Seadrill -4% despite Q2 earnings beat, calls a halt to newbuilding orders


Seadrill (NYSE:SDRL) -4.1% premarket after beating Q2 earnings estimates, but it says it will refrain from ordering new rigs until the market became clearer to read.

SDRL already has 18 rigs under construction but John Fredriksen says the near-term market for ultra-deepwater drilling units remains challenging and is uncertain about how deepwater drilling rates will develop, driven by reduced exploration drilling that has led to a slower growth rate in overall upstream spending.

SDRL's Q2 earnings beat is largely due to a tax benefit; EBITDA came in at $641M, below forecasts of ~$663M and down from the $665M posted in the year-ago quarter.

Says it intends to prioritize returning cash to shareholders, and can maintain a quarterly dividend of $1/share well into 2016 even if the rig market fails to make a significant recovery.

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Comments (24)
  • djsulli
    , contributor
    Comments (2442) | Send Message
     
    A SDRL buying dip?
    27 Aug 2014, 08:39 AM Reply Like
  • Martin_Kostka
    , contributor
    Comments (18) | Send Message
     
    I would very much think so if it opens up in the 35 USD range. I think it will gain 1 dollar today alone.
    27 Aug 2014, 08:50 AM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    yeah definitely a buying dip.
    27 Aug 2014, 09:24 AM Reply Like
  • tiger8896
    , contributor
    Comments (717) | Send Message
     
    You buy SDRL for the dividend which seems secure for the foreseeable future but you don't buy it for the alpha.

     

    Unless we get an energy crisis I don't see the return of companies to deep water drilling, too many risks and regulation so I don't see outsize returns on these stocks.
    27 Aug 2014, 11:44 AM Reply Like
  • NUNAY the KING
    , contributor
    Comments (301) | Send Message
     
    If 18 rigs are still under construction, this is going to be a long slog in which majors should get better pricing, and service companies would see some belt tightening. Admittedly, this is only one indicator. (Long NOV, CVX)
    27 Aug 2014, 09:03 AM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    18 rigs that will take 5-8 years to complete though iirc... a lot can happen in that time span.
    27 Aug 2014, 09:25 AM Reply Like
  • Nick Knows Nothing
    , contributor
    Comments (22) | Send Message
     
    It looks like a house of cards to me. They are making money but seems to me the dividend is not sustainable. And the high yield is propping up the stock price. There are to many loans , credit swaps and other suspicious items between the different partnerships in the notes to the report.
    I know they have some hard assets any good contracts but there is just to much that I don't really understand for my money. Reminds me of Enron or World Com.

     

    But I will admit that I really no nothing. These are just my opinions.
    27 Aug 2014, 09:48 AM Reply Like
  • Profit Propositions
    , contributor
    Comments (862) | Send Message
     
    Nick,

     

    if you know nothing, there is no reason for SDRL to remind you of Enron or Worldcom. I'm not a SDRL shareholder, but your comment had an aura of nothingness in it.
    27 Aug 2014, 10:17 AM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    Yep for us know nothings its best just to sit on the sideline and learn. Commenting is overrated 75% of the time.
    27 Aug 2014, 10:21 AM Reply Like
  • Nick Knows Nothing
    , contributor
    Comments (22) | Send Message
     
    Let me say that I do know SDRL is up t their eyeballs in debt. I do follow the oils services sector very closely and with a down turn in day rates they could be in trouble in a hurry. Their financials are much to convoluted for me to own the stock. I say buyer beware with SDRL it could unravel very quickly.
    27 Aug 2014, 01:49 PM Reply Like
  • sts66
    , contributor
    Comments (2908) | Send Message
     
    If you think a credit swap is a "suspicious" line item then you really don't know anything!
    27 Aug 2014, 02:29 PM Reply Like
  • Akaralph
    , contributor
    Comments (2251) | Send Message
     
    Don't forget that SDRL still has a $20B backlog.
    27 Aug 2014, 10:14 AM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    When you say backlog do you mean they have 20B$ in rigs ordered or deals with oil E&Ps?
    27 Aug 2014, 10:22 AM Reply Like
  • JDoe20
    , contributor
    Comments (1246) | Send Message
     
    Contracts for $20B in future revenues.
    27 Aug 2014, 10:53 AM Reply Like
  • Maobama
    , contributor
    Comments (462) | Send Message
     
    Revenue backlog, although the spending backlog is probably close to that amount also...
    27 Aug 2014, 10:36 AM Reply Like
  • Profit Propositions
    , contributor
    Comments (862) | Send Message
     
    Just to remain factually correct:

     

    spending is closer to 6.2 billion, which is a tiny bit less than 20 billion in revenue backlog
    27 Aug 2014, 10:51 AM Reply Like
  • user 18159032
    , contributor
    Comments (1741) | Send Message
     
    Profits, remaining factually correct on a SDRL threat, dream on.
    27 Aug 2014, 08:43 PM Reply Like
  • jeffreyreich
    , contributor
    Comments (193) | Send Message
     
    I would think the biggest obstacle facing SDRL is obtaining contracts for all new iron coming out of the shipyard. That said, it appears SDRL, PACD and ORIG and others with new equipment are not totally up against the wall when it comes to finding lucrative contracts. It may be taking a little longer than what they might be facing in a more evenly balanced supply/demand market but the work is there and dayrates seem to be holding up rather well. The companies with older equipment are the ones that seem to be feeling the pinch.
    27 Aug 2014, 10:49 AM Reply Like
  • IMayBeWrong
    , contributor
    Comments (5) | Send Message
     
    An investment in SDRL is not an attempt to make a quick buck. Gotta be looooong. This is the energy industry, and particularly with oil, prices have always gone up in the long run. There have always been short term fluctuations and there always will be. When the world economy improves, which will be gradual, consumption will increase and prices will firm. Don't mean to be too elementary here, but, when this occurs SDRL will be in the best position of all in its peer group to capitalize on this. They have more than enough new rigs on order to take advantage of this, while it's peer group has last generation iron. The others will be scrambling to catch up. Given anything other than a very gradual world wide recovery, SDRL is a $100 stock.
    ...just my opinion...IMayBeWrong.
    27 Aug 2014, 11:57 AM Reply Like
  • Fernando Soriano
    , contributor
    Comments (858) | Send Message
     
    Agree with IMaybeWrong. With no true alternative able to supply growing demand for energy, these people have business until the earth becomes so full of holes as Swiss cheese. And that includes the sea. I added some more today.
    Of course, I may be wrong too.
    27 Aug 2014, 02:25 PM Reply Like
  • mapodga
    , contributor
    Comments (6707) | Send Message
     
    So short attack is over.

     

    Market bought all short shares. Now we can go up again :)
    27 Aug 2014, 06:50 PM Reply Like
  • Frenzy466
    , contributor
    Comments (39) | Send Message
     
    I think people may overlook the fact that SDRL is some what of a General Partner, much like pipeline GP's are. They own significant stakes in at least three other companies....
    27 Aug 2014, 07:08 PM Reply Like
  • mapodga
    , contributor
    Comments (6707) | Send Message
     
    Valuation... of SDRL

     

    It is strange when after ER of the company where the main risk s profit, this profit is beaten for more then 50% and then price of the stock goes down 2.7% instead to go up at least 5% as is usual here at NYSE.

     

    it just doesn't make sense. When company fulfil plan is always more worth then before.

     

    They tried to attack price also last time but then SDRL bought shares in Oslo.

     

    This time we got opportunity to get easy discount worth more then whole dividend. And it also goes on account some short sellers.
    Which attacked company that said that it had 1.3 bln of cash and which is owned by very rich man.

     

    The could easy bought half of the float if needed. This shorts are really some crazy guys.
    27 Aug 2014, 07:10 PM Reply Like
  • sts66
    , contributor
    Comments (2908) | Send Message
     
    One time non-recurring events drove that "profit" beat, ergo why the stock got beat up today, plus their (honest) statements of a currently tough market for contracts - "fierce competition". Just because JF could buy every share of SDRL he doesn't already own and still have pocket change left over, means nothing to the market, nor should it - it's irrelevant.
    27 Aug 2014, 07:49 PM Reply Like
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