Diamond Offshore Drilling, Inc. April 21, 2009

1. Diamond Offshore Drilling, Inc.April 21, 2009 Alan Lagunov, Pragnesh Podar, Gana Raman, Bilal Rathore

2. Offshore Drilling • Diamond Offshore’s job is to drill and complete wells at the direction of customers • Completion in industry terms means preparing the well for production • Rigs come with a full crew and the equipment and supplies needed to carry out the assigned task • May range from a few days to multiple years • Crews live on rigs for 14 days, then get 14 days off

3. Business Description • Provides contract drilling services to the energy industry globally • Oil and gas • Leading company in deepwater drilling • One of the world’s largest fleets of offshore drilling rigs • 30 semisubmersibles • 14 jack-up units • 1 drill ship

4. Company History • Incorporated in Delaware in 1989 • Diamond Offshore is a collection of three companies • Ocean Drilling and Exploration Co. (ODECO) • Zapata Petroleum Corp. • Partnership which included George H.W. Bush • Purchased by Artheusa Ltd. in early 1990s • Diamond M Drilling Co. • After oil collapse of 1980s, Loews bought assets of Diamond M (1989)

5. Company History • In 1992, Diamond M bought out ODECO • In 1993, changed name to Diamond Offshore Drilling, Inc. • In 1995, Loews sold 30% of the company in an IPO • Wholly owned subsidiary of Loews prior to that • In April 1996, acquired Artheusa Ltd. • In February 2009, added to the S&P 500 index

6. Types of Rigs • Semisubmersibles (30) • Used in water depths of 1,100 to 10,000 feet • Consist of an upper working and living deck resting on vertical columns connected to lower hull members approximately 55 feet to 90 feet below the water line • Typically anchored in position and remain stable for drilling in the semi-submerged floating position due to wave transparency characteristics at the water line • Three rigs use computer-controlled thruster (dynamic-positioning) system to maintain the rig’s position over a drill site

7. Types of Rigs • Jack-up Units (14) • Mobile, self-elevating drilling platform equipped with legs that are lowered to the ocean floor until a foundation is established to support the drilling platform • Used in water depths of 20 to 350 feet • Drill Ship (1) • Self-propelled • Positioned over a drill site through the use of either an anchoring system or a dynamic-positioning system • Used in water depths of up to 7,500 feet

8. Worldwide Rig Locations Total 45 rigs Source: Company Website

9. Source: Oil Market Report. March 2009

10. Key Deep Water Areas Source: Howard Weil Energy Conference. March 2009

11. Industry Overview • Profitability depends on technical expertise and efficiency of operation. • Labor Intensive Industry • Avg. Annual Rev. per Employee = $410,000 • US oil and gas drilling support activities expected to grow at an annual compounded rate of 4% until 2013. Source: Hoovers Competitive Summary. April 2009

12. DO & Top Competitors • Diamond Offshore (DO) • Market Cap: $9.64 Billion • Close (4/20/2009): $69.64 • Transocean (RIG) • Market Cap: $20.49 Billion • Close (4/20/2009): $64.09 • Noble (NE) • Market Cap: $6.68 Billion • Close (4/20/2009): $25.56 • ENSCO (ESV) • Market Cap: $41.90 Billion • Close (4/20/2009): $29.55 Competitors from Hoovers

13. Comparables Source: Capital IQ

14. DO & Competitor 5 yr Returns Source: Google Finance

15. Floaters After Newbuild Deliveries Source: Howard Weil Energy Conference. March 2009

16. Crude Oil vs. DO Stock Price Source: Howard Weil Energy Conference. March 2009

17. DO Correlation with Crude Oil Spot Extremely High Correlation! R2 = 0.9347 Source: Bloomberg. April 2009

18. DO Correlation with Rig Count Extremely High Correlation! R2 = 0.8244 Source: Bloomberg. April 2009

19. Oil Cost Curve

20. Competitive Correlation

21. Competitor Dividends Source: Howard Weil Energy Conference. March 2009

22. Return on Capital Employed (From Credit Suisse) Source: Howard Weil Energy Conference. March 2009

23. Strengths & Weaknesses • Strengths • Leading player in deepwater drilling • Recently finished upgrading three rigs in 2008 • Increases efficiency and marketability • Conservative capital structure increases survivability in tough times • Weaknesses • Cyclical industry with intense price competition • Heavily rely on a limited number of customers • Top 5 customers accounted for 40% of revenues • Contracts do not adjust for increases in operating costs

24. Opportunities & Threats • Opportunities • Capitalize on foreseeable growth in emerging markets • Profit from the decline in mature onshore oil fields which require offshore exploration. • Threats • Worldwide demand for oil • The ability of the Organization of Petroleum Exporting Countries (OPEC) to control production levels and pricing. • Public Health for employees

25. Office Locations • Headquarters in Houston, Texas • Regional offices in Louisiana, Australia, Brazil, Indonesia, Scotland, Singapore and The Netherlands Source: Company Website

26. Ownership • 50.4% owned by Loews Corporation(NYSE:L), a diversified holding company • Three officers from Loews serve on Diamond Offshore’s Board of Directors • 94.83% owned by institutions

27. Key Management Executives • James S. Tisch, Chairman of the Board and Director • Served as CEO until 2008 and a former CEO at Loews (parent company) • Lawrence R. Dickerson, CEO, President and Director • Served in the United States Commission on Ocean Policy from 2001-2004 • Gary T. Krenek, CFO and Senior VP • Served as CFO since 2006

28. Valuation • DCF : $63/share • Triangulation: $60/share • 10% to Comp’s P/E ratio • 90% to DCF

29. Recommendation • Write 1 Sept. 2009 80 strike Call Contract • Purchase 1 Sept. 2009 60 strike Put Contract • Execute Flat, or with slight credit to account • Why? • Protection from market volatility during the summer. • Capitalize on potentially sharp price moves during the summer. • Protect downside with a net cash inflow. • Allows exit at a good price.