Boston, MA 11/28/2014 (wallstreetpr) – The fallout in the oilfield services industry may push Diamond Offshore Drilling Inc (NYSE:DO) to act like Seadrill Ltd (NYSE:SDRL) in a recent dividend move. The latter moved to suspend dividends as it seeks to save money and cut its huge debt. According to an article on Street Insider quoting Wells Fargo & Co. (NYSE:WFC) experts, more oilfield services companies may interfere with their dividends payment to address the difficulties at hand.
Seadrill Ltd (NYSE:SDRL) withdrew dividends to firm its balance sheet, according to MarketWatch. The company has about $6 billion in debt. It expects the suspension of dividends to save it $2 billion every year for the foreseeable future. However, the company said its stock buyback program was still on course. It expects to repurchase 10% of its outstanding shares in the coming year, according to a board authorization.
Drilling market fallout
The move by Seadrill Ltd (NYSE:SDRL) on dividends validates the increasing pressure that oil-services companies are facing. The troubles mostly come from the fallout in oil prices and the softness in the drilling contracts market. The economic embargoes against Russia are also seen as potential challenges for the oil-field services companies.
According to the Wells Fargo analysts, Diamond Offshore Drilling Inc (NYSE:DO) and Transocean (NYSE: RIG) are some of the oilfield services companies that may follow suit in dividends alteration. The companies have an urgent need to shore their balance sheets and cutting dividends comes as a viable money saving opportunity.
On its part, Diamond Offshore Drilling Inc (NYSE:DO) recently declared a special dividend of $0.75 per share. The company expects to pay the dividend on Dec. 1, 2014 to shareholders of record as of Nov. 5, 2014.
Weak financial results
Concerning financial performance, things fell out for Diamond Offshore Drilling Inc (NYSE:DO) in the most recent quarter. The company earned $0.38 per share, yet analysts expected earnings of $0.74 per share. It missed the EPS target by a huge margin. As if that was not enough, the company generated $738 million in revenue, which was behind $741 million that analysts expected for the quarter.
Shares of Diamond Offshore Drilling Inc (NYSE:DO) has been falling ever since the stock made a high of $39.31 in November’14. The stock closed below its 20-Day EMA of $35.93 with RSI of 35.41.