Credit Suisse sees a Seadrill earnings miss but a safe dividend

Looking ahead to Seadrill’s (SDRL -1%) earnings report next month, Credit Suisse expects a miss but believes the dividend is safe.

The firm's revenue estimate for SDRL is a bit below consensus and it sees operating expense normalizing this quarter; it models for 97% floater efficiency vs. Wall Street's implied 100%, rigs undergoing yard work (not always fully disclosed), and floater operating expense/day of ~$200K vs. $219K/day in the prior quarter.

CS expects SDRL to maintain its dividend at a minimum, but says it would not be surprised to see another increase; it estimate an 86% payout of operating cash flow to fund the current dividend, leaving some wiggle room for another dividend increase.

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Comments (12)
  • Pnclpusher
    , contributor
    Comments (14) | Send Message
    Does anyone know the approximate cost to purchase the new rigs? Given a possible $600,000 per day rate, and expenses of $200,000 a day, what is the ROI?
    11 Jul 2014, 03:54 PM Reply Like
  • abujordan
    , contributor
    Comments (172) | Send Message
    ~600 million is a good number. 5 year contracts would seem to work out nicely for a rig if you could get 600k/day and keep expenses at 200k, leaving some margin for down time, other expenses, &/or lower day rates.
    11 Jul 2014, 04:45 PM Reply Like
  • rado403
    , contributor
    Comments (152) | Send Message
    This is the same bank that had to pay a fine to the USA IRS---
    11 Jul 2014, 04:54 PM Reply Like
  • KenNagle
    , contributor
    Comments (291) | Send Message
    On balance I don't listen to analysts since they seems to have a herd mentality. Rembember, analysts were falling all over themselves to increase Apple's PT and then falling all over themselves to reduce it lower and lower. I think a comp[any like Apple gets what their firms consider to be the top analysts; and if these people get it so wrong on Apple why should anyone pay attention to what these basically youngsters who have never managed anything opine.


    As for Credit Suisse, in my world character still means something - I think it is unethical for CS to come out now and opine on a maybe earnings miss -


    On Seadrill, management has demonstrated that they know what they are doing.
    11 Jul 2014, 06:59 PM Reply Like
  • robgra
    , contributor
    Comments (1232) | Send Message
    "I think it is unethical for CS to come out now and opine on a maybe earnings miss -"
    Hey, now, how else can they repair all those shorts they're holding?
    12 Jul 2014, 09:34 AM Reply Like
  • Debutant
    , contributor
    Comments (2995) | Send Message
    I neither respect nor heed the analysts or their Mini-Me's, but, an earnings miss combined with last week's CB story would keep the share price under pressure.
    12 Jul 2014, 05:29 AM Reply Like
  • mapodga
    , contributor
    Comments (7712) | Send Message
    Rigs are going down.


    will come back, next month or so...
    12 Jul 2014, 12:14 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (1466) | Send Message
    Would they care to put up real numbers as to what they expect the earnings to be (miss and all)? Strange to say the earnings might miss but the dividend is strong and or will be increased.


    Does anyone know the earnings guidance?


    I'm also leaning towards another dividend increase.
    13 Jul 2014, 01:56 PM Reply Like
  • Landsharks6
    , contributor
    Comments (155) | Send Message
    To Anyone,


    Im looking to establish a position in this company but haven't studied it.Does this seem to be a good entry point $37-39 per share.


    Thank you
    13 Jul 2014, 02:25 PM Reply Like
  • mapodga
    , contributor
    Comments (7712) | Send Message


    It is good entry point.


    I bought currently at 39.5$, so you will come better out then me.


    Before that I bought at 34.5$ and sold at 37$


    Stock is stable through year and have big reserve in relative and absolute terms.


    It has value 38.1 in 2011, 41.5 in 2012, 48 in 2013 and already 41 in this year.


    So it floats between 33$ and 48$ and currently is in lower side. So Lets say it is relative in lower 25% of this interval. In absolute terms rigs industry is undervalued because after 2010 it is far behind S&P growth and this could easily change some day.


    In this weeks I think is in the lowest points for this year. Could go to 36$ but not necessary, depends of the market mood regarding rigs industry.


    Next month will begin grow, because it goes toward dividend time.


    Advantage with SDRL is that has almost best dividend around (10%), which is quite safe for at least 1 year in front. So with such dividend you can compensate eventual "mistake" by buying to expensive.


    It is always problem with this values.


    2 weeks ago we had 40 and there were a lot of people saying that would buy if goes again back to 39. No everybody is asking if is good to buy at 37.6.


    13 Jul 2014, 03:24 PM Reply Like
  • Dan Terry
    , contributor
    Comments (37) | Send Message
    I have followed/traded SDRL for years and the entire time its always being trash talked by short sellers betting against it, many whom have had to pay my SDRL dividend check and lost their shirt at the same time..(I find it amusing how these short seller gamblers love to trash a solid oil exploration company yet you have tech based companies with no real profits and everyone is fast to buy them, probably the same kind of people that short SDRL) I just stocked up on more of it last week when everyone was selling it because of the bond offering/retraction of it after the selloff - no real reason for SDRL to go down, its a buying opp, was just over $40 before. I am bullish on this stock for sure, I feel it is one of the best stock buys available right now and they reward investors by letting them in of a generous share of the profits thru the dividend. I do not know why anyone would buy any other offshore driller - reasons are: The best rigs for ultradeepwater give it the edge over competitors(Most of the competitions fleets are not ultradeep water therefor limiting the competition in this market where most new oil is now being found - we are talking capability here, its not just a matter of having an old fleet vs. new fleet), best P/E ratio & highest dividend yield of these companies. Yes, they utilize a lot of financing/debt - how do you think they bought & run the newest & best equipment - plus factor in that their competitors will have to take on even more debt to buy new rigs at higher prices the longer they wait if they want to keep up with SDRLs fleet & ultradeep capability. One more thing on my rant here, correct me if I am wrong but have heard oil shale companies are finding some of their estimates are falling way short in the amount of oil they actually extract before running into worthless rock.. Also oil shale is very labor intensive and less lucrative than offshore oil.. All the more reason to buy SDRL
    15 Jul 2014, 09:12 PM Reply Like
  • frank paxman
    , contributor
    Comments (1692) | Send Message
    Here's hoping for an irrational market reaction to earnings and a buying opportunity.
    13 Jul 2014, 06:25 PM Reply Like
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