According to Motley Fool: If SDRL only received 267,000 dollars a Day for the use of their new modern Rigs, they would still be a profitable company. Rates are currently 575,000 a day and some analysts are predicting they could go down to 475,000 a day with increased competition. However, as noted by MF, Seadrills current Rates are locked in until 2017 and their Fleet is less than 5 years old versus 20 years old for their nearest competitors RIG and ENSCO. That means less maintenance and more time earning money for SDRL's Rigs. The Bottom Line - Buy SDRL stock when it dips like it has been the past couple of months. 2014 will soon be a memory and the Investors who buy now will be all smiles from 2015 to 2020.
That day rate you quoted is only for floaters, actually it is only for drill ship floaters, and I believe that SDRL's average rate is slightly higher at $600,000 . For semi-submersibles , it is $500,000; for jack-ups it is $185,000; and for tender rigs, it is only $150,000. For SeaDrill and subsidiaries, they have 10 Drillships, 25 Semi-Submersibles, 29 Jack-Ups, and 3 Tender Rigs (all of the above are for active, under contract, drilling rigs - does not include those rigs contracted, but not drilling or in mobilization).
SeaDrill is not locked in to contracts to 2017 for all rigs, but they have some contracts that do go out to 2020 (this is the "backlog"). Rigs are coming off contract all the time. There are two this month for example (West Ariel and West Prospero). And you can add 6 more this year, 8 for 2015, 9 for 2016, etc. all the way out to 2020 (not 2017). Of course rigs will come off contract, that by itself is not a bad thing. The question is when and at what price will they be replaced. This is why the stock is dropping - there is a question as to the value of those replacement contracts if we are in a slow down. It has little to nothing to do with the current dividend, except that the dividend is funded by the cash flow from those contracts.
Thanx a great read. What about a saturation point? I have seen this with container cranes,worldwide,whereas everyone got in on the act,ports lined with the biggest and most modern,and then they are now idle,with each port vying for shippers to get ships in & out faster & cheaper then the other guy. Same thing here,presently they are constructing new rigs,out the wazooo. - Competition,saturation,slack in demand,new,moreviable sources for tea are ramping up,. I still think the risk of low 20s remains,possibly even lower and I got out. China is going kaput,too.
Bill Gates and Warren Buffet predict that by 2040 - all the countries of the world will be
similar to Europe, China and North America. All these developing countries need OIL !
fracking/shale just isin't going to do it. I'm not just looking to 2020 - I'm looking to 2040.