D IAMOND O FFSHORE (DO) October 24, Michael DeRenzo Jason Chan Paddy Gu Caleb Pierson

A GENDA Introduction Company Overview Macroeconomic Outlook Relevant Stock Market Prospects Financial Analysis Valuation Recommendation 2

D IAMOND O FFSHORE IN RCMP 3 February 2008: Purchased 100 shares at $ per share November 2008: Purchased 50 shares at $72.96 per share April 2009: Sold a Sep. $80 call at $5.85; Bought a Sep. $60 put at $4.78 September 2009: Sold 100 shares at $76.25 vs. exercise adjusted strike on short call October 2010: Purchased 100 shares at $68.02 per share Current share price: $63.23 Accounts for % of total portfolio value

C OMPANY O VERVIEW 4 Diamond Offshore Drilling Found in 1989 and headquartered in Houston, Texas Global offshore oil drilling contractor that serves independent oil and gas companies as well as government-owned oil companies Operates Ultra-Deepwater, Deepwater, Mid-Water and Jack-up oil rigs Loews Corp. currently holds a 50.42% stake Insurance companies, investment managers, hedge funds and government pension sponsors hold a combined 49.35% stake DO offers its oil rigs to 35 different customers – Major customers include Petróleo Brasileiro S.A. and OGX Petróleo e Gás Ltda. – Accounts for 26 and 5 percent of gross trade accounts respectively – Compared to competitors, DO has a relatively large customer base Source: Capital IQ, Form 10-Q 2Q 2013 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

C OMPANY O VERVIEW 5 Management’s Outlook Key factors that impact DO’s rigs operating results – Regulatory surveys and planned downtime –7 rigs will undergo surveys during second half of 2013 –In total the 7 rigs will be out of service for approximately 670 days – Physical damage on rigs – Construction and capital upgrade projects All of these factors impact the revenue earning days for each of the oil rigs, ultimately lowering the overall utilization rates and average daily revenue Ultra-Deepwater and Deepwater Floater markets consists of highest utilization rates – This will result in overall increased competition within these markets Source: Form 10-Q 2Q 2013 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

B REAKDOWN OF O IL R IGS BY O CEAN D EPTH 6 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Source: Diamond Offshore, DiamondOffsore: Investors: Annual Reports and Proxy Statements Feb

C OMPANY O VERVIEW 7 -Source: IHS,. N.p.. Web. 29 Oct < DO Oil RigsUltra-DeepwaterDeepwaterMid-WaterJack-ups Revenue Earning Days (2013) 1, , Utilization (2013)83%97%64%72% Average Daily Revenue (2013) $350,000$399,200$266,500$86,800 Breakdown Of DO Oil Rigs DO recently increased total rig count to 45 – 38 floaters (Ultra-Deepwater, Deepwater, Mid-Water) and 7 Jack-ups – The newest rig is expected to be completed by Q and has been contracted for use in Q As of 10/18/2013 global supply of oil rigs hit 814 – Marketed utilization rate of 95.1% F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

8 Key External Drivers Source: IBIS World, The Conference Board Global price of crude oil – Supply, demand and overall volatility Global GDP growth rate – BRIC nations and other emerging markets – Emerging markets are projected to drop from 5.5% in 2012 to 5% in 2013 – As emerging economies mature their GDP growth rates will continue to decline towards developed economies growth rates Increase in manufacturing industries – Petrochemicals, plastics, power generation, utilities, etc. M ACROECONOMIC O UTLOOK F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

9 P ROJECTED G LOBAL S UPPLY & D EMAND O F O IL Source:. N.p.. Web. 29 Oct < Liquid fuels still remain the largest energy source – Liquid share of world energy consumption expected to fall from 34% (2010) to 28% (2040) Global Oil Production Global Oil Demand F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

I NDUSTRY O VERVIEW 10  Volatile prices prevail  BRIC demand  Deep-water Horizon  Oil and Gas consumption is expected to expand moderately as global economic growth continues  Environmental concerns associated with deep- sea oil and gas drilling  Rising operating costs through compliance monitoring and longer lead times  Industry's revenue is forecast to grow at an annualized rate of 2.5% in the five years to 2018 to $5.1 trillion  Ability to accommodate environmental requirements  Downstream ownership links  Output is sold under contract - incorporate long- term sales contracts  Control cost structure Keys To Success Industry Trends Current Performance F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

I NDUSTRY L IFE C YCLE Mature Industry contribution to US economy average at 1.4% per year Lag the global economy’s GDP Technological change tend to be incremental Merger activity is ongoing 11 Introduction Growth Maturity Decline Time Total Industry Revenue F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Source: IBIS World

P ORTER ’ S FIVE FORCES 12 Power of Suppliers: Low and SteadySubstitutes: Low and Increasing Industry Specific MachineHigh incentive for people to innovative Determined by demand of Drillers Biodiesel, Ethanol, Electricity, Solar, Wind Power Barrier to Entry: High and SteadyPower of Buyers: High and Steady Competition, Capital Intensity and RegulationWhoever bids with the lowest price gets the contract Competition: High and Increasing Compete on the basis of price Competition between oil and gas as fuels is very limited Organization of the Petroleum Exporting Countries (OPEC)effects competition levels Fracking Boom in United States and ability to access large amounts of shale oil F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

13 I NDUSTRY A NALYSIS – O IL & G AS E XPLORATION & D RILLING Revenue Revenue Growth Source: U.S. Energy Information Administration (EIA)." U.S. Energy Information Administration (EIA). N.p., n.d. Web. 29 Oct Expected revenue: $4.5 Trillions in 2013 Up from $4.2 trillion in 2008 Annualized growth rate of 1.3% from 2008 to Revenue is expected to grow 3.0% in 2013 Industry performance did experience significant pitfalls Profit has fluctuated according to oil and gas prices. F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

D RILLING D AY R ATES & U TILIZATION P ERCENTAGES 14 Mid-Water Oil RigsDeepwater & Ultra-Deepwater Oil Rigs IHS Petrodata Day Rate Indices track drilling fleet day rates and utilization percentages Day rates for Mid-Water Oil Rigs reached the highest level in October since the index’s inception in 1994 Source: "Day Rate Index | IHS." IHS Home Page. N.p., n.d. Web. 29 Oct F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

U NDERSTANDING M ARKET P OWER 15 StrengthsWeaknesses - Majority of fleet is in sector with highest utilization rate - Have five new ultra deep rigs becoming available soon - Highly dependent on cash flow from a volatile emerging market - Rely on a relatively small number of customers OpportunitiesThreats - New technology allows for deeper water exploration - Market does not have a dominant company - Volatility of crude oil prices - Decline in GDP growth rates in emerging markets - High incentives towards alternative energy F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

F INANCIAL A NALYSIS - R ATIOS 16 DO, Financial Analysis Liquidity Ratios Current Ratio Quick Ratio Cash Ratio Profitability Ratios Operating Profit Margin52.41%42.89%37.79%32.22%39.68% Net Margin37.90%28.75%28.97%24.12%25.52% ROA27.87%15.25%14.31%10.35%10.32% ROE (Book Value)41.10%26.32%24.93%16.63%16.31% Solvency Ratios Debt/Assets Debt/Equity Interest Coverage Activity Ratios A/R Turnover Days Sales Outstanding Fixed Asset Turnover Total Asset Turnover F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

F INANCIAL A NALYSIS – D UPONT DuPont Analysis Tax Burden70.95%73.66%71.52%81.62%78.48% Interest Burden96.69%98.17%93.73%93.93%95.40% Operating Profit Margin52.41%42.89%37.79%32.22%39.68% Asset Turnover 72.1%57.97%49.40%47.71%41.28% Leverage ROE38.06%31.02%21.80%18.94%19.38% 17 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

R ECENT S TOCK P ERFORMANCE & 200 Day Moving Average Stock Chart DO’s stock price has been well below the 200 day moving average since the end of July, 2013 Currently the stock price is hovering right around the 20 day moving average and looks as if it may fall below the 20 day moving average in the near future F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Source: Yahoo Finance

V ALUATION – U TILIZATION R ATES Utilization Rates - DO Historical figuresForecast Figures 2010A2011A2012A2013P2014P2015P2016P2017P Average Utilization Rates: Ultra-Deepwater66%82%85% 84% 83% Deepwater74%94%88% 87% 86% Mid-Water79%72%68%64% 63%62% Jack-Ups61%47%53%50% 49%48%47% Average Dayrates: Ultra-Deepwater Deepwater Mid-Water Jack-Ups Number of Rigs Ultra-Deepwater Deepwater Mid-Water19 18 Jack-Ups Total Total Revenue ($ in millions) Ultra-Deepwater , , , , , , , Deepwater , Mid-Water1, , , , , , , , Jack-Ups Total Contract Drilling Revenue3, , , , , , , ,425.19

V ALUATION – WACC WACC Calculation Capital Structure Debt-to-Total Capitalization 24.2% Equity-to-Total Capitalization 75.8% Cost of Debt 5.9% Tax Rate 30.0% After-tax Cost of Debt 4.1% Cost of Equity Risk-free Rate(1) 2.7% Market Risk Premium 6.8% Levered Beta 1.30 Cost of Equity 11.5% WACC 9.7% (1) Interpolated yield on 10-year U.S. Treasury (2) Sourced from Capital 20 Comparable Companies Unlevered Beta Market Debt/MarginalUnlevered CompanyLevered BetaValue of DebtValue of EquityEquityTax RateBeta Transocean Ltd. (NYSE:RIG) 1.42 $12,459.0 $16, % 30.0% 0.96 Ensco plc (NYSE:ESV) 1.33 $4,845.9 $12, % 30.0% 1.04 Noble Corp. (NYSE:NE) 1.50 $4,634.4 $9, % 30.0% 1.06 Rowan Companies plc (NYSE:RDC) 1.50 $2,009.6 $8, % 30.0% 1.15 Atwood Oceanics, Inc. (NYSE:ATW) 1.59 $838.3 $4, % 30.0% 1.10 Mean Median Relevered Beta MeanTarget UnleveredDebt/MarginalRelevered BetaEquityTax RateBeta Relevered Beta % 30.0% 1.30 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

C APEX P ROJECTIONS 21 DO’s Capex growth rate based off of the average historical Capex of the Comparable Companies from FY2008 – FY2012

V ALUATION – DCF 22 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Discounted Cash Flows - DO Historical FiguresForecast Figures 2008A2009A2010A2011A2012A2013P2014P2015P2016P2017P EBIT2,011, ,998, ,472, ,309, , ,526, ,464, ,476, ,510, ,574, Less: Income Taxes(536,499.00)(492,212.00)(380,559.00)(216,729.00)(197,604.00)(406,119.86)(389,762.17)(360,214.94)(376,172.27)(416,173.42) Plus: D&A287, , , , , , , , ,262, ,713, Less: CapEx(666,857.00)(412,444.00)(434,262.00)(774,756.00)(702,041.00)(888,854.11)(1,125,378.19)(1,424,841.32)(1,803,991.60)(2,284,033.77) Less: Change in Working Capital:(311,884.00)160,661.00(458,810.00)(80,338.00)(28,580.73)3,522.25(109,542.07)81, , Unlevered FCF 687, , , ,660.48(7,343.07) Terminal Value =19,385, Present Value of Cash Flows 693, , , , , PV of Terminal Value = 10,521, Discount Rate: 13.0% EV = 11,941, % premium added due to business risks involved

V ALUATION – DCF 23 Terminal Value Assumption Terminal Multiple8.0x Terminal Value 19,385, Calculation of Implied Share Price Implied Enterprise Value $ 11,941,597 Less: Debt $ 1,496,066 Plus: Cash $ 1,485,590 Implied Market Cap $ 11,931,121 Implied Share Price $ EBITDA Exit Multiple EV/EBITDAWeighted Transocean Ltd. (NYSE:RIG)8.6x20.0% Ensco plc (NYSE:ESV)7.7x55.0% Noble Corp. (NYSE:NE)9.0x5.0% Rowan Companies plc (NYSE:RDC)9.6x10.0% Atwood Oceanics, Inc. (NYSE:ATW)8.9x10.0% Weighted Average:8.0x F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

V ALUATION – C OMPARABLES C OMPANY A NALYSIS 24 MultiplesWeightImplied DO Share Price Price/Book Value20% $ Forward TEV/Sales20% $ Forward TEV/EBITDA25% $ Forward P/E25% $ DCF10% $ DO Implied Stock Price $ Comparables - DO Enterprise Value /Price /Growth RatesProfitability CY 2012CY 2013CY 2014LT EquityDebt/EnterpriseEPS 1 YearMargins ValueEquityValue Rev.EBITDA BVActual (1)Est. (1) Growth (1)Rev.EBITDA NI Transocean Ltd. (NYSE:RIG) $ 16, % $ 23,7222.5x8.6x1.0x10.1x11.5x8.7x22.8%3.1%-1.5%29.5%7.5% Ensco plc (NYSE:ESV) $ 12, % $ 17,1273.7x7.7x1.0x10.0x8.6x7.5x16.1% 14.8%48.5%26.9% Noble Corp. (NYSE:NE) $ 9, % $ 15,3994.1x9.0x1.2x16.8x12.9x8.4x20.3%19.7%29.5%47.1%18.7% Diamond Offshore Drilling, Inc. (NYSE:DO) $ 8, % $ 9,0553.1x6.6x1.9x12.6x13.3x10.0x17.6%-0.7%-5.0%46.9%24.0% Rowan Companies plc (NYSE:RDC) $ 4, % $ 55,1593.6x9.6x1.0x18.2x16.7x10.2x21.6%14.0%9.6%37.8%15.4% Atwood Oceanics, Inc. (NYSE:ATW) $ 3, % $ 4,5814.6x8.9x1.7x10.8x10.3x8.4x23.5%34.8%39.7%51.6%33.6% Mean 3.7x8.8x 1.2x13.2x12.0x8.6x 0.2x 0.4x 0.2x Median 3.7x8.9x 1.0x10.8x11.5x8.4x 0.2x 0.1x 0.5x 0.2x High 4.6x9.6x 1.7x18.2x16.7x10.2x 0.2x 0.3x 0.4x 0.5x 0.3x Low 2.5x7.7x 1.0x10.0x8.6x7.5x 0.2x 0.0x 0.3x 0.1x F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

C OMPARABLES S TOCK C HART 25 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION From the start of the year (2013), DO’s stock price has been one of the lowest (Jan – May) and the lowest (May – Dec) among its competitors. Source: Yahoo Finance

D ECISION D RIVERS Strengths – Positioned to take advantage of deep water and ultra-deep water opportunities with forthcoming drillships and semisubmersibles – Deepwater and ultra-deep water are the areas with the highest current utilization rate Concerns – Slow down in emerging market GDP growth – Alternative sources of energy and oil – Large forthcoming capital expenditures for fleet maintenance/upgrade – Stock performance vs. comparables show poor performance – Highly competitive and cyclical industry 26 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

R ECOMMENDATION Valuation – Current Price $63.01 per share – Analyzed Price $58.67 per share based on Triangulation Recommendation – SELL 150 MP 27 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

Q UESTIONS ? 28