Seadrill Climbs as Investors Bet on Higher Dividend

(Bloomberg) — Seadrill Ltd., the offshore drilling company controlled by billionaire John Fredriksen, climbed in Oslo as investors bet payments to shareholders will increase when the company reports its first-quarter results tomorrow.

Shares in Hamilton, Bermuda-based Seadrill, gained as much 1.5 percent to 234.2 kroner, where it was trading as of 11:45 a.m. local time. That makes it the biggest gainer in the Bloomberg EMEA Oil & Gas Index today.

Seadrill will increase its dividend to 86 cents from 85 cents, according to Bloomberg dividend forecasts. That will give a 12-month dividend yield of about 11 percent. The company will report first-quarter net income of $304 million, up from $17 million in the previous three months, according to the average of 17 analyst estimates compiled by Bloomberg.

Seadrill, which is expanding its fleet in anticipation of rising demand from oil and gas producers, has gained 15 percent so far this year. The driller has 22 new-build rigs under construction and a contract backlog of about $21 billion, according to its fourth-quarter report. It has since ordered two more jack-up rigs, it said on March 5.

The driller will pay out 90 cents a share in the first quarter, before rising to $1 apiece in the fourth-quarter, Frank Harestad, an analyst at Pareto Securities ASA, said in a note dated May 23. The broker expects a “solid” and potentially increased dividend, combined with a “good outlook for the drilling market,” to positively impact Seadrill’s valuation in the coming months, he said.

Seadrill will be able to sign “robust contracts” for its five newbuilds scheduled to be delivered between this year and 2015, said Harestad, who has a buy recommendation on the stock.

– Stephen Treloar, Copyright 2013 Bloomberg.

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