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Seadrill Limited (SDRL)

  • Fri, Apr. 17, 7:54 AM
    • Seadrill (NYSE:SDRL) unit North Atlantic Drilling (NYSE:NADL) says it has delayed closing a cooperation deal with Rosneft (OTC:RNFTF) by two years and agrees to renegotiate the terms of the agreement.
    • Western sanctions against Russia and Rosneft had raised concerns about the proposed $4.1B deal and already have forced the Russian oil firm to cancel several NADL contracts.
    • Under the deal, which had already been delayed to May this year, NADL would buy ~150 land rigs from Rosneft, which would take a ~30% stake in NADL; SDRL, which holds 71% of NADL, would remain the majority shareholder.
  • Thu, Apr. 16, 10:58 AM
    • Ensco (ESV -4.8%) reveals in its April fleet status report that it agreed to lower dayrates on seven of its jackups working for Saudi Aramco in the Middle East, with reductions ranging 10%-20% and an average decline of 15% across the seven rigs.
    • Cowen analysts believe further rate negotiations are ongoing and could affect other operators with units contracted to Saudi Aramco, noting that Rowan (RDC -4.2%) may be the most exposed since it has nine rigs currently working with Aramco; RDC secured three-year contract extensions in Sept. 2014 on four of the jackups, which could see reductions, as well as four units currently under negotiation extensions.
    • Other contractors with units working for Aramco are Noble Corp. (NE -4.9%) with four units, Hercules Offshore (HERO -3.9%) with two (after the termination of the Hercules 261), and Seadrill (SDRL -3.9%) with three.
    • Other offshore drilling contractors also are lower: RIG -3%, ATW -2.3%, DO -4.1%, HP -2.7%, ORIG -2.5%, PACD -4.2%.
  • Tue, Apr. 14, 11:58 AM
    • Seadrill (SDRL +6.7%) posts strong gains on a day of rising crude oil prices; Deutsche Bank is optimistic about SDRL's long-term outlook but retains its Hold rating and $14 price target.
    • The firm says it recently hosted meetings with SDRL and came away more confident in the long-term outlook; while investors are clearly concerned about leverage, SDRL offered a clear path toward long-term viability and solvency without the need to issue equity.
    • Deutsche Bank believes SDRL's liquidity needs are relatively modest for this year and next, and says management is cultivating a number of longer-term options under a range of scenarios including a prolonged downturn with little or no access to capital markets.
  • Thu, Apr. 9, 11:25 AM
    • Rosneft (OTC:RNFTF) says it is in constant contact with global rig contractors in its search for a company to provide a rig to restart exploration work next year in the Arctic's Kara Sea.
    • Rosneft says it could use already proven partners or companies which it has not worked with in the past; Reuters reports the Russian company could choose a rig from China or Korea, or from Seadrill's (NYSE:SDRL) North Atlantic Drilling (NYSE:NADL), with whom Rosneft cancelled a two-and-a-half year rig contract earlier this year due to Western sanctions imposed on Russia over policies in Ukraine.
    • Rosneft was forced to push back the resumption of drilling from this year after Exxon suspended its cooperation in the project because of sanctions.
  • Mon, Mar. 30, 9:14 AM
    • Seadrill (SDRL, SDLP) says BP has terminated a contract for its West Sirius semi-submersible drilling rig, resulting in a $160M decrease to its backlog, while extending a deal with another rig.
    • SDRL says the termination will take effect by May, following the rig completing the current well and demobilization; it is now operating in the U.S. Gulf of Mexico.
    • Prior to the cancellation notice, the dayrate and term for the West Sirius and West Capricorn contracts were swapped; the West Sirius dayrate was cut by $40K/day and the term decreased by two years to expire in July 2017, while the dayrate for the West Capricorn was raised by $40K/day and the term extended by two years to expire in July 2019.
  • Wed, Mar. 25, 8:27 AM
    • Norwegian offshore driller Northern Offshore says its partner North Atlantic Drilling (NYSE:NADL) received notice of cancellation from Rosneft (OTC:RNFTF) for a two-and-a-half year rig contract.
    • The cancellation is for Northern Offshore's Energy Endeavour jack-up drilling rig, which is part of a multi-rig contract to provide drilling services in the Russian Arctic.
    • NADL is a Seadrill (NYSE:SDRL) subsidiary, and all three companies are controlled by Norwegian billionaire John Fredriksen.
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  • Thu, Mar. 19, 2:26 PM
    • It's a rough day for offshore drilling contractors following Transocean's (RIG -7.1%) announcement last night that it will scrap four rigs and stack four more it previously had idled, taking a $300M-$325M charge.
    • Most notably, the Deepwater Expedition, which was working for $650K/day in 2014, will be scrapped; overall, the number of rigs the company plans to scrap is now 16, with possibly more to come.
    • RIG was awarded a $300K/day contract for one rig for work off the coast of Nigeria, and idles another rig.
    • In cutting its stock price target to $16 from $17, RBC expects just 10%-20% of available rig days will be contracted eventually given current market conditions vs. Wall Street expectations for ~35%.
    • Also: ESV -4.3%, NE -5.3%, RDC -0.6%, DO -3.1%, SDRL -2.4%, ATW -5.7%, PACD -4.5%, HP -1.8%.
  • Mon, Mar. 16, 11:57 AM
    • Seadrill (SDRL -2.1%) is lower after its North Atlantic Drilling (NADL -9%) subsidiary said Friday it will be difficult to conclude an upcoming contract with Rosneft (OTC:RNFTF) due to weak market conditions and a challenging political environment.
    • NADL received a notice of termination from Rosneft for the West Navigator vessel, which was due to start work for the Russian firm in July; the cancellation cut NADL's contract backlog by $1B.
    • SDRL also says it is cutting $1.1B worth of Petrobras (NYSE:PBR) orders from its backlog due to the Brazilian firm's troubles.
  • Thu, Mar. 12, 5:48 PM
    • While energy E&Ps are out aggressively raising equity, major drillers have little choice but to strengthen their balance sheets; on the heels of Ensco’s (NYSE:ESV) successful bond issuance last week, this week Noble Corp. (NYSE:NE) is looking to strengthen its balance sheet.
    • Transocean (NYSE:RIG) has $900M due later this year followed by $1B in 2016, $750M in 2017, and $1.2B in 2018, but Credit Suisse notes that while RIG’s 2018 paper is yielding ~7%, the 2020 and beyond paper is yielding 9%-10% less than ideal; RIG has a $3B revolver which provides flexibility and could keep it on the sidelines.
    • Seadrill (NYSE:SDRL) has $350M due later this year and "while it has a lot of work ahead of it... the majority of [its] debt is bank debt"; SDRL medium term debt is yielding 10%-plus.
    • Drillers that have attractive pricing from a management perspective - Rowan (NYSE:RDC), Atwood Oceanics (NYSE:ATW) and Diamond Offshore (NYSE:DO) - do not have near-term maturities, Credit Suisse says.
  • Wed, Mar. 11, 3:48 PM
    • Paragon Offshore (NYSE:PGN) and Diamond Offshore (NYSE:DO) are at risk from Pemex contract cancellations but Seadrill (NYSE:SDRL) is probably safe, according to analyst Lenny Zephirin.
    • The analyst says Pemex is committed to reduce the age of its jack-up fleet by replacing old equipment; with this in mind, PGN and DO - each with two rigs up for contract renewal, averaging a respective 38.2 and 40 years in age - appear especially vulnerable for rigs be terminated or renewed at lower dayrates.
    • However, SDRL looks safe in Mexico, currently averaging five years for 5 jack-ups and four years for one semis, Zephirin says.
    • The analyst also sees Saudi Aramco continuing to cause problems for drillers, particularly Rowan (NYSE:RDC), whose exposure to Saudi Aramco is 34.4% of its ~$5.1B backlog, and a potential discount could negatively impact RDC’s gross EPS by $0.45-$0.55/year; EPS could be impacted at Ensco (NYSE:ESV) by $0.35-$0.45, Hercules Offshore (NASDAQ:HERO) by $0.10-$0.20, Noble Corp. (NYSE:NE) by $0.12-$0.24 and SDRL by $0.05-$0.10.
  • Thu, Mar. 5, 10:45 AM
    • The offshore oil drilling rig market is unlikely to recover for at least two years following the slump in crude prices, Seadrill (SDRL +0.2%) CFO Rune Magnus Lundetrae says.
    • Daily rates for chartering offshore rigs in the spot market may fall further after sinking below $400K for the most advanced vessels from $650K less than two years ago, Lundetrae says, with rates perhaps climbing back toward $400K - roughly the level rig owners need to cover expenses including debt - by 2017.
    • The CFO also seems pessimistic about closing the rig agreement with Rosneft (OTC:RNFTF) that has been delayed by sanctions against Russia, adding that the deal will only go through if $4.1B in offshore rig contracts and North Atlantic Drilling’s (NYSE:NADL) acquisition of ~150 onshore rigs are included.
  • Tue, Mar. 3, 2:41 PM
    • Deutsche Bank analyst Mike Urban is negative on the offshore drilling sector and particularly on Hercules Offshore, but he likes Seadrill (SDRL +1.6%) well enough to offer some praise while maintaining his Hold rating.
    • SDRL’s strong contract coverage and high-quality fleet leave the company relatively well positioned amid a likely long downturn, Urban says, and he views the announced deferral of jackup newbuild deliveries as a positive given his expectation that the shallow water market is on the cusp of a sharp decline.
    • SDRL has a best in class fleet and is making the right moves for the long term, Urban says but warns that nothing is guaranteed in this market, fully expecting rigs to go idle.
  • Tue, Mar. 3, 12:32 PM
    • In a discussion of big energy companies cancelling contracts with offshore drillers, Credit Suisse analyst Gregory Lewis notes that national oil companies such as Petrobras sometimes end deals for the sake of convenience, and that drillers with lots of exposure to state-run companies are vulnerable.
    • Most drillers have a core customer: Lewis says Shell (RDS.A, RDS.B) comes to mind for Noble Corp. (NYSE:NE) with ~47% of 2015 backlog and Chevron (NYSE:CVX) for Transocean (NYSE:RIG) with ~15% of 2015 backlog.
    • But among those with the most exposure to national oil companies on their 2015 contracted revenues, Lewis says Diamond Offshore (NYSE:DO), Seadrill (NYSE:SDRL) and Ensco (NYSE:ESV) are at the top, while Pacific Drilling (NYSE:PACD) and Atwood Oceanics (NYSE:ATW) have none.
  • Thu, Feb. 26, 3:57 PM
    • Ensco (ESV -8.2%) has suffered a steady retreat throughout the session even though its Q4 earnings beat analyst estimates; ESV is badly lagging peers Seadrill (SDRL -2.4%) and Transocean (RIG -1.9%), who also released earnings during the past 24 hours.
    • The difference appears to be ESV's unexpected decision to cut its dividend by a whopping 80% to $0.60 from $3, which equates to a 9% payout of 2015 operating cash flow; ESV is now yielding 2.3%.
    • Credit Suisse says that while it was concerned about the dividend's long-term sustainability, it had thought a lower dividend would be an H2 2015 or H1 2016 event, also noting workforce cuts is "not the sign of a V shaped recovery."
    • ESV reports Q4 utilization fell to 86% from 90% in the year-ago quarter, due mostly to increases in uncontracted rig days.
    • CEO Carl Trowell said in today's earnings call that the company will shut down or cold stack a rig by mid 2015, costing ~$12M over the first two quarters, and could stack an additional rig if oil prices do not improve.
  • Thu, Feb. 26, 2:32 PM
    • Offshore drillers are warning that the number of deepwater rigs stacked or scrapped is set to hit a two-decade high, and predicting that the industry slump caused by lower crude oil prices could last another two years.
    • Seadrill (SDRL -2.2%) said today that the severity of the downturn and extent of oversupply was such that ~25% of the rigs would come available for hire this year, and that industry decisions regarding the cold stacking and scrapping of older units likely would accelerate to levels not been seen in two decades (Q4 earnings).
    • Transocean's (RIG -1%) Q4 results were not as bad as expected, but Senior VP Terry Bonno warned today that the company “continue(s) to expect challenging conditions... [with] extended periods of inter-contract idle time and significant competition for the limited tendering opportunities available."
    • Dayrates for advanced, deepwater rigs have tumbled from a peak of ~$650K two years ago to $350K-$400K, with contractors slashing prices in the face of dwindling exploration.
    • Also: ESV -7.3%, RDC -3.4%, DO -4.3%, ATW -5.1%, PACD -9.1%, HERO -13.6%.
  • Thu, Feb. 26, 12:29 PM
    • Seadrill (SDRL -0.8%) is modestly lower after Q4 earnings fell 32% Y/Y and saying the oil services sector is facing challenging times amid lower oil prices, spending cuts and an oversupply of rigs.
    • SDRL's Q4 earnings from continuing operations of $0.78/share were ahead of the $0.60 consensus, but EBITDA of $672M was below estimates as operating costs came in ahead of expectations; the quarter was negatively impacted by a $232M non-cash impairment of goodwill relating to its jack-up rig segment.
    • SDRL warns that stalled rig contracts worth a total $4.1B signed with Russia's Rosneft could be in danger, and says it received a contract cancellation from Talisman affecting $81M of backlog.
    • Says spending cuts by oil companies amid lower oil prices "has severely curtailed drilling budgets for at least 2015," and that it expects requests to reduce rig rates or terminate contracts early and "may be willing to engage in discussions" to modify contracts.
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Company Description
Seadrill Ltd provides drilling & well services to the offshore industry. It has a fleet of drilling units that is outfitted to operate in shallow water, mid-water and deepwater areas, in benign & harsh environments.