I was under the impression that oil at about $50 a bbl was needed to maintain exploration for the rigs with a small profit, higher of course for the oil sands but this article puts it at $70. Does anyone have other info out there?
Point taken. Thanx. While I hate discussing SDRL in the same vane of a HERO or DRYS. I see where DRYS got an 8 month reprieve on their $800 million rig related debt. It will cost them a couple extra points i believe(link below). If it comes to it SDRL can surely match DRYS's deal. Then again, I'm hoping some of SDRL's near term installments can be reduced sigificantly by the jackup renegotiation. That's nearly $1 billion worth of installments in total. Thoughts?
Just to add that it is possible some/all(??) of that "alternative" financing could come from the newbuild jckups. Payments for 2 jackups have been delayed till delivery and payment schedule for the other 2 have been renegotiated in exchange for corporate guarantees.
I think we are in agreement long term. It is short term that there may be a pinch. True I think you can conservatively count on that roughly $2 billion coming in in 2009. But if you go back to Q3 report(late Nov), they stated they still had $750 million in installments due in Q4 so between that and the $380 million due in Q1/2009, SDRL is supposedly on the hook for $1.1 billion in the short term. They will of course have cash flow from 2 quarters-Q4/08 and Q1/09- as well as $250 million from a rig getting on site and maybe even gains on a TRS(??). It just looks to me like they have to come up with some other alternative short term financing.
"Seadrill is clearly hard up for cash"
Actually they are cash flow rich in 2009 (or I should say we shareholders are).
Here's their situation:
November received $1.450 billion in sale leaseback proceeds, none of which went for dividends. Last dividend was paid in Sept. Seadrill made payments of $1.420 billion payments due on newbuilds in 4th quarter for West Hercules (in operation)and for West Taurus (in operation in 1st Q 09).
Receiving $250 million in sale leaseback proceeds for West Taurus in 1st quarter when its starts operations.
4th quarter cash flow from operations - let's estimate $200 million.
2009 cash available from operations - I conservatively estimate $1.6 billion. This is based on company's EBITA forecast for 2009 through 2012. It goes higher each year after that.
Net cash available in 2009 is roughly $2.0b (1.6 + 150 + 250)
Total newbuild payments due in 2009 equals 830 million.
Thus the company has a surplus of cash in 09 of roughly
$1.27 billion. This number will go up if they are able to negotiate any further sale leasebacks in 2009. Not for me to guess what they will decide to do with it, but they did say they were going to revert to their shareholder friendly dividend policy at publication of the annual results.
With $380 million in newbuilding payments due in 1st quarter I would expect that any dividend would be small compared to later in 09.
"The results from the twelve month period ended December 31, 2008, include a non-cash charge of $1.3 billion to reflect the impairment of goodwill and property and equipment,"
HERO stockholder's equity (In thousands)
December 31, 2007 $2,011,433
December 31, 2008 $ 907,772
When the (market)value of an asset decreases significantly, loan covenants are breached. When covenants are broken the lender tightens the conditions of the loan(s)->interests increase->earnings decrease.
"$7 billion rigs debt on balance sheet with no markets"
Not to put words in anyones mouth but I believe what dpwtr is referring to is the market for sale-leasebacks which is the JF model. Without those sale-leasebacks much more of the EBITDA will be dedicated to paying down debt/installments as opposed to divvies.
The author of that comment that the "$7 billion rigs debt on balance sheet with no markets" is not stating fact. Seadrill has over 12 billion in long term contract coverage on its rigs and these contracts are rock solid with major E&Ps.
dpwtr makes some great points. I too would be pleasantly surprised by the return of divvies this quarter. Of course they do have the strong cashflow coming online, a strong floater market despite all the calamity and of course the current contracts are solid. Some $2.5 billion was raised in sale-leasebacks but much of that cash(all?) was used for ordering 2 more floaters and 4 jackups, something like $600 million in divvies and $600 million to cover TRS losses and Q3 report showed SDRL was clearly hard up for cash-some $700 million still due in Q4 for newbuild installments. Some of this can surely be met by cashflow and payments due as part of sale-leaseback newbuilds arriving onsite but the current situation is anything but transparent.
I too have been adding shares during all of this because of the long term prospects but I fear SDRL may be in for some more choppy waters.