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Seadrill Ltd (NYSE:SDRL): Slowdown Limits Future Investment

Boston, MA 03/18/2014 (wallstreetpr) – The global oil drilling companies are experiencing cash pressure due to slow growth in the market. And, the increasing costs for new production and high dividend payout limit opportunities to fund their operations. Companies are mostly focus on saving cash for their shareholders rather than investing in exploration or maintaining existing assets. It expects that the trend continues as the market remains slow in their activities in 2014 and 2015.

The slowdown in the drilling market has significant impact over stock prices. Companies like Seadrill Ltd (NYSE:SDRL), one of worlds’ biggest offshore driller, also experiences pricing pressure. The stock price is down by 13% in last 12 months and closed at $32.93.

Ultra-deep offshore market

Ultra-deep offshore market is one of most lucrative segment which was once peaked to $625,000 a day last year; however, it now closes at around $575,000 and expects to go down further. Analysts predict that the rates will be in between $525,000 and $475,000 per day.

Seadrill already had 32 ultra-deep water units, but the addition of new ultra-deep drilling vessels depends on further spending. Currently, company is focusing on its existing fleet and likely to go for future investment once oil companies rise their spending.

Seadrill’s Performance

In 4Q2013, Seadrill Ltd (NYSE:SDRL) reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $768 million, up by 27% compared to same period last year, above analysts’ expectations. Company expects a flat or lower growth in 1Q2014 due to operational issues related to several vessels. But, company is well positioned with contact backlogs in floaters and jack-up rigs that will support company’s operating income in coming quarters.

In 4Q2013, cash dividend raised from $0.95 to $0.98 per share. Seadrill Ltd (NYSE:SDRL) continues to focus largely on quarterly dividend growth; however, future dividend depends on market outlook and future earnings.

Published by Nicholas Maithya

Nicholas is a Financial Analyst by profession, who enjoys writing about investments, technological developments, business, economics and other financial topics at various financial publications. Join him here on Wallstreetpr.com as he endeavors to deliver to you the latest breaking news on the above mentioned fronts. Contact him by email at [email protected] or follow Nicholas Kitonyi @nmaithyak on Twitter.

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