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SeaDrill Limited Message Board

  • irbbping irbbping Jun 28, 2011 12:59 PM Flag

    dumb question or what am I missing

    I do not understand how SDRL can stay in business and pay the DIV that they pay. If they pay $3 based on the latest DIV and have projected earnings of $3 how are they staying in business, what am I missing ? No current position.

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    • Os>>. The entity must first pay out all accumulated earnings and profits as dividends, then payouts become ROC.<<

      That is my understanding also.
      Now what has this to do with limited partnerships?

    • Some companies use cash flow (which adds back depreciation and other non-cash charges) as the basis for dividend payout, not net income. I think that the payout is like 58% of cash flow.

    • What you are per chance "missing" is
      to add John Fredriksen, our Chairman, into the equation.

      He is a self-made billionaire, getting to the top in TWO businesses. His first billions he made out of the tanker business - he is Numero Uno, with a tanker fleet Onassis could only dream about.

      Next comes the drilling business - SDRL is his biggest personal holding- From a virtual standing start, not much more than 5 years, this year he made SDRL Numero UNO where it counts most - earning/cash flow power. SDRL also has the youngest + fastest growing drilling fleet on the planet.
      By and by, in the process he has outperformed Warren Buffett 's Berkshire's price performance.

      Please peruse the company website, particularly sections dealing with Investor Information + read the "mission statement" - SDRL is here to generate cash dividends.
      We still have huge gaps by the leading reporting agencies like WSJ, Google, Yahoo Finances - the last has a risible $2.02 for the cash dividend, others mis-report the # of shares outstanding - thus YIELDS + MARKET CAP INFO IS OFTEN OUT OF WHACK.

      Soon these reporting hicc-ups will sort themselves out + SDRL will be, in my opinion, priced in the 40's + 50's - a valuation based on fundamental VALUE analysis.

    • New potential investor here. You guys who know about the sector, what' your view of DRYS. Thye have taken beating this year and look cheap. B/S is OK. I have read some positive things about them as sector rebounds. Thanks for the insight.

    • Well the problem is that the projected earnings will probably be closer to 4.70 than 3.00

      When one gets data from the "experts" remember that they count the trailing twelve months earnings, as a rule. With a stock like SDRL, one should try to predict future earnings. The following is a "look ahead" for 2011 earnings on SDRL.

      Revenues Lost due to NADL

      The rigs aquired by NADL have a daily revenue of 2.68M or 241.5M/Q. This is the revenue lost by SDRL. Considering a 37% Net Profit Margin, this represents 89.4M/Q earnings loss.

      This is partially offset by 1) dividends paid by NADL to SDRL, and 2) money recaptured by handing NADL 2B of debt and 3)calling in 1B of 3.6% convertible bonds.

      1) Issue price 1.70/share, assume 7% dividend rate. 1.7 x .07 = 12¢/year or 3¢/Q
      750M shares x .03 = 22.5 M/Q

      2) Assuming a 6.5% interest rate on the bonds, 2B x .065 = 130M/yr = 32.5M/Q

      3) 1B x .036 = 36M/y or 9M/Q

      the loss is then 89.4 - 22.5 - 32.5 - 9 = 25.4M/Q

      considering 470M shares, this represents 5.4¢ /Q

      SDRL estimated 2Q to 4Q earnings based on 1Q earnings

      1st Q operating earnings 430M


      (1) Loss of NADL earnings 25.4M
      (2) Gain on Pride (est) 70M

      430 - 25.4 +70 = 474M

      Estimated 2Q Earnings per share

      474 / 469 = 1.01

      Estimated 3rd Q earnings


      (1) Gain on Juno 18M
      (2) Gain on Janus 50M

      430 - 25.4 + 18 + 50 = 472.6M

      Earnings per share

      472.6 / 469 = 1.00

      Estimated 4th Q earnings

      430 - 25.4 = 404.6

      Earnings per share considering no extraordinary items

      404.6 / 469 = 0.86

      First quarter earnings came in at 1.84 per share

      Estimated total earnings per year

      1.84 + 1.01 + 1.00 + 0.86 = 4.71

      • 1 Reply to boxcar_242
      • thanks for the detail on earnings, i am at the point where i am basically a value investor and use stock divs as part of my living expenses. i own ERF but wanted more exposure in the energy industry. Also have some utilities and MLP's, preferreds and commodities. i would like some exposure to gold and silver but have been waiting for silver to settle down. rogers sugar and atlantic power have been the best ones for me for div and capital gain since the 2008/9 crash.

2.31-0.04(-1.70%)Oct 21 4:01 PMEDT