Diamond Offshore Drilling Inc, one of the world's top five offshore rig contractors, reported a better-than-expected adjusted profit as the company cut costs and secured higher rates for its upgraded fleet.

The company - owned 50.4 percent by hotel, energy and financial services conglomerate Loews Corp - also said it would pay a special quarterly cash dividend of 75 cents per share on top of its regular dividend of 13 cents.

Chief Executive Marc Edwards, a former Halliburton Co executive who took over at Diamond in February, said the company's added capacity and upgraded fleet put it in a strong position to navigate through any downturn.

Demand for contract drilling is softening as vessels ordered during boom times are delivered just as energy companies tighten spending on offshore exploration.

Analysts expect only a modest recovery in demand in the second half of 2014, with rig utilization staying below 2013 levels.

Utilization rates for Diamond Offshore's ultra-deepwater rigs fell to 66 percent in the first quarter from 91 percent in the fourth quarter.

However, the company said first-quarter day rates for ultra-deepwater rigs rose nearly 11 percent to $387,000 from the fourth quarter, while those for deepwater rigs rose about 4 percent to $418,000.

Diamond Offshore's shares, which have fallen about 30 percent in the last nine months, were up 0.6 percent at $48.80 in premarket trade on Thursday.

The company's net profit fell 17 percent 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.

Excluding a tax gain, Diamond Offshore reported earnings of 93 cents per share.

Revenue fell about 3 percent to $709.4 million.

Analysts on average had expected a profit of 65 cents per share on revenue of $686.3 million, according to Thomson Reuters I/B/E/S.

Analysts have been expecting Diamond Offshore to fare worse than its rivals, given the age of its fleet. The company has 45 offshore rigs, with an average age of 25.7 years.

A rig that has been in service for 25 years or more is considered old, said Jefferies & Co analyst Brad Handler.

Diamond Offshore, whose competitors include Ensco Plc , Transocean Ltd and Helmerich & Payne Inc , has two rigs due for delivery in 2014 but has not announced any contracts for them.