Seadrill Shares Fall on Increased Deepwater Rig Downtime and Delays

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February 1, 2013

seadrill logo(Bloomberg) — Seadrill Ltd., controlled by Norway’s John Fredriksen, dropped the most in two months in Oslo after downtime for its deepwater rigs exceeded guidance and as one of its units took longer than planned to start a new assignment.

Shares in the company, which is relocating its head office to London from Stavanger in Norway, fell as much as 4.8 percent, the most since Dec. 4, and traded down 2.4 percent at 211.2 kroner as of 1 p.m. in the Norwegian capital. More than 1.1 million shares have been traded so far today, compared with a three-month daily average volume of about 1 million.

Seadrill’s deepwater rigs were out of operation for about 100 days during the fourth quarter, compared with guidance of 41 days given in the previous quarter, the company said yesterday. Its first-quarter earnings will also be hurt by the West Hercules semi-submersible rig taking longer than expected to be ready for its assignment with Statoil ASA, Seadrill said.

Pareto Securities ASA will reduce its fourth-quarter earnings per share estimate by about 10 cents from 70 cents, the broker said in an e-mailed note today. The total impact, including the delay to the start up of West Hercules and costs related to its relocation, will be about 20 cents per share between the fourth quarter of 2012 and the second quarter of 2013, Pareto said.

“We view this only as a minor hiccup and we recommend buying on weakness,” RS Platou AS analyst Robert Jensen said in an e-mail to clients.

‘Modest Reduction’

“The net effect from the operational update is a modest 2 percent reduction to our 2012-2013 earnings per share estimate,” he wrote.
Seadrill, which today said it ordered two jack-up drilling rigs from Dalian Shipbuilding Industry Co. at a cost of about $230 million each, is scheduled to announce its fourth quarter results on Feb. 28. The company is expected to report earnings per share of 72 cents, according to the average of 17 analyst estimates compiled by Bloomberg. That compares with a loss of 23 cents a year earlier.

Shares in Seadrill, which is expanding its fleet in anticipation of rising energy demand, have declined 2.4 percent during the last 12 months. Its contract backlog has climbed to a record $20.3 billion, the company said on Aug. 27.

– Stephen Treloar, Copyright 2013 Bloomberg.


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