Seadrill 3Q net income at $315M

Seadrill has reported that its consolidated revenues for the third quarter of 2013 were US$1,280 million compared to $1,268 million in the second quarter of  2013.

The increase is primarily due to the inclusion of Sevan Drilling and jack-up rigs AOD II and West Tucana, and tender rigs T-15 and T-16 entering the fleet, offset by the disposal of the tender rig fleet.

Operating profit for the quarter was US$471 million compared to US$507 million in the preceding quarter. The decrease is a result of higher operating expenses due to new rigs entering the fleet and higher general and administrative expenses due to the consolidation of Sevan Drilling.

Net financial and other items for the quarter showed a loss of US$96 million compared to a gain of US$1,292 million in the previous quarter. The loss is primarily related to negative impacts from interest rate swap movements (a non-cash effect) and the exclusion of the gain on sale of the tender rig business.Income taxes for the third quarter were US$60 million, an increase of US$11 million from the previous quarter.

Net income for the quarter was US$315 million representing basic and diluted earnings per share of $0.61 and $0.60, respectively.

Market development
“The fundamental outlook for the offshore drilling industry remains firm. Exploration and production companies continue to view deep and ultra-deepwater acreage as attractive areas to invest capital. Several oil companies are however encountering a period in which cash flows are challenged and budgets must be re-examined. It is typical during these periods for project commencements in all regions to slow on the margin before growth capital is deployed in the most impactful projects that will replace reserves and
grow free cash flow.

As a result of the pause in upstream spending we have observed a decline in the overall number of fixtures, lead times and contract duration. We also expect to see a number of sublets adding to near term available supply. Contrasting with 2012 when the market was under supplied, based on these observations it is clear that the market is adequately supplied currently and may encounter some challenges in 2014. Importantly, these challenges will be acutely felt by lower specification assets while Seadrill is positioned
in the high end of asset classes where utilization is likely to remain at 100%. In terms of expected near term contract duration, there is a significant work obligation required to retain licenses that expire in 2014 and 2015 and it is likely to lead to more coordination of rig capacity from oil companies and somewhat shorter and more flexible work programs for rig operators. The current contract for the West Tellus is an example of this trend,” Seadrill said in a release.

Highlights
• Seadrill reports third quarter 2013 EBITDA* of US$663 million
• Seadrill reports third quarter 2013 net income of US$315 million and earnings per share of $0.61
• Seadrill increases the ordinary quarterly cash dividend by 4 cents to 95 cents per share
• Economic utilization for floaters was 94% in Q3 2013 in-line 94% in Q2 2013
• Economic utilization for the jack-up fleet in Q3 2013 was 97%, down from 98% in Q2 2013
• Seadrill ordered four ultra-deepwater drillships for an estimated project price below US$600 million per rig, with
deliveries scheduled for the second half of 2015
• Seadrill ordered two jack-ups for an estimated project price of US$230 million per rig, with deliveries in the second and
third quarters of 2016, respectively
• Seadrill reached 50.1% ownership in Sevan Drilling and launched a mandatory offer for all outstanding shares which
closed on August 22, 2013
• Seadrill secured a 180 day contract for the newbuild ultra-deepwater drillship West Tellus with a total estimated revenue
potential of US$150 million
• Seadrill secured a 2.5 year contract for the jack-up rig West Freedom with a total estimated revenue potential of US$222
million
• Seadrill secured a one year contract extension with Talisman in Malaysia for the jack-up rig West Vigilant with a total
estimated revenue potential of US$61 million
• North Atlantic Drilling awarded an extension of the current drilling contract, in addition to a new drilling contract for
West Navigator, securing employment to December 2014 with a total estimated revenue potential of US$98 million
• Seadrill completes placement of US$500 million unsecured senior notes maturing in 2020