This was an excerpt from a Motley Fool article today. Anyone on the board know anything about it?
Seadrill expects that day rates for new, sixth and seventh generation drill ships will fall to an average of $425,000 to $475,000 for the rest of the year -- well below the peak of $650,000 per day reported last year, the peak of the recent drilling boom.
Unfortunately, this downbeat outlook is almost certainly going to have an effect on Seadrill's results. Still, nothing is set in stone, and the company may perform better than management's dismal outlook suggests. Nevertheless, five of Seadrill's existing units and seven new-builds yet to be delivered are still without contracts.
The company is postponing all new rig orders until it note an improvement in the market. Seadrill already has 19 new drilling units on order yet to be delivered.
What did management say about Europeans reaction to events in Iraq, Nigeria and Ukraine?
Will the Europeans sit idly by and stop offshore drilling where 80 percent of new oil and gas discoveries are made?
Do the Europeans expect LNG imports from the United States to be ready by Winter 2015 when, in fact, it will be a minimum of five years to have any impact at all?
What will China, India, Japan do to shore up their energy requirements?
If turmoil impacts USA energy prices at the consumer level will USA politicians legislate export restrictions? (I sure hope so.)
These questions and the answers will impact day rates.
Does anyone have useful answers to these questions?
Are all the negative projections correct?
I have no idea and I very much doubt anyone except T Boone Pickens and others with decades of experience regarding world turmoil impact on oil & gas does have a clue.
My decades of experience investing just gives me the knowledge that nobody really knows anything clearly what the situation will be 6 months from now.
I have been reading a lot about an expected drop in day rates. However, SRDL recently landed a two contracts at respectable rates. They have the youngest fleet of deepwater rigs and can expect a premium over other drillers. I have an account I manage as a fiduciary and it has seen an $18000 unrealized capital gain and a $3000 dividend so far.
My 401K will be released to me in a few months and I'll be looking for a buying opportunity. So, if you feel compelled to sell off a large position, please do it after August 15th ;-)
I didn't have to read the TMF article to know who wrote it. It is the boob Rupert Hargreaves who has been bashing SDRL continuously. I respond as I can there but he is not worth the time anymore. Matt Dilallo of TMF writes much better articles.
Sentiment: Strong Buy
Motley Fools is not a serious information service, they are all over the place with goofy articles.
I rarely take any thing they write to heart. Most of the time I don't even read it.
They are a waste of time.
Notice the stock price ignored this dumb article.
Sentiment: Strong Buy
This article is an interpretation of comments by management. I interpret their comments very differently and so do other analysts. In general you have to be very careful of the Motley Fool articles. Often well written to twist facts in their direction. I have gotten panicked out of a couple investments but am very careful now. The average day rate they predicted are for all of their rigs - latest generation and older ones - this is my interpretation anyway. Yes they are being prudent to put off delivery of the new ones giving the market time to ride through some lean times - how lean no one really knows. Higher oil prices are definitely going to have a good effect on drilling.
This is the 1st I've seen such negativity amid the recent change of heart from MS and the 1bil plus contract. Perhaps the article is an outlier but a dayrate drop from 600,000+ a day to 475,000 a day prediction is a significant reduction. This is why I'm wondering if anyone has any relevant info that confirms or puts the lie to this story.
From a 6/11/14 Motley Fool article on SDRL - " ...EBITDA interest coverage ratio of 6.5 ...can service debt and pay the current level of dividends from the operating cash flows "
From Morgan Stanley on 6/16.14 -" Offshore rig demand is on the mend..We see deep value in SDRL..."
Haa, deep value. How deep? Deeper than their competitors? The stock outlook rhymes with the operation. Article published as "deep value" on 6/11; was it ultra-deep back mid-end of April? YES….