Update: Seadrill Earnings Enhance Our Bull Case

| About: Seadrill Limited (SDRL)


Seadrill announced second-quarter earnings today and reported record group EBITDA of $865 million.

The earnings are in line with our expectations and the company has also maintained its quarterly dividend at $1 per share.

Strong earnings and recent contract wins for rigs have enhanced our bull case.

Seadrill (NYSE:SDRL) announced second-quarter earnings today - the company reported EBITDA of $641 million and the consolidated EBITDA for the group stood at a record level of $865 million. Furthermore, second-quarter earnings stood at $653 million, resulting in per share income of $1.29 for the quarter. The quarterly dividend of the company remains unchanged at $1 and the order backlog stands at around $20 billion. One of the most important developments for the company during the second quarter was the deal with Rosneft - Seadrill has confirmed in the second-quarter earnings that Seadrill's subsidiary, North Atlantic Drilling (NYSE:NADL) will be deploying 5 rigs with Rosneft during 2015-2017, with the total revenue potential of over $4 billion.

The cash position of the company remains strong along with the financing options. Seadrill also completed the redemption of a $650 million convertible bond offering, which allows the company to manage its debt profile. At the moment, total interest bearing debt of the company stands at about $12.25 billion. Total revenues for the quarter stood at $1.222 billion - almost identical [$1.221 billion] to the first-quarter revenues.

The results are in line with our expectations - we have maintained that despite the fears about the sector and a slowdown; we do not expect the earnings of the company to be impacted. In our opinion, the demand for ultra-deepwater, high-specification rigs will remain high and this equipment will be able to maintain attractive day rates. Seadrill has the majority of its assets in the high-specification, ultra-deepwater category. The company's ability to win contracts for its newbuilds as well as out-of-contract rigs shows that the fears about a slowdown in the sector are unfounded. We maintain that Seadrill is a solid long-term investment and this earnings report has further supplemented our bull case.

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