3 Things to Watch When Seadrill Ltd Releases Earnings

 

Photo credit: Seadrill 

Seadrill (NYSE: SDRL  ) is scheduled to release its first quarter results on May 28. It's an important report for the company as Seadrill's stock has been under a lot of pressure this year. The hope for investors is that Seadrill will actually be able to deliver some good news that will give its stock a boost.

There is some reason to hope as both Transocean (NYSE: RIG  ) and Ensco (NYSE: ESV  ) defied critics this quarter and delivered solid results. Transocean saw its revenue improve while its costs fell, both of which enabled the company to earn higher income than the previous quarter. Meanwhile, Ensco's earnings were solid and only down about 3% over last year's first quarter. Further, Ensco expects its second quarter revenue to improve by 4%, which is a very positive sign for the company as it suggests the rig market isn't as weak as some think.

In order to help investors better understand what to expect when Seadrill reports earnings, I've created the following slideshow. It details the three areas investors need to watch closest to make sure Seadrill is still on the right course for long-term outperformance. 

1 great place to earn income in the energy sector
Seadrill of course is a great dividend paying stock. However, it knows the secret of really great dividends is found in using a little known strategy. That's why Seadrill created another company to take advantage of small IRS "loophole" to really line its investors' pockets with cash. To learn more about the this income strategy you need to check out our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Read/Post Comments (7) | Recommend This Article (8)

Comments from our Foolish Readers

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  • Report this Comment On May 27, 2014, at 10:53 AM, DukeMontrose wrote:

    BINGO!

    The market reaction is slow so far but the Russian deal announced over the past week-end is huge: = please refer to the latest PRs for details =

    because:

    1. It validates SDRL's strategy of ordering a record number of new units, confirming its status as the driller with the most modern fleet;

    2. Above will keep adding significant increases in cash flow as the new units join the fleet in 2014 + 2015 + start being cash cows as soon as they are delivered.

    3. It increases the SDRL "family's" consolidated backlog to new highs.

    4. Translation = virtually guarantees record levels of cash flow, at least for the next two years.

    4. It brings in a new investor, out of left field, further increasing SDRL's flexibility

    5. What other investment we fools are aware of , with such prospects + a dividend yield of 10% ?

    The flies in the ointment =

    (a) management's fanatical focus on paying out every cent of cash coming in immediately in dividends.

    (b) management's disinterest in "promoting" SDRL as a high tech growth stock in the past.

    Those flies produced an unhappy under-performance in SDRL's stock in the last couple of years. Will management show some flexibility + learn from that bitter experience? Will it forgo a potential $10, even $20 billion increase in enterprise value by continuing with the slow dispiriting slog of the last 2 years?

    SDRL has shown some high degree of flexibility + quick to exploit emerging opportunities as witnessed by the latest deal. That follows in the footsteps of its recent Mexican foray, entering that lucrative market with local partners = leaving the competition in the dust.

    In short, will/can management develop the same "street smarts" it has in opportunistic deal-making in the areas of cash dividends + PR?

    If the answer is "Yes" - SDRL could show a minimal 50% price appreciation before the end of 2015 = that is this fool's foolish prediction.

  • Report this Comment On May 27, 2014, at 10:55 AM, DukeMontrose wrote:

    This fool entered a detailed comment + when he hit the "publish comment" , it simply VANISHED!

  • Report this Comment On May 27, 2014, at 11:56 AM, ziying wrote:

    Living in Sarasota I placed a big bet on SDRL. I own over 2200 shares. Loved the news today.

  • Report this Comment On May 28, 2014, at 8:46 AM, Heidikitty wrote:

    If I had the money I would buy additional shares but I am top heavy with SDRL and looking forward to 2015. Thanks for the good news as I always value the Motley Fool above any of the rest plus my investment person at the Bank says now is the time to buy SDRL. He also said be diversified as Motley Fool always said. Keep us updated as you always do. Thanks

  • Report this Comment On May 28, 2014, at 12:25 PM, Heidikitty wrote:

    Please explain the deal with Russia and SDRL this past week end

  • Report this Comment On May 28, 2014, at 12:28 PM, Heidikitty wrote:

    My concern is can SDRL trust Russia with any deals they make?

  • Report this Comment On May 29, 2014, at 1:48 PM, TMFmd19 wrote:

    @Heidikitty - The Russian deal was actually with a publicly traded subsidiary of SDRL. The Russian energy co. is taking a stake in this company and signing long-term rig contracts. There aren't a whole lot of details just yet, though its estimated that it will be 9 rigs for a total of 35 rig years under contracts.

    However, the fact that its a separate company (though one that Seadrill is the largest shareholder) does mute some of the risk of it being a Russian company. As well as some of SDRL's reward.

    Hope that helps, I do have another slideshow coming out soon on this deal and others it recently announced. Check back in a few days for that.

    Matt

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11/21/2014 4:05 PM
SDRL $21.36 Up +0.57 +2.74%
Seadrill CAPS Rating: ****
ESV $39.87 Up +0.73 +1.87%
Ensco CAPS Rating: ****
RIG $25.93 Up +0.41 +1.61%
Transocean, Inc. CAPS Rating: ****

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