Seadrill Ltd.'s Strong First-Quarter Results Yield Another Dividend Boost

Seadrill (NYSE: SDRL  ) announced its first-quarter results before the market opened this morning. The company reported earnings of $3.094 billion, or $6.54 per share. However, its results were greatly affected by deconsolidating the financial results of Seadrill Partners (NYSE: SDLP  ) from its results.

A closer proxy for Seadrill's underlying earnings is its reported net operating income. For the first quarter the company reported $890 million in net operating income, which was well above the $534 million that analysts were expecting. It was also much higher than the $552 million the company delivered in last year's first quarter. However, operating income was partially affected by the gain on the sale of the ultra-deepwater drillship West Auriga to Seadrill Partners. Overall, Seadrill delivered a strong quarter as cash flow in the quarter totaled $912 million, which was $168 million higher than last quarter.

This higher cash flow, when combined with the company's solid operating results and strong long-term prospects enabled Seadrill to once again raise its dividend to investors. The company is increasing its quarterly dividend by $0.02 per share to a quarterly total of $1.00 per share.

While there were a number of positives in Seadrill's first quarter, the company does see near-term challenges ahead in the ultra-deepwater market. The company noted that just seven ultra-deepwater rigs were contracted in the first quarter, which is the lowest quarter of activity since the financial crisis in 2009. Because of this, Seadrill has curtailed ordering any additional units. Instead, the company plans to be proactive to take advantage of any distressed assets that may come available if weaker rivals struggle. 

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  • Report this Comment On May 28, 2014, at 12:52 PM, KoyOte1 wrote:

    I wonder why SDRL would buy older "distressed assets that may come available if weaker rivals struggle" when SDRL has the most modern fleet around and they don't have all their new rigs contracted, too boot?

  • Report this Comment On May 28, 2014, at 2:11 PM, TMFmd19 wrote:

    An asset doesn't have to be older to be distressed. Here's the direct quote from their release: "Seadrill

    believes there may be distressed assets coming available and is taking prudent steps to have the firepower to take advantage of interesting opportunities that may materialize. However the Board will remain committed to owning only top specification modern assets." http://www.seadrill.com/stream_file.asp?iEntityId=1596

    Matt

  • Report this Comment On May 28, 2014, at 8:34 PM, awallejr wrote:

    This stock simply crushed EPS but the pundits don't want to count it because it included the sale of a rig and the deconsolidation of SDLP. I would give them the deconsolidation but sales do count. They would rather leave out any sales and just go on leasing income. Imagine doing that to an autodealer that sells and leases cars. Sales don't count.

    Of course they count. That is what they are able to do. That was the whole point of SDLP. An absolutely brilliant move, one even Icahn wants to duplicate.

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