Seadrill 3Q Net Income Rises to $315M

Seadrill today reported 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, up from US$216 million recorded for the same period last year, representing basic and diluted earnings per share of $0.61 and $0.60, respectively.

Cash flow

As of September 30, 2013, cash and cash equivalents were US$551 million, an increase of US$114 million compared to the
previous quarter. Net cash from operating activities for the nine month period ended September 30, 2013 was US$1,204 million and net cash used in investing activities for the same period was US$1,497 million. Net cash provided by financing activities was US$526 million.
Market development

Also, Seadrill provided its view on the market outlook:

“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.”

[mappress]
October 25, 2013