Slowing Offshore Drilling Market Impacts Seadrill

Seadrill (NYSE: SDRL  ) reported fourth-quarter results before the market opened this morning. The contract offshore driller reported net income of $281 million, or $0.49 per share. Operating profit was much higher at $568 million, which was up 20% from the $471 million Seadrill reported in the third quarter.

Seadrill sold several assets during the quarter to buyers including its affiliate Seadrill Partners (NYSE: SDLP  ) . The company sold the tender rig T-16 to Seadrill Partners, as well as part of two semisubmersible rigs. Seadrill also acquired a high specification jack-up in the quarter, while both companies announced several new drilling contracts or extensions.

Overall, Seadrill's fleet of floaters and jack-ups had high use levels during the quarter. Floaters had an economic utilization of 94%, which was in line with its third quarter. Meanwhile, economic utilization for its jack-up fleet was 98% on the quarter, slightly higher than the 97% the company saw in the preceding period.

Seadrill's solid results and cash flow enabled the company to raise its dividend by $0.03 to $0.98 per share. However, that's likely to be the last dividend increase the company hands out to investors for a while. In a statement commenting on market conditions, the company noted that "2014 and 2015 may show slower growth in activity levels than earlier anticipated." Because of this Seadrill sees "limited value" in increasing its own dividend further, preferring to preserve its cash for share buybacks or future dividends.

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  • Report this Comment On February 25, 2014, at 9:39 AM, akaralph wrote:

    Great opportunity to buy SDRL this morning. They will not cut the dividend from .98/Q, although it might not be increased either. 11% yield going forward.

  • Report this Comment On February 25, 2014, at 2:32 PM, Nohjnogias wrote:

    I'm echoing akaralph comment. This looks to be a golden opportunity (barring some worldwide economic setback) to establish or increase a position in SDRL.

  • Report this Comment On February 25, 2014, at 3:28 PM, Pong2 wrote:

    But why would SDRL fall more than 5% in one day?

    This "foolish" article doesn't give a hint as to what could cause this.

  • Report this Comment On February 26, 2014, at 7:37 AM, TMFmd19 wrote:

    @Pong2 - "However, that's likely to be the last dividend increase the company hands out to investors for a while. In a statement commenting on market conditions, the company noted that "2014 and 2015 may show slower growth in activity levels than earlier anticipated." Because of this Seadrill sees "limited value" in increasing its own dividend further, preferring to preserve its cash for share buybacks or future dividends."

    -That outlook is likely why the stock sold off.

    Matt

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