The drilling market has finally performed up to expectations for Seadrill (SDRL +0.00%) 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 (RIG +3.73%) reported revenue efficiency of just 83.8% in the first quarter and Noble's (NE +0.00%) 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.
