* Third quarter adjusted profit $1.22/shr vs est. $1.17/shr
* Revenue down 3 percent to $706 million
* Net profit falls due to cash flow problems at customers
* Overall market remains stable-CEO
Oct 24 (Reuters) - Diamond Offshore Drilling Inc posted a quarterly profit that beat analysts' estimates due to higher utilization of rigs used in shallow and ultra-deepwater drilling.
The drilling contractor said utilization -- a measure of rig used as a percentage of the fleet -- rose to 93 percent from 75 percent for ultra-deepwater rigs in the third quarter.
Utilization as well as daily rates rose for the company's jack-up, or shallow-water, rigs in the quarter.
"The overall market remains stable, supported by Brent oil prices above $100 per barrel and ongoing rig demand," said Chief Executive Larry Dickerson, who will retire in March.
Bigger rivals Noble Corp and Ensco Plc both reported higher-than-expected quarterly profits as rates paid for their rigs improved.
Diamond Offshore's third-quarter net income dropped 47 percent to $94.7 million, or 68 cents per share, hurt by cash flow issues at its customers.
The company, which is majority owned by Loews Corp, said it was working to relocate rigs contracted to oil and gas producers with cash flow issues.
Excluding a charge related to non-payments by customers, profit was $1.22 per share, higher than the analysts average estimate of $1.17 per share, according to Thomson Reuters I/B/E/S.
Total revenue fell about 3 percent to $706.2 million in the quarter ended Sept. 30, and missing analysts' expectations of $751.64 million.
Diamond Offshore shares closed at $63.23 on Wednesday on the New York Stock Exchange.