The drilling market has finally performed up to expectations for Seadrill (NYSE:SDRL) and investors are starting to see progress in both shallow and deep water. During the first quarter of 2013 the company reported a 20% jump in revenue to $1.27 billion and net income was flat at $440 million.
Where the long-term progress can be seen is in the company's ultra-deep-water segment where newbuilds are starting to add to revenue. The company took delivery of one ultra-deep-water drillship in February and accepted another in April, which will affect the second quarter. The new rig helped drive floater revenue up 11% from a year ago to $807 million, although this hasn't affected the bottom line yet due to higher operating expenses.
Utilization for floaters is up to 92% from 86%, which is a solid improvement given the delays the industry has had because of bolt replacements on blowout preventers. Transocean (NYSE:RIG) reported revenue efficiency of just 83.8% in the first quarter and Noble's (NYSE:NE) drillship utilization was 83%, while semi-submersibles saw a decline in utilization to 84% during the first quarter.
With two ultra-deep-water drillships due in 2013 and four more in 2014, high day rates of around $600,000 and high utilization rates will continue to push earnings upward, especially if shallow water drilling continues to perform well.
Jack-ups steal the show
The overriding trend that's helped earnings recently is a pickup in jack-up demand, which is no longer a drag on results. Seadrill's jack-up revenue was up 35% in the quarter to $269 million an operating income was up 146% to $145 million. This is still much smaller than the $318 million in operating income from floaters, but it's now a solid contributor instead of an anchor on results.
Transocean and Noble saw similar trends with Transocean's day rates for high-specification jack-ups up 45% to $163,000 per day, and Noble's up 5% to $105,559.
A giant yield for investors
To top off strong results, Seadrill is increasing its dividend to $0.88 per share, which is an 8.6% yield annually for investors. With growth coming in ultra-deep water and improving results in shallow water this is still one of the best stocks in energy.
Fool contributor Travis Hoium manages an account that owns shares of Seadrill. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Seadrill and Transocean. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.