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Seadrill (NYSE:SDRL) is an offshore deep water drilling company which operates in 15 countries and five continents. Seadrill's 52 week low is $31.37 a share and its 52 week high is $42.34 a share. Seadrill also pays a dividend of $3.40, or approximately 9% based on its current price.

Seadrill's net income was not consistent during Q1 through Q3 2012. From Q1 to Q2 there was a surge in net income, however, this increase was not from operating profit. This increase was from a "gain on decline in ownership interest" of $169 million and a "gain on realization of marketable securities" of $85 million.

  1. Q1 2012 net income = $439 million
  • Net income attributable to the parent = $416 million
  1. Q2 2012 net income = $554 million
  • Net income attributable to the parent = $526 million
  1. Q3 2012 net income = $216 million
  • Net income attributable to the parent = $189 million

From Q1 through Q2 net operating income increased from $456 million to $483 million. The biggest contributor was an increase in contract revenue from $1.025 billion to $1.087 billion. In Q3, contract revenue decreased to below Q1 2012 levels and operating expenses increased.

  1. Q1 2012 net operating income = $456 million
  • Q1 2012 operating revenue = $1.050 billion

  • Contract revenue = $1.025 billion

  • Floaters = $657 million

  • Jack-up rigs = $199 million

  • Tender rigs = $169 million

  • First quarter operating expenses = $594 million

  • Vessel and rig operating expenses = $381 million

  1. Q2 2012 net operating income = $483 million
  • Q2 2012 operating revenue = $1.122 billion

  • Contract revenue = $1.087 billion

  • Floaters = $718 million

  • Jack-up rigs = $186 million

  • Tender rigs = $183 million

  • Q2 operating expenses = $639 million

  • Vessel and rig operating expenses = $404 million

  1. Q3 2012 net operating income = $413 million
  • Q3 2012 operating revenue = $1.092 billion

  • Contract revenue = $1.056 billion

  • Floaters = $674 million

  • Jack-up rigs = $203 million

  • Tender rigs = $178 million

  • Q3 operating expenses = $679 million

  • Vessel and rig operating expenses = $423 million

While operating net income from tender rigs has been increasing, operating net income from jack-up rigs has been decreasing.

  1. Q1 2012 operating net income per operation:
  • Floaters = $318 million

  • Jack-up rigs = $67 million

  • Tender rigs = $71 million

  1. Q2 2012 operating net income per operation:
  • Floaters = $345 million

  • Jack-up rigs = $59 million

  • Tender rigs = $78 million

  1. Q3 2012 operating net income per operation:
  • Floaters = $282 million

  • Jack-up rigs = $47 million

  • Tender rigs = $84 million

Q3 2012 Back log:

  • $21.3 billion contract backlog

  • Tender rigs = $2.3 billion

  • Jack-ups = $3.3 billion

  • Floaters = $15.7 billion

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From Q1 2012 to Q3 2012 Seadrill's total assets were steadily climbing upwards.

  1. Q1 total assets = $18.702 billion
  • Total current assets = $1.943 billion
  • Total non-current assets = $16.759 billion

  • Floaters = $12.981 billion

  • Jack-up rigs = $4.214 billion

  • Tender rigs = $1.507 billion

  1. Q2 total assets = $18.934 billion
  • Total current assets = $1.972

  • Total non-current assets = $16.962 billion

  • Floaters = $13.234 billion

  • Jack-up rigs = $4.160 billion

  • Tender rigs = $1.540 billion

  1. Q3 total assets = $19.479 billion
  • Total current assets = $2.298
  • Total non-current assets = $17.181 billion

  • Floaters = $13.660 billion

  • Jack-up rigs = $4.232 billion

  • Tender rigs = $1.587 billion

From the beginning of Q1 through Q3, cash and cash equivalents have increased by $35 million.

  1. Q1 cash and cash equivalents = $445 million
  • Net cash provided by operating activities = $454 million
  1. Q2 cash and cash equivalents = $276 million
  • Net cash provided by operating activities = $482 million
  1. Q3 cash and cash equivalents = $518 million
  • Net cash provided by operating activities = $413 million

Net cash used in investment activities is as follows for the Q1 2012 to Q3 2012:

  1. Q1 2012 net cash used in investing activities = $440 million
  • Additions to new buildings = $506 million

  • Additions to rigs and equipment = $32 million

  • Investments in associated companies = $14 million

  • Change in margin calls and other restricted cash = +$108 million

  1. Q2 2012 net cash used in investing activities = $687 million
  • Additions to new buildings = $865 million

  • Additions to rigs and equipment = $101 million

  • Investments in associated companies = $54 million

  • Proceeds from realization of marketable securities = +$219 million

  1. Q3 2012 net cash used in investing activities = $302 million
  • Additions to new buildings = $226 billion

  • Additions to rigs and equipment = $110 million

  • Investments in associated companies = $6 million

Seadrill's debt has been gradually decreasing between Q1 2012 and Q3 2012. Seadrill has been managing its debt appropriately by borrowing when it needs to and paying it off with excess cash.

  1. Q1 2012 total interest bearing debt = $10.134 billion
  • Total bank loans and other = $7.330 billion

  • Total bonds = $1.137 billion

  • Long-term interest bearing debt = $8.675 billion

  1. Q2 2012 total interest bearing debt = $9.838 billion
  • Total bank loans and other = $7.128 billion

  • Total bonds = $1.122 billion

  • Long-term interest bearing debt = $8.376 billion

  1. Q3 2012 total interest bearing debt = $10.818 billion
  • Total bank loans and other = $7.154 billion

  • Total bonds = $2.119 billion

  • Long-term interest bearing debt = $9.296

At this moment I don't consider Seadrill to be a good value. In Q3 2012, contract revenues were down. In Q1 2013, SapuraKencana purchased most of Seadrill's tender rig fleet for $2.9 billion. Seadrill has a P/E of 16.4x, which is high compared to companies in its sector like BP, (NYSE:BP) 11.6x, and Ensco (NYSE:ESV) 12.1x. In addition, I believe the sale of the company's tender rig fleet will result in a decrease in future earnings, resulting in an even higher P/E. With the sale to SapuraKencana and a P/E of 16.4x, the stock is not worth the price.

Disclosure: I am holding SDRL short term. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: While I express my opinion in this article, only you can determine if a specific stock is right for your portfolio. You should always do your own research before buying or selling any stock. While I own shares of SDRL I plan on selling them. Note that where I have listed components of a category, the list in not necessarily complete. If you want a complete list, see the citation.

Source: Seadrill Limited Is Not Worth The Risk