Please ensure Javascript is enabled for purposes of website accessibility

Slowing Offshore Drilling Market Impacts Seadrill

By Matthew DiLallo – Feb 25, 2014 at 9:12AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Seadrill sees “limited value” in future dividend increases given the current market conditions.

Seadrill (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 (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.

link

Matt DiLallo has the following options: short April 2014 $38 puts on Seadrill. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Seadrill. 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.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SeaDrill Limited Stock Quote
SeaDrill Limited
SDRL
Seadrill Partners Stock Quote
Seadrill Partners
SDLP

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.