And I ask the longs "heavily indebted Seadrill." can anyone comment on the piling debt of this company? I have 100 shares only, but I'm kind of worry of the constant debt this company keeps on taking.
Of the 450 rigs operated by the eight largest drillers the average rig age is 24 years, whereas SDRL maintains a fleet with an average age of 8 years. SDRL has debt but they accumulated it assembling the most modern drilling fleet out there and in these times with the increased regulation and scrutiny after Macondo, their rigs are in demand. RIG avg fleet age = 25 years. DO avg age = 31 years.
SDRL's problem right not is a loss of 25% of revenue and how they are going to handlle the problem. A 25 % loss of revenue could well mean a 25% loss in share price. JF has to pull another rabbit out of the hat.
Don't get me wrong. The rabbit and the hat are there. We will just have to wait and see how he plays it.
With that debt, they also have the newest equipment in the industry. And that is highly beneficial in this ultra regulated environment. HAving Debt is part of business, knowing how to leverage Debt like JF is part of being smart, His cash can be directed to other areas to improve business
What better time to borrow than now with such low interest rates. SDRL is using the cheap money to finance purchases that are often already contracted out for a net profit before they are even built. Average age of this fleet is 3 years. The other driller [paying 1/2 the dividends] (DO) has a old fleet of rigs. Like another post said, this company is both growth and dividend. Buy Buy Buy
About cash dividends
SDRL's major competitor RIG has been dilly-dally-ing with its "special" cash dividend for many months - Dividend Plan A of RIG was nixed by a Swiss court, now RIG is on Plan B - full of uncertainty - additionally RIG has reported an immense loss recently plus a One Billion write off = #2 disaster - #1 was Gulf spill in 2010.
Mention above as I believe JF's plan is to be Number One driller - RIG's second disaster will bring that closer to realization imo.
There are a number of posters here whose knowledge about SDRL vastly exceeds mine - per chance they have something to say about this.
In the meantime SDRL's generous dividend is a better floor for its market price than many other stocks like RIG which pay no regular cash dividends.
I call SDRL "the stock of the year" - that is my opinion which does not count for much.
Where did you get that info?
SDRL is leveraged but only prudently.
dear Debbie, you stumbled upon what I call "the stock of the year" -
as we have it both ways:
We are leveraged but please remember the controlling shareholder is a self-made highly successful Norwegian billionaire whose net worth is greater than the market value of the entire SDRL. He is there in the very unlikely event if SDRL is ever "over in debt" -
that leverage allows accelerated growth. The recent announcement for a new deepwater arctic drilling ship is a good example - SDRL did borrow to pay for the new unit, BUT a 5 year lease not only pays for the new ship, including the borrowed amount, in the initial lease period but has a built in profit of approx $100 million!
The Norwegian daddy's mere presence allows much of the profit generated to paid out in increasing cash dividends, and recently even in an extra 20 cent dividend!
Thus you have your cake - and eat it too - accelerated growth combined with a high yield. What more can we wish for?