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Why Seadrill (SDRL) has a brighter future than shipbuilding peer Frontline (FRO): As the oil...

Why Seadrill (SDRL) has a brighter future than shipbuilding peer Frontline (FRO): As the oil industry pushes further into deeper waters, SDRL's ships, boring as far as seven miles below the surface, are projected to earn an average $625K/day a year from now, 21% more than in 2011; FRO's large crude carriers earn $30.3K/day, down from an average $97K in 2008.
Comments (10)
  • Herr Hansa
    , contributor
    Comments (3083) | Send Message
     
    These sectors are not really comparable. An oversupply of tankers is the biggest reason for lower charter day rates on oil shipments. High day rates on drilling rigs and drill ships depends upon continued high oil price per barrel.
    12 Jun 2012, 05:24 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    I was not aware FRO was/is a "Shipbuilder"
    12 Jun 2012, 05:33 PM Reply Like
  • elliot_mllr
    , contributor
    Comments (1440) | Send Message
     
    1980XLS-2.0, you are correct. Frontline is a charterer of vessels not a builder of them. And as Herr Hansa points out,SDRL and FRO are not peers. FRO charters tankers. SDRL charters drill ships, tenders, jackup rigs, ultra deepwater rigs, etc. etc.But I disagree with Herr Hansa in that SDRL signs long term contracts with large international oil companies and the spot price of oil thereafter is irrelevant so long as the contracts are operative.
    Elliot Miller
    12 Jun 2012, 05:56 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3083) | Send Message
     
    I would look more at future newbuilding drillships and rigs not yet delivered. While I have a great deal of confidence in SDRL, the newbuildings set to come on-line do not have locked in contracts.
    12 Jun 2012, 05:59 PM Reply Like
  • nuahw
    , contributor
    Comments (167) | Send Message
     
    mr HANSA,check SDRL's home page for employment of rigs...you will find that quite a few rigs with contracts ending soon have extention clauses....others coming on line have contracts, as well as mobilaztion fees
    13 Jun 2012, 04:21 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3083) | Send Message
     
    I'm on Seadrill's mailing list, so I get regular updates. Simply wanted to point out a risk factor, which they also list in forward looking statements. I've held shares for a while, though I recently took profits on the run-up. I am currently looking at a re-entry point, based upon further macro-economic overall market weakness.
    13 Jun 2012, 04:53 PM Reply Like
  • VeroMike
    , contributor
    Comments (248) | Send Message
     
    We will continue to drill for oil.
    SeaDrill is in an enviable position.
    I am retired and like the dividend.
    The stock is in the middle of its range,$ 24-40.
    It has dropped almost $10 in 30 days because the price of oil dropped from $102 to $84.
    Since the rigs are already on long term leases this is a ridiculous movement.
    Expect stock to rebound to $40-50 before end of year.
    13 Jun 2012, 08:14 AM Reply Like
  • elliot_mllr
    , contributor
    Comments (1440) | Send Message
     
    VeroMike:
    You are correct that it is irrational for SDRL to trade correlated to the price of crude but idiot traders do trade that way. Try tracking the share price of RIG with that of crude and you'll see them highly--and irrationally--correlated.
    Elliot Miller
    13 Jun 2012, 01:19 PM Reply Like
  • Blutopaz
    , contributor
    Comments (95) | Send Message
     
    Thanks for the heads-up on the future price of SDRL....BluTopaz, Tennessee.
    18 Jun 2012, 08:54 AM Reply Like
  • Blutopaz
    , contributor
    Comments (95) | Send Message
     
    Mike,
    thanks for the heads up on SDRL future price.....BluTopaz, Tenn.
    18 Jun 2012, 08:56 AM Reply Like
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