SDRL-up's the DIVIDEND From $.98 to $1.00--Copy from SA
EBITDA rose by 10% year-on-year, and almost 3% from the previous quarter.
Deepwater and ultra deepwater drillships lead the positive momentum.
While much of the gains have already been had, Seadrill has continued upside from here.
Seadrill (SDRL) just reported first-quarter earnings and the market seems pleased with the results. Seadrill closed up Thursday by more than 2%. Such upside action is a continuation of a greater upward trend since about April when the stock was about 19% lower than where it is now. This article will weigh Seadrill's first-quarter results and will attempt to gauge how much continued upside Seadrill has.
First quarter results
This quarter Seadrill reported EBITDA earnings 10.5% higher than those of the same quarter last year and almost 3% greater than the EBITDA of last quarter.
Fleet utilization, an important metric reflecting the health of any rig lessor, dropped to 88% for floaters but remained at 97% for jack-ups. Seadrill's floater utilization rate was well below its own standard but still above the current industry average of 79.7% according to Rig Zone. This lower rig utilization was apparently due to technical issues on three of Seadrill's deepwater floaters, which caused some downtime. Management has already secured the replacement parts and is confident that rates will return to their usual place in the high 90s.
Management also raised the dividend from $0.98 to $1.00. Unlike last quarter, management did not raise the dividend because it saw little use in the further raising the yield at such low equity prices. Apparently management was encouraged by the significant price appreciation since April.
As mentioned in the conference call of a previous quarter, the dividend is fine until 2016 at least, despite the fact that Seadrill pays nearly all of its operational cash flow in the form of dividends. This is because Seadrill has contracted the majority of it ships for multi-year deals, and hence has good cash flow visibility.Conclusion
In my opinion, Seadrill's quarter was a B+. EBITDA continues to march upward and the secure dividend continues to follow in its wake. While there are some signs of weakness in dayrates going forward, there are also some encouraging signs such as an important deal with Rosneft. Despite the runup over the last month, Seadrill continues to be a good deal right now.
sarge...I read the downgrade and they say SDRL will have a hard time leasing out drilling rigs in 2015...I disagree, because several drilling rigs can be moved (sold or released) to SeaMex and NADL...to be honest, it looks like SDRL 'may not have enough drilling rigs available' to cover future demand from their associates....
The fact is, that NADL and SeaMex are both going to need more drilling rigs as they move their business forward...investors need to remember, that SDRL is a basket of many off-shore drilling companies...! How can NADL move forward and SDRL not profit from it (???), because SDRL owns 70%
of NADL....! $tagg...!