Diamond Offshore Drilling Inc, one of the world's top five offshore rig contractors, reported a 17 percent drop in quarterly profit as demand fell for rigs used in deep water drilling.
Contract drillers face a tough year as vessels ordered during boom times are delivered just as energy companies are tightening spending on offshore exploration.
Diamond Offshore, whose competitors include Ensco Plc , Transocean Ltd and Helmerich & Payne Inc , has two rigs due for delivery in 2014 but has yet to land contracts for them.
While the fall in rig demand and utilization is likely to affect the entire sector, analysts expect Diamond Offshore to fare worse than rivals, given the age of its fleet.
Diamond Offshore, controlled by Loews Corp - a hotel, energy and financial services conglomerate - has 45 offshore drilling rigs, whose average age is about 25.7 years.
A rig that has been in service for 25 years or more is considered old, said Jefferies & Co analyst Brad Handler.
Analysts expect only a modest recovery in demand in the second half of the year, with rig utilization staying below 2013 levels.
The utilization rate for Diamond Offshore's deepwater rigs fell to 64 percent in the March quarter from 94 percent a year earlier.
The company said it would pay a special quarterly cash dividend of 75 cents per share and a regular quarterly cash dividend of 13 cents per share.
Diamond Offshore's net profit fell to $145.8 million, or $1.05 per share, in the first quarter ended March 31, from $176 million, or $1.27 per share, a year earlier.
Revenue fell about 3 percent to $709.7 million.
Diamond Offshore shares closed at $48.53 on the New York Stock Exchange on Wednesday. They have fallen 30 percent in the last nine months.
Reporting By Shubhankar Chakravorty in Bangalore