Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



SeaDrill Maintains Its Crown as Top Drilling Stock

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

With one fell swoop, SeaDrill (NYSE: SDRL  ) took a year that's had some uncertainty and turned it into a success with a mind-blowing announcement. This morning the company said it had signed contracts for three rigs, two that are currently under construction, that will run for 19 rig years and have a potential value of $4 billion. My back-of-the-envelope calculations tell me that is a rate of $577,000 per day on average. Not bad in a year when oil prices have fallen.

No company has made as big a bet on ultra-deepwater drilling as SeaDrill. Sure, everyone is adding ultra-deepwater rigs, but SeaDrill is has become primarily an ultra-deepwater company, giving it an advantage on the market over rivals. Transocean (NYSE: RIG  ) and Noble (NYSE: NE  ) are much more diversified, providing a drag on their earnings. Ocean Rig (Nasdaq: ORIG  ) is the only real pure play, but it's run by George Economou, a man who has never had the interest of shareholders at heart.

SeaDrill has a lot of debt on its balance sheet, but it has amassed that debt by building a fleet of ultra-deepwater ships that are in high demand today. The deal also expands ultra-deepwater drilling in the Gulf of Mexico, an area of extreme interest for drillers right now. The easy wells have mostly been tapped in the Gulf, and rigs are moving further and further offshore to find oil.

The company will soon report second-quarter earnings, and investors are expecting earnings per share to rise to $0.78 this quarter from $0.70 a year ago. For the next year, the stock is trading at a P/E of 11 and has an 8.4% dividend, which is one of the reasons I like the current price. Deals like this one just show how much growth and earnings potential the company has going forward.

SeaDrill will benefit indirectly if the price of oil rises, but it isn't one of the companies highlighted in our report "3 Stocks for $100 Oil." The report is free while it lasts.

Fool contributor Travis Hoium manages an account that owns shares of SeaDrill. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Transocean and SeaDrill. Motley Fool newsletter services have recommended buying shares of SeaDrill. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 26, 2012, at 10:22 AM, artmuseum wrote:

    Superb summary on SDRL.

    Let us not forget John Fredriksen, the financial engineering genius at the helm. [As we not forget Warren B. when BerkshireH. is mentioned].

    Let me predict the next major coup will take in Brazil.

    With each move, JF's SDRL is surging further ahead of its peers.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1958520, ~/Articles/ArticleHandler.aspx, 10/28/2016 2:36:12 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,155.54 -14.14 -0.08%
S&P 500 2,127.40 -5.64 -0.26%
NASD 5,190.55 -25.43 -0.49%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/28/2016 2:20 PM
SDRL $2.20 Down -0.08 -3.33%
Seadrill CAPS Rating: ***
NE $5.29 Down -0.24 -4.34%
Noble CAPS Rating: ****
ORIG $1.13 Down -0.02 -1.68%
Ocean Rig UDW CAPS Rating: No stars
RIG $10.23 Down -0.15 -1.45%
Transocean CAPS Rating: ****