsuits and actions cannot be predicted with certainty. As a result, there can be no assurance as to the ultimate outcome of these matters. Any claims against us, whether meritorious or not, could cause us to incur costs and expenses, require significant amounts of management time and result in the diversion of significant operational resources. In the opinion of our management, no pending or known threatened claims, actions or proceedings against us are expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

NPI Arrangement. We received customer payments measured by a percentage net profits interest (primarily of 27%) under an overriding royalty interest in certain developmental oil-and-gas producing properties, or NPI, which we believe is a real property interest. Our drilling program related to the NPI was completed in 2011, and the balance of the amounts due to us under the NPI was received in 2013. However, in August 2012, the customer that conveyed the NPI to us filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Certain parties (including the debtor) in the bankruptcy proceedings questioned whether our NPI, and certain amounts we received under it after the filing of the bankruptcy, should be included in the debtor’s estate under the bankruptcy proceeding. In 2013, we filed a declaratory judgment action in the bankruptcy court seeking a declaration that our NPI, and payments that we received from it since the filing of the bankruptcy, are not part of the bankruptcy estate. We agreed to a settlement with the company that purchased most of the debtor’s assets (including the debtor’s claims against our NPI) whereby the nature of our NPI will not be challenged by that party and our declaratory judgment action was dismissed. Following the settlement, the bankruptcy was converted to a Chapter 7 liquidation proceeding. Several lienholders who had previously intervened in the declaratory judgment action filed motions in the bankruptcy contending that their liens have priority and seeking disgorgement of $3.25 million of payments made to us after the bankruptcy was filed. We believe that our rights to the payments at issue are superior to these liens, and we have filed appropriate motions to dismiss these claims. In addition, the bankruptcy trustee filed counterclaims seeking disgorgement of a total of $30.0 million of pre- and post-bankruptcy payments made to us under the original NPI. The bankruptcy court has dismissed all but one of the trustee’s disgorgement claims, which is limited in amount to $17.0 million. We continue to pursue all available defenses and available protections, and still expect the bankruptcy proceedings to be concluded with no further material impact to us.

Personal Injury Claims. Under our current insurance policies, which renewed effective May 1, 2016, our deductibles for marine liability insurance coverage with respect to personal injury claims not related to named windstorms in the U.S. Gulf of Mexico , which primarily result from Jones Act liability in the Gulf of Mexico, are $10.0 million for the first occurrence, with no aggregate deductible, and vary in amounts ranging between $5.0 million and, if aggregate claims exceed certain thresholds, up to $100.0 million for each subsequent occurrence, depending on the nature, severity and frequency of claims that might arise during the policy year. Our deductible for personal injury claims arising due to named windstorms in the U.S. Gulf of Mexico is $25.0 million for the first occurrence, with no aggregate deductible, and vary in amounts ranging between $25.0 million and, if aggregate claims exceed certain thresholds, up to $100.0 million for each subsequent occurrence, depending on the nature, severity and frequency of claims that might arise during the policy year.

The Jones Act is a federal law that permits seamen to seek compensation for certain injuries during the course of their employment on a vessel and governs the liability of vessel operators and marine employers for the work-related injury or death of an employee. We engage outside consultants to assist us in estimating our aggregate liability for personal injury claims based on our historical losses and utilizing various actuarial models. We allocate a portion of the aggregate liability to “Accrued liabilities” based on an estimate of claims expected to be paid within the next twelve months with the residual recorded as “Other liabilities.” At March 31, 2016 our estimated liability for personal injury claims was $38.0 million, of which $5.5 million and $32.5 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Consolidated Balance Sheets. At December 31, 2015 our estimated liability for personal injury claims was $40.4 million, of which $8.2 million and $32.2 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Consolidated Balance Sheets. The eventual settlement or adjudication of these claims could differ materially from our estimated amounts due to uncertainties such as:

• the severity of personal injuries claimed;

• significant changes in the volume of personal injury claims;

• the unpredictability of legal jurisdictions where the claims will ultimately be litigated;

• inconsistent court decisions; and

• the risks and lack of predictability inherent in personal injury litigation.

Purchase Obligations. The Ocean GreatWhite, a 10,000 foot dynamically positioned, harsh environment semisubmersible drilling rig, is under construction in South Korea at an estimated cost of $764 million, including shipyard costs, capital spares, commissioning, project management and shipyard supervision. The contracted price to Hyundai Heavy Industries Co., Ltd. totaling $628.5 million is payable in two installments, of which the first installment of $188.6 million has been paid. The final installment of $439.9 million is due upon delivery of the rig, which is expected to occur in the second half of 2016.

At March 31, 2016, we had no other purchase obligations for major rig upgrades or any other significant obligations, except for those related to our direct rig operations, which arise during the normal course of business. See Note 13.

Letters of Credit and Other. We were contingently liable as of March 31, 2016 in the amount of $69.0 million under certain performance, supersedeas, bid, tax and customs bonds and letters of credit. Agreements relating to approximately $63.9 million of performance, tax, supersedeas, court and customs bonds can require collateral at any time. As of March 31, 2016, we had not been required to make any collateral deposits with respect to these agreements. The remaining agreements cannot require collateral except in events of default. On our behalf, banks have issued letters of credit securing certain of these bonds.

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Accumulated Other Comprehensive Gain (Loss)

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Accumulated Other Comprehensive Gain (Loss)

11. Accumulated Other Comprehensive Gain (Loss)

The components of our AOCGL and related changes thereto are as follows:

	Unrealized (Loss) Gain on
	Derivative Financial Instruments			Marketable Securities			Total AOCGL
	(In thousands)
Balance at January 1, 2016	$	6		$	(5,041	)	$	(5,035	)
Change in other comprehensive loss before reclassifications, after tax of $0 and $2		—			(6,559	)		(6,559	)
Reclassification adjustments for items included in Net Income, after tax of $1 and $0		(1	)		—			(1	)
Balance at March 31, 2016	$	5		$	(11,600	)	$	(11,595	)

The following table presents the line items in our Consolidated Statements of Operations affected by reclassification adjustments out of AOCGL.

Major Category of AOCGL	Three Months Ended March 31,						Consolidated Statements of Operations Line Items
	2016			2015
	(In thousands)
Derivative Financial Instruments:
Unrealized loss on FOREX contracts	$	—		$	5,520		Contract drilling, excluding depreciation
Unrealized gain on treasury lock agreements		(2	)		(2	)	Interest expense
		1			(1,931	)	Income tax expense
	$	(1	)	$	3,587		Net of tax

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Restructuring and Separation Costs

3 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Separation Costs

12. Restructuring and Separation Costs

In early 2015, in response to the continuing decline in the offshore drilling market, we reviewed our cost and organization structure, and, as a result, our management approved and initiated a reduction in workforce at our onshore bases and corporate facilities, also referred to as the Corporate Reduction Plan. We recognized $6.2 million during the three-month period ended March 31, 2015 in restructuring and employee separation costs related to the Corporate Reduction Plan.

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Sale and Leaseback Transaction

3 Months Ended

Mar. 31, 2016

Leases [Abstract]

Sale and Leaseback Transaction

13. Sale and Leaseback Transaction

In February 2016, we entered into a ten-year agreement with a subsidiary of GE Oil & Gas, or GE, to provide services with respect to certain blowout preventer and related well control equipment, or Well Control Equipment, on our four newly-built drillships. Such services include management of maintenance, certification and reliability with respect to such equipment. In connection with the contractual services agreement with GE, we agreed to sell the Well Control Equipment to another GE affiliate and subsequently lease back such equipment over separate ten-year operating leases.

During March 2016, we executed two sale and leaseback transactions with respect to the Well Control Equipment on the Ocean BlackHawk and Ocean BlackHornet. As a result of these transactions, we received an aggregate $105.0 million in proceeds from the sale of the Well Control Equipment on these rigs and executed two ten-year operating lease and contractual services agreements. No gain or loss was recognized on the transactions. Future commitments under the operating leases and contractual services agreements for the Ocean BlackHawk and Ocean BlackHornet are estimated to be approximately $33.0 million per annum or an aggregate $327.0 million over the term of the agreements. We expect to complete the remaining sale and leaseback transactions for the Ocean BlackLion and Ocean BlackRhino in the second and fourth quarters of 2016, respectively.

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Segments and Geographic Area Analysis

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segments and Geographic Area Analysis

14. Segments and Geographic Area Analysis

Although we provide contract drilling services with different types of offshore drilling rigs and also provide such services in many geographic locations, we have aggregated these operations into one reportable segment based on the similarity of economic characteristics due to the nature of the revenue earning process as it relates to the offshore drilling industry over the operating lives of our drilling rigs.

Revenues from contract drilling services by equipment type are listed below:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Floaters:
Ultra-Deepwater	$	325,961	$	251,396
Deepwater		59,117		138,770
Mid-Water		47,672		176,357
Total Floaters		432,750		566,523
Jack-ups		10,773		33,054
Total contract drilling revenues		443,523		599,577
Revenues related to reimbursable expenses		27,020		20,479
Total revenues	$	470,543	$	620,056

Geographic Areas

Our drilling rigs are highly mobile and may be moved to other markets throughout the world in response to market conditions or customer needs. At March 31, 2016, our actively-marketed drilling rigs were en route to or located offshore five countries in addition to the United States. Revenues by geographic area are presented by attributing revenues to the individual country or areas where the services were performed.

	Three Months Ended March 31,
	2016		2015
	(In thousands)
United States	$	161,582	$	77,158
International:
South America		121,488		193,075
Europe		102,619		151,270
Australia/Asia		64,973		137,135
Mexico		19,881		61,418
Total revenues	$	470,543	$	620,056

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General Information (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Interim Financial Information

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S., or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, pursuant to such rules and regulations, they do not include all disclosures required by GAAP for complete financial statements. The consolidated financial information has not been audited but, in the opinion of management, includes all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated balance sheets, statements of operations, statements of comprehensive income and statements of cash flows at the dates and for the periods indicated. Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years.

Use of Estimates in the Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated.

Assets Held For Sale

Assets Held For Sale

At December 31, 2015, we reported the $14.2 million carrying value of five marketed-for-sale jack-up rigs as “Assets held for sale” in our Consolidated Balance Sheets. One of these rigs was sold for $8.0 million in February 2016. In March 2016, one of our previously impaired mid-water semisubmersible rigs completed its drilling contract and was sold for scrap in the second quarter of 2016. We have reported the $6.6 million aggregate carrying value of our remaining marketed-for-sale jack-up rigs and the mid-water semisubmersible rig to be sold for scrap as “Assets held for sale” in our Consolidated Balance Sheets at March 31, 2016.

Drilling and Other Property and Equipment

Drilling and Other Property and Equipment

We carry our drilling and other property and equipment at cost, less accumulated depreciation. Maintenance and routine repairs are charged to income currently while replacements and betterments that upgrade or increase the functionality of our existing equipment and that significantly extend the useful life of an existing asset are capitalized. During the three months ended March 31, 2016 and the year ended December 31, 2015, we capitalized $30.7 million and $262.4 million, respectively, in replacements and betterments of our drilling fleet.

Capitalized Interest

Capitalized Interest

We capitalize interest cost for qualifying construction and upgrade projects. See Note 8. A reconciliation of our total interest cost to “Interest expense, net of amounts capitalized” as reported in our Consolidated Statements of Operations is as follows:

	Three Months Ended March 31,
	2016			2015
	(In thousands)
Total interest cost, including amortization of debt issuance costs	$	28,825		$	29,996
Capitalized interest		(3,309	)		(6,014	)
Total interest expense as reported	$	25,516		$	23,982

Debt Issuance Costs

Debt Issuance Costs

Historically, we have presented deferred costs associated with the issuance of long-term debt as “Other Assets” in our unaudited consolidated balance sheets and have amortized such costs over the respective terms of the related debt. In April 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30); Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03, which requires debt issuance costs associated with our senior notes to be presented in the balance sheet as a reduction in the related long-term debt. We have adopted the provisions of ASU 2015-03 effective January 1, 2016 and have retrospectively applied its provisions to all periods presented in our Consolidated Financial Statements. The retrospective effect of our adoption of ASU 2015-03, which affected only the presentation of deferred debt issuance costs in our Consolidated Balance Sheets at December 31, 2015, is as follows:

	Other Assets			Long-term Debt
	(In thousands)
Amount as previously presented, before adoption of ASU 2015-03	$	116,480		$	1,994,773
Deferred debt issuance costs		(14,995	)		(14,995	)
Amount as restated, after adoption of ASU 2015-03	$	101,485		$	1,979,778

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation (Topic 718), or ASU 2016-09, which simplifies several aspects of the accounting for share-based payment transactions. The new guidance makes several modifications to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. In addition, ASU 2016-09 clarifies the statement of cash flows presentation for certain components of share-based awards. The guidance of ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2017. Earlier adoption is permitted. We are currently evaluating the provisions of ASU 2016-09 and have not yet determined the impact on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09. The new standard supersedes the industry-specific standards that currently exist under GAAP and provides a framework to address revenue recognition issues comprehensively for all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Under the new guidance, companies recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also provides for additional disclosure requirements. In July 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09. The guidance of ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and may be adopted using a retrospective or modified retrospective approach.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or ASU 2016-02, which requires an entity to separate the lease components from the nonlease components in a contract. The lease components are to be accounted for under ASU 2016-02, which, under the guidance, may require recognition of lease assets and lease liabilities by lessees for most leases and derecognition of the leased asset and recognition of a net investment in the lease by the lessor. ASU 2016-02 also provides for additional disclosure requirements for both lessees and lessors. Nonlease components would be accounted for under ASU 2014-09. The guidance of ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption of ASU 2016-02 is permitted.

We are evaluating the provisions of ASU 2016-02 concurrently with the provisions of ASU 2014-09. We have not yet determined the impact of these ASUs on our financial position, results of operations or cash flows.

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General Information (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Reconciliation of Total Interest Cost to Interest Expense

A reconciliation of our total interest cost to “Interest expense, net of amounts capitalized” as reported in our Consolidated Statements of Operations is as follows:

	Three Months Ended March 31,
	2016			2015
	(In thousands)
Total interest cost, including amortization of debt issuance costs	$	28,825		$	29,996
Capitalized interest		(3,309	)		(6,014	)
Total interest expense as reported	$	25,516		$	23,982

Retrospective Effect of Adoption that Impacted on Presentation of Deferred Debt Issuance Costs

The retrospective effect of our adoption of ASU 2015-03, which affected only the presentation of deferred debt issuance costs in our Consolidated Balance Sheets at December 31, 2015, is as follows:

	Other Assets			Long-term Debt
	(In thousands)
Amount as previously presented, before adoption of ASU 2015-03	$	116,480		$	1,994,773
Deferred debt issuance costs		(14,995	)		(14,995	)
Amount as restated, after adoption of ASU 2015-03	$	101,485		$	1,979,778

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Supplemental Financial Information (Tables)

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Accounts Receivable, Net of Allowance for Doubtful Accounts

Accounts receivable, net of allowance for bad debts, consist of the following:

	March 31, 2016			December 31, 2015
	(In thousands)
Trade receivables	$	341,440		$	390,429
Value added tax receivables		17,221			14,475
Amounts held in escrow		9,231			4,966
Related party receivables		355			167
Other		1,074			1,057
		369,321			411,094
Allowance for bad debts		(5,724	)		(5,724	)
Total	$	363,597		$	405,370

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

	March 31, 2016		December 31, 2015
	(In thousands)
Rig spare parts and supplies	$	36,794	$	42,804
Deferred mobilization costs		48,438		52,965
Prepaid insurance		2,964		4,483
Prepaid taxes		16,969		14,969
Other		5,677		4,258
Total	$	110,842	$	119,479

Accrued Liabilities

Accrued liabilities consist of the following:

	March 31, 2016		December 31, 2015
	(In thousands)
Rig operating expenses	$	55,852	$	47,426
Payroll and benefits		45,145		59,787
Deferred revenue		50,337		31,542
Accrued capital project/upgrade costs		83,310		84,146
Interest payable		44,130		18,365
Personal injury and other claims		5,741		8,320
Other		4,694		4,183
Total	$	289,209	$	253,769

Noncash Investing and Financing Activities

Noncash investing activities excluded from the Consolidated Statements of Cash Flows and other supplemental cash flow information is as follows:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Accrued but unpaid capital expenditures at period end	$	83,310	$	34,439
Common stock withheld for payroll tax obligations (1)		181		236
Cash interest payments(2)		908		—
Cash income taxes paid, net of (refunds):
U.S. federal		—		(3,344	)
Foreign		16,683		21,281
State		—		—

⁽¹⁾ Represents the cost of 7,923 shares and 7,810 shares of common stock withheld to satisfy payroll tax obligation incurred as a result of the vesting of restricted stock units in the three months ended March 31, 2016 and 2015, respectively. These costs are presented as a deduction from stockholders’ equity in “Treasury stock” in our Consolidated Balance Sheets at March 31, 2016 and 2015.

⁽²⁾ Interest payments, net of amounts capitalized, were $0.8 million and $0 for the three-month periods ended March 31, 2016 and 2015, respectively.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Reconciliation of Numerators and Denominators of Basic and Diluted Per-Share Computations

A reconciliation of the numerators and the denominators of our basic and diluted per-share computations follows:

	Three Months Ended March 31,
	2016		2015
	(In thousands, except per share data)
Net income (loss) — basic and diluted numerator	$	87,425	$	(255,709	)
Weighted average shares — basic (denominator):		137,162		137,151
Dilutive effect of stock-based awards		44		—
Weighted average shares including conversions — diluted (denominator)		137,206		137,151
Earnings (loss) per share:
Basic	$	.64	$	(1.86	)
Diluted	$	.64	$	(1.86	)

Securities Excluded from Computation of Diluted Earning Per Share

The following table sets forth the share effects of stock-based awards excluded from our computations of diluted earnings per share, or EPS, as the inclusion of such potentially dilutive shares would have been antidilutive for the periods presented:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Employee and director:
Stock options		10		35
Stock appreciation rights		1,527		1,624
Restricted stock units		169		50

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Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Investments in Marketable Securities as Available for Sale

Our investments in marketable securities are classified as available for sale and are summarized as follows:

	March 31, 2016
	Amortized Cost		Unrealized Gain (Loss)			Market Value
	(In thousands)
Corporate bonds	$	16,600	$	(11,601	)	$	4,999
Mortgage-backed securities		67		1			68
Total	$	16,667	$	(11,600	)	$	5,067

	December 31, 2015
	Amortized Cost		Unrealized Gain (Loss)			Market Value
	(In thousands)
Corporate bonds	$	16,480	$	(5,042	)	$	11,438
Mortgage-backed securities		77		3			80
Total	$	16,557	$	(5,039	)	$	11,518

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Amounts Recognized in Consolidated Balance Sheets and Consolidated Statements of Operations Related to Derivative Financial Instruments Designated as Cash Flow Hedges

The following table presents the amounts recognized in our Consolidated Balance Sheets and Consolidated Statements of Operations related to our derivative financial instruments designated as cash flow hedges for the three-month period ended March 31, 2015.

	Three Months Ended March 31,
	2015
	(In thousands)
FOREX contracts:
Amount of (loss) gain recognized in AOCGL on derivative (effective portion)	$	(2,810	)
Location of (loss) gain reclassified from AOCGL into income (effective portion)		Contract drilling expense
Amount of (loss) gain reclassified from AOCGL into income (effective portion)	$	(5,520	)
Location of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)		Foreign currency transaction gain (loss)
Amount of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	$	(9	)

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Financial Instruments and Fair Value Disclosures (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on Recurring and Nonrecurring Basis

Assets and liabilities measured at fair value are summarized below:

	March 31, 2016
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value
	(In thousands)
Recurring fair value measurements:
Assets:
Short-term investments	$	113,843	$	—	$	—	$	113,843
Corporate bonds		—		4,999		—		4,999
Mortgage-backed securities		—		68		—		68
Total assets	$	113,843	$	5,067	$	—	$	118,910
Nonrecurring fair value measurements:
Assets:
Impaired assets (1)(2)	$	—	$	—	$	178,415	$	178,415

⁽¹⁾  Represents the book value as of March 31, 2016 of 11 drilling rigs, which were written down to their estimated recoverable amounts in 2015, of which $6.6 million and $171.8 million were reported as “Assets held for sale” and “Drilling and other property and equipment, net of accumulated depreciation,” respectively, in our Consolidated Balance Sheets at March 31, 2016. See Note 2.

⁽²⁾  Excludes the fair value of one marketed-for-sale jack-up rig sold in February 2016.

	December 31, 2015
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Assets at Fair Value		Total Losses for Year Ended (1)
	(In thousands)
Recurring fair value measurements:
Assets:
Short-term investments	$	105,659	$	—	$	—	$	105,659
Corporate bonds		—		11,438		—		11,438
Mortgage-backed securities		—		80		—		80
Total assets	$	105,659		11,518	$	—	$	117,177
Nonrecurring fair value measurements:
Assets:
Impaired assets (2)(3)	$	—	$	—	$	189,600	$	189,600	$	860,441

⁽¹⁾  Represents the aggregate impairment loss recognized for the year ended December 31, 2015 related to our 2015 Impaired Rigs.

⁽²⁾  Represents the book value of our 2015 Impaired Rigs, which were written down to their estimated recoverable amounts during 2015, of which $14.2 million and $175.4 million were reported as “Assets held for sale” and “Drilling and other property and equipment, net of accumulated depreciation,” respectively, in our Consolidated Balance Sheets at December 31, 2015.

⁽³⁾  Excludes five rigs with an aggregate fair value of $2.4 million, which were impaired in 2015, but were subsequently sold for scrap prior to December 31, 2015.

Fair Values and Related Carrying Values of Our Debt Instruments

	March 31, 2016				December 31, 2015
	Fair Value		Carrying Value		Fair Value		Carrying Value
	(In millions)
5.875% Senior Notes due 2019	$	472.1	$	499.7	$	506.8	$	499.7
3.45% Senior Notes due 2023		177.9		249.2		208.0		249.2
5.70% Senior Notes due 2039		343.6		497.0		360.0		497.0
4.875% Senior Notes due 2043		493.8		748.9		455.3		748.9

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Drilling and Other Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2016

Property, Plant and Equipment [Abstract]

Summary of Cost and Accumulated Depreciation of Drilling and Other Property and Equipment

Cost and accumulated depreciation of drilling and other property and equipment are summarized as follows:

	March 31, 2016			December 31, 2015
	(In thousands)
Drilling rigs and equipment	$	9,187,672		$	9,345,484
Construction work-in-progress		288,900			269,605
Land and buildings		64,928			64,775
Office equipment and other		71,650			71,537
Cost		9,613,150			9,751,401
Less: accumulated depreciation		(3,393,908	)		(3,372,587	)
Drilling and other property and equipment, net	$	6,219,242		$	6,378,814

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Accumulated Other Comprehensive Gain (Loss) (Tables)

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Components of Accumulated Other Comprehensive Gain (Loss)

The components of our AOCGL and related changes thereto are as follows:

	Unrealized (Loss) Gain on
	Derivative Financial Instruments			Marketable Securities			Total AOCGL
	(In thousands)
Balance at January 1, 2016	$	6		$	(5,041	)	$	(5,035	)
Change in other comprehensive loss before reclassifications, after tax of $0 and $2		—			(6,559	)		(6,559	)
Reclassification adjustments for items included in Net Income, after tax of $1 and $0		(1	)		—			(1	)
Balance at March 31, 2016	$	5		$	(11,600	)	$	(11,595	)

Items in Consolidated Statements of Operations Affected by Reclassification Adjustments

The following table presents the line items in our Consolidated Statements of Operations affected by reclassification adjustments out of AOCGL.

Major Category of AOCGL	Three Months Ended March 31,						Consolidated Statements of Operations Line Items
	2016			2015
	(In thousands)
Derivative Financial Instruments:
Unrealized loss on FOREX contracts	$	—		$	5,520		Contract drilling, excluding depreciation
Unrealized gain on treasury lock agreements		(2	)		(2	)	Interest expense
		1			(1,931	)	Income tax expense
	$	(1	)	$	3,587		Net of tax

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Segments and Geographic Area Analysis (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Revenues from Contract Drilling Services by Equipment Type

Revenues from contract drilling services by equipment type are listed below:

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Floaters:
Ultra-Deepwater	$	325,961	$	251,396
Deepwater		59,117		138,770
Mid-Water		47,672		176,357
Total Floaters		432,750		566,523
Jack-ups		10,773		33,054
Total contract drilling revenues		443,523		599,577
Revenues related to reimbursable expenses		27,020		20,479
Total revenues	$	470,543	$	620,056

Revenues by Geographic Area Presented by Attributing Revenues to Individual Country

Revenues by geographic area are presented by attributing revenues to the individual country or areas where the services were performed.

	Three Months Ended March 31,
	2016		2015
	(In thousands)
United States	$	161,582	$	77,158
International:
South America		121,488		193,075
Europe		102,619		151,270
Australia/Asia		64,973		137,135
Mexico		19,881		61,418
Total revenues	$	470,543	$	620,056

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General Information - Additional Information (Detail) $ in Thousands	1 Months Ended	3 Months Ended		12 Months Ended
	Feb. 29, 2016 USD ($) Rigs	Mar. 31, 2016 USD ($) Rigs	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($) Rigs	Apr. 28, 2016
Property, Plant and Equipment [Line Items]
Carrying value of jack-up and mid-water rigs | $		$ 6,600		$ 14,200
Proceeds from disposition of assets | $	$ 8,000	$ 113,295	$ 4,763
Number of rigs completed its drilling contract | Rigs		1
Amount capitalized for asset replacements and betterments | $		$ 30,700		$ 262,400
Subsequent Event [Member]
Property, Plant and Equipment [Line Items]
Outstanding common stock owned by Loews Corporation					53.00%
Jack-ups Held for Sale [Member]
Property, Plant and Equipment [Line Items]
Number of offshore rigs owned | Rigs				5
Number of offshore rigs sold | Rigs	1

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General Information - Reconciliation of Total Interest Cost to Interest Expense, Net of Amounts Capitalized (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Interest Costs Incurred [Abstract]
Total interest cost, including amortization of debt issuance costs	$ 28,825	$ 29,996
Capitalized interest	(3,309)	(6,014)
Total interest expense as reported	$ 25,516	$ 23,982

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General Information - Retrospective Effect of Adoption that Impacted on Presentation of Deferred Debt Issuance Costs (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other assets	$ 110,323	$ 101,485
Long-term debt	$ 1,980,049	1,979,778
Scenario, Previously Reported [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other assets		116,480
Long-term debt		1,994,773
Restatement Adjustment [Member] | Deferred Debt Issuance Costs [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other assets		(14,995)
Long-term debt		$ (14,995)

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Asset Impairments - Additional Information (Detail) $ in Thousands	3 Months Ended				12 Months Ended
	Mar. 31, 2016 Rigs	Dec. 31, 2015 USD ($) Rigs	Sep. 30, 2015 USD ($)	Mar. 31, 2015 USD ($) Rigs ft	Dec. 31, 2015 Rigs
Schedule Of Asset Impairment Charges [Line Items]
Number of rigs evaluated for impairment	10
Impairment of assets | $		$ 499,400	$ 2,600	$ 358,528
Number of additional rigs evaluated for impairment		8			8
Number of additional rigs impaired		9			9
2015 Impaired Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Number of rigs evaluated for impairment				17
Number of rigs impaired				8
Impaired long-lived assets held and used, method for determining fair value	We estimated the fair value of five of the 2015 Impaired Rigs that were cold stacked utilizing a market approach, which required us to estimate the value that would be received for each rig in the principal or most advantageous market for that rig in an orderly transaction between market participants. Such estimates were based on various inputs, including historical contracted sales prices for similar rigs in our fleet, nonbinding quotes from rig brokers and/or indicative bids, where applicable. We estimated the fair value of the three remaining 2015 Impaired Rig using an income approach, as they were contracted to customers at that time. The fair value of each of these rigs was estimated based on a calculation of the rig’s discounted future net cash flows over its remaining economic life, which utilized significant unobservable inputs, including, but not limited to, assumptions related to estimated dayrate revenue, rig utilization, estimated equipment upgrade and regulatory survey costs, as well as estimated proceeds that may be received on ultimate disposition of the rig. Our fair value estimates were representative of Level 3 fair value measurements due to the significant level of estimation involved and the lack of transparency as to the inputs used.
Impairment of assets | $				$ 358,500
Number of rigs impaired on disposal					17
Number of rigs sold					1
Number of rigs cold stacked	5
Mid-Water Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Number of rigs impaired				7
Ultra-deepwater Drillship [Member]
Schedule Of Asset Impairment Charges [Line Items]
Water depth rated capacity of impaired drillship | ft				7,875
Ultra Deep Water Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Number of additional rigs impaired		1			1
Deep Water Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Number of additional rigs impaired		1			1
Mid-Water Drilling Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Number of additional rigs impaired		2			2
Mid-Water Drilling Rigs [Member] | 2015 Impaired Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Number of rigs sold					6
Jack-ups [Member]
Schedule Of Asset Impairment Charges [Line Items]
Number of additional rigs impaired		5			5
Jack-ups [Member] | 2015 Impaired Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Number of rigs sold	1
Number of rigs marketed for sale	4
Rig with Fair Values Estimated Using Market Approach [Member] | 2015 Impaired Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Total rigs estimated using market approach				5
Rig with Fair Values Estimated Using Income Approach [Member] | 2015 Impaired Rigs [Member]
Schedule Of Asset Impairment Charges [Line Items]
Total rigs estimated using income approach				3

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Supplemental Financial Information - Accounts Receivable, Net of Allowance for Doubtful Accounts (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Trade receivables	$ 341,440	$ 390,429
Value added tax receivables	17,221	14,475
Amounts held in escrow	9,231	4,966
Related party receivables	355	167
Other	1,074	1,057
Receivables Gross Current, Total	369,321	411,094
Allowance for bad debts	(5,724)	(5,724)
Total	$ 363,597	$ 405,370

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Supplemental Financial Information - Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Rig spare parts and supplies	$ 36,794	$ 42,804
Deferred mobilization costs	48,438	52,965
Prepaid insurance	2,964	4,483
Prepaid taxes	16,969	14,969
Other	5,677	4,258
Total	$ 110,842	$ 119,479

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Supplemental Financial Information - Accrued Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Payables and Accruals [Abstract]
Rig operating expenses	$ 55,852	$ 47,426
Payroll and benefits	45,145	59,787
Deferred revenue	50,337	31,542
Accrued capital project/upgrade costs	83,310	84,146
Interest payable	44,130	18,365
Personal injury and other claims	5,741	8,320
Other	4,694	4,183
Total	$ 289,209	$ 253,769

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Supplemental Financial Information - Noncash Investing and Financing Activities (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Condensed Financial Statements, Captions [Line Items]
Accrued but unpaid capital expenditures at period end	$ 83,310	$ 34,439
Common stock withheld for payroll tax obligations	181	236
Cash interest payments	908
U.S Federal [Member]
Cash income taxes paid, net of (refunds):
Cash income taxes paid, net of refunds		(3,344)
Foreign [Member]
Cash income taxes paid, net of (refunds):
Cash income taxes paid, net of refunds	$ 16,683	$ 21,281

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Supplemental Financial Information - Noncash Investing and Financing Activities (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Condensed Financial Statements, Captions [Line Items]
Interest payments, net of amounts capitalized	$ 0.8	$ 0.0
Restricted Stock [Member]
Condensed Financial Statements, Captions [Line Items]
Number of shares of common stock withheld	7,923	7,810

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Earnings Per Share - Reconciliation of Numerators and Denominators of Basic and Diluted Per-Share Computations (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Net income (loss) - basic and diluted numerator	$ 87,425	$ (255,709)
Weighted average shares - basic (denominator):	137,162	137,151
Dilutive effect of stock-based awards	44
Weighted average shares including conversions - diluted (denominator)	137,206	137,151
Earnings (loss) per share:
Basic	$ 0.64	$ (1.86)
Diluted	$ 0.64	$ (1.86)

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Earnings Per Share - Securities Excluded from Computation of Diluted Earning Per Share (Detail) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Options [Member]
Employee and director:
Securities excluded from computation of diluted earning per share	10	35
Restricted Stock Units (RSUs) [Member]
Employee and director:
Securities excluded from computation of diluted earning per share	169	50
Stock Appreciation Rights (SARs) [Member]
Employee and director:
Securities excluded from computation of diluted earning per share	1,527	1,624

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Marketable Securities - Investments in Marketable Securities as Available for Sale (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 16,667	$ 16,557
Unrealized Gain (Loss)	(11,600)	(5,039)
Market Value	5,067	11,518
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,600	16,480
Unrealized Gain (Loss)	(11,601)	(5,042)
Market Value	4,999	11,438
Mortgage-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	67	77
Unrealized Gain (Loss)	1	3
Market Value	$ 68	$ 80

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Derivative Financial Instruments - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Notional amount of foreign currency contracts settled	$ 0	$ 57,500,000
Derivative contracts outstanding	$ 0		$ 0
Amount of loss recognized		(6,390,000)
Contract Drilling Expense [Member] | FOREX Contracts Designated as Accounting Hedges [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of loss recognized		(6,400,000)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount reclassified from AOCGL due to the probability of a forecasted transaction not occurring		$ 0

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Derivative Financial Instruments - Amounts Recognized in Consolidated Balance Sheets and Consolidated Statements of Operations Related to Derivative Financial Instruments Designated as Cash Flow Hedges (Detail) - Derivative Designated as Accounting Hedges [Member] - FOREX Contracts [Member] $ in Thousands	3 Months Ended
	Mar. 31, 2015 USD ($)
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (loss) gain recognized in AOCGL on derivative (effective portion)	$ (2,810)
Contract Drilling Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (loss) gain reclassified from AOCGL into income (effective portion)	(5,520)
Foreign Currency Transaction Gain (Loss) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	$ (9)

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Financial Instruments and Fair Value Disclosures - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Mar. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Transfers between fair value levels	$ 0			$ 0
Impairment of assets		$ 499,400,000	$ 2,600,000	$ 358,528,000
Measurement period for determining fair value of debt instruments	10 days
Level 1 [Member] | Cash Held in Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of investments	$ 93,400,000	85,200,000
Level 1 [Member] | Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of investments	$ 20,400,000	$ 20,400,000

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Financial Instruments and Fair Value Disclosures - Assets and Liabilities Measured at Fair Value on Recurring and Nonrecurring Basis (Detail) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Mar. 31, 2015	Dec. 31, 2015	Mar. 31, 2016
Assets:
Book Value of Assets	$ 6,378,814			$ 6,378,814	$ 6,219,242
Loss on assets	499,400	$ 2,600	$ 358,528
Fair Value Measurements, Recurring [Member]
Assets:
Short-term investments	105,659			105,659	113,843
Corporate bonds	11,438			11,438	4,999
Mortgage-backed securities	80			80	68
Total assets	117,177			117,177	118,910
Fair Value Measurements, Recurring [Member] | Level 1 [Member]
Assets:
Short-term investments	105,659			105,659	113,843
Total assets	105,659			105,659	113,843
Fair Value Measurements, Recurring [Member] | Level 2 [Member]
Assets:
Corporate bonds	11,438			11,438	4,999
Mortgage-backed securities	80			80	68
Total assets	11,518			11,518	5,067
Nonrecurring Fair Value Measurements [Member]
Assets:
Book Value of Assets	189,600			189,600	178,415
Loss on assets				860,441
Nonrecurring Fair Value Measurements [Member] | Level 3 [Member]
Assets:
Book Value of Assets	$ 189,600			$ 189,600	$ 178,415

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Financial Instruments and Fair Value Disclosures - Assets and Liabilities Measured at Fair Value on Recurring and Nonrecurring Basis (Parenthetical) (Detail) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2016 USD ($) Rigs	Dec. 31, 2015 USD ($) Rigs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value of impaired rigs	$ 171.8	$ 175.4
Nonrecurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of rigs written down to their estimated recoverable amounts | Rigs	11
Number of rigs sold for scrap | Rigs		5
Fair value of assets impaired and sold during the period		$ 2.4
Jack-ups [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value of impaired rigs		$ 14.2
Number of rigs sold for scrap | Rigs	1
Jack Ups And Mid Water Rigs Held For Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value of impaired rigs	$ 6.6

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Financial Instruments and Fair Value Disclosures - Fair Value and Related Carrying Values of Our Debt Instruments (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
5.875% Senior Notes due 2019 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value	$ 472.1	$ 506.8
Carrying Value	499.7	499.7
3.45% Senior Notes due 2023 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value	177.9	208.0
Carrying Value	249.2	249.2
5.70% Senior Notes due 2039 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value	343.6	360.0
Carrying Value	497.0	497.0
4.875% Senior Notes due 2043 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value	493.8	455.3
Carrying Value	$ 748.9	$ 748.9

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Financial Instruments and Fair Value Disclosures - Fair Value and Related Carrying Values of Our Debt Instruments (Parenthetical) (Detail)	Mar. 31, 2016	Dec. 31, 2015
5.875% Senior Notes due 2019 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate of senior notes	5.875%	5.875%
3.45% Senior Notes due 2023 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate of senior notes	3.45%	3.45%
5.70% Senior Notes due 2039 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate of senior notes	5.70%	5.70%
4.875% Senior Notes due 2043 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate of senior notes	4.875%	4.875%

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Drilling and Other Property and Equipment - Summary of Cost and Accumulated Depreciation of Drilling and Other Property and Equipment (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Property and equipment	$ 9,613,150	$ 9,751,401
Less: accumulated depreciation	(3,393,908)	(3,372,587)
Drilling and other property and equipment, net	6,219,242	6,378,814
Drilling Rigs and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	9,187,672	9,345,484
Construction Work-in-Progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	288,900	269,605
Land and Buildings [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	64,928	64,775
Office Equipment and Other [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	$ 71,650	$ 71,537

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Drilling and Other Property and Equipment - Additional Information (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Ocean GreatWhite [Member]
Property, Plant and Equipment [Line Items]
Rigs under construction	$ 288.9	$ 269.6

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Credit Agreement, Commercial Paper and Credit Ratings - Additional Information (Detail) - USD ($)	1 Months Ended	3 Months Ended
	Jan. 31, 2016	Mar. 31, 2016	Apr. 28, 2016
Debt Instrument [Line Items]
Commitment fee		0.20%
Other Loans [Member]
Debt Instrument [Line Items]
Notes outstanding		$ 0
Eurodollar Loans [Member]
Debt Instrument [Line Items]
Interest margin		1.25%
Notes outstanding		$ 0
ABR Loans [Member]
Debt Instrument [Line Items]
Interest margin		0.25%
Federal Funds Rate [Member]
Debt Instrument [Line Items]
Basis point increase		0.50%
Eurodollar [Member]
Debt Instrument [Line Items]
Basis point increase		1.00%
Performance Letters of Credit [Member]
Debt Instrument [Line Items]
Participation fees for letters of credit		0.625%
Commercial Paper [Member]
Debt Instrument [Line Items]
Repayment of notes	$ 286,600,000
Revolving Credit Agreement [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Additional amount available under Credit Agreement			$ 1,500,000,000

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Commitments and Contingencies - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2016 USD ($) Installment ft	Dec. 31, 2015 USD ($)
Contingencies And Commitments [Line Items]
Net profits interest percent	27.00%
Disgorgement claims, limit	$ 17,000,000
Deductible for marine liability coverage including personal injury claims, per first occurrence	10,000,000
Range of deductible for liability coverage for personal injury claims, lower limit	5,000,000
Range of deductible for liability coverage for personal injury claims, upper limit	100,000,000
Other purchase obligations	0
Total Contingent Liabilities Under Letters of Credit and Bonds [Member]
Contingencies And Commitments [Line Items]
Contingent liability under letters of credit and other bonds	69,000,000
Potentially Collateralized Contingent Liability Under Letters Of Credit and Bonds [Member]
Contingencies And Commitments [Line Items]
Contingent liability under letters of credit and other bonds	$ 63,900,000
Hyundai Heavy Industries, Co., Ltd. [Member] | Ultra-Deepwater Floater Construction [Member]
Contingencies And Commitments [Line Items]
Water depth of rig | ft	10,000
Cost of enhancement of project	$ 764,000,000
Total number of installments due under each turnkey construction agreements | Installment	2
Cost of construction per shipyard agreement	$ 628,500,000
Construction installments paid	188,600,000
Final installment for Ultra-Deep water Floater Construction	439,900,000
NPI Arrangement [Member]
Contingencies And Commitments [Line Items]
Payments received from customer after bankruptcy filing	3,250,000
Payments received from customer before and after bankruptcy filing	30,000,000
Personal Injury Claims [Member]
Contingencies And Commitments [Line Items]
Personal injury claims recorded	38,000,000	$ 40,400,000
Personal Injury Claims [Member] | Accrued Liabilities [Member]
Contingencies And Commitments [Line Items]
Personal injury claims recorded	5,500,000	8,200,000
Personal Injury Claims [Member] | Other Liabilities [Member]
Contingencies And Commitments [Line Items]
Personal injury claims recorded	32,500,000	$ 32,200,000
Windstorms in U.S. Gulf of Mexico [Member]
Contingencies And Commitments [Line Items]
Deductible for marine liability coverage including personal injury claims, per first occurrence	25,000,000
Range of deductible for liability coverage for personal injury claims, lower limit	25,000,000
Range of deductible for liability coverage for personal injury claims, upper limit	$ 100,000,000

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Accumulated Other Comprehensive Gain (Loss) - Components of Accumulated Other Comprehensive Gain (Loss) (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (5,035)
Change in other comprehensive loss before reclassifications	(6,559)
Reclassification adjustments for items included in Net Income	(1)
Ending balance	(11,595)
Derivative Financial Instrument [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	6
Reclassification adjustments for items included in Net Income	(1)
Ending balance	5
Marketable Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(5,041)
Change in other comprehensive loss before reclassifications	(6,559)
Ending balance	$ (11,600)

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Accumulated Other Comprehensive Gain (Loss) - Components of Accumulated Other Comprehensive Gain (Loss) (Parenthetical) (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Equity [Abstract]
Change in other comprehensive loss on derivatives, tax expense (benefit)	$ 0
Change in other comprehensive loss on marketable securities, tax (expense) benefit	2
Reclassification adjustments for items included in Net Income on derivatives, tax (expense) benefit	1
Reclassification adjustments for items included in Net Income on marketable securities, tax (expense) benefit	$ 0

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Accumulated Other Comprehensive Gain (Loss) - Items in Consolidated Statements of Operations Affected by Reclassification Adjustments (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Contract drilling, excluding depreciation	$ (212,841)	$ (350,658)
Interest expense	(25,516)	(23,982)
Income tax expense	(4,229)	(31,409)
Net income (loss)	87,425	(255,709)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Cash Flow Hedges [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	1	(1,931)
Net income (loss)	(1)	3,587
Reclassification out of Accumulated Other Comprehensive Income [Member] | Cash Flow Hedges [Member] | FOREX Contracts [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Contract drilling, excluding depreciation		5,520
Reclassification out of Accumulated Other Comprehensive Income [Member] | Cash Flow Hedges [Member] | Treasury Lock Agreements [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	$ (2)	$ (2)

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Restructuring and Separation Costs - Additional Information (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2015 USD ($)
Restructuring and Related Activities [Abstract]
Restructuring and employee separation costs	$ 6,168

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Sale and Leaseback Transaction - Additional Information (Detail) $ in Millions	1 Months Ended
	Mar. 31, 2016 USD ($) Drillship	Feb. 29, 2016 Drillship
Leases [Abstract]
Maturity of lease agreement	10 years	10 years
Number of new build drillships in lease agreement | Drillship	2	4
Future minimum rental payments under leases	$ 327.0
Proceeds from sale of equipment	105.0
Future minimum rental payments under leases per annum	$ 33.0

XML

Segments and Geographic Area Analysis - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2016 Country Segment
Segment Reporting [Abstract]
Number of reportable segments | Segment	1
Number of countries with rigs | Country	5

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Segments and Geographic Area Analysis - Revenues from Contract Drilling Services by Equipment Type (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information [Line Items]
Contract drilling	$ 443,523	$ 599,577
Revenues related to reimbursable expenses	27,020	20,479
Total revenues	470,543	620,056
Ultra-deepwater Semisubmersible [Member]
Segment Reporting Information [Line Items]
Contract drilling	325,961	251,396
Deepwater [Member]
Segment Reporting Information [Line Items]
Contract drilling	59,117	138,770
Mid-Water [Member]
Segment Reporting Information [Line Items]
Contract drilling	47,672	176,357
Total Floaters [Member]
Segment Reporting Information [Line Items]
Contract drilling	432,750	566,523
Jack-ups [Member]
Segment Reporting Information [Line Items]
Contract drilling	$ 10,773	$ 33,054

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Segments and Geographic Area Analysis - Revenues by Geographic Area Presented by Attributing Revenues to Individual Country (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues	$ 470,543	$ 620,056
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues	161,582	77,158
South America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues	121,488	193,075
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues	102,619	151,270
Australia/Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues	64,973	137,135
Mexico [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues	$ 19,881	$ 61,418