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Norwegian oilfield service firm, Seadrill Ltd (SDRL - Snapshot Report) reported better-than-expected first-quarter 2013 earnings.

Earnings per share came in at 85 cents, which surpassed the Zacks Consensus Estimate of 59 cents owing to better utilization of rigs. However, the earnings per share figure fell below the year-ago profit of 87 cents, primarily due to a significant increase in operating cost.

The total operating revenue of $1,265.0 million was up 20.5% from the first quarter of 2012 and was also ahead of our projection of $1,111.0 million. The beat was due to better performances from its Jack-up rigs and Tender rigs units.

Segmental Analysis

Floaters: This segment reported operating profit of $317.0 million in the quarter, down slightly from the year-ago level of $318.0 million.

Jack-up rigs: The unit registered operating profit of $145.0 million, up by a substantial 116.4% from $67.0 million recorded in the first quarter of 2012. Better utilization of the rigs aided the result.

Tender rigs: The segment accounted operating profit of $90.0 million, up by 26.8% from the prior-year quarter’s profit of $71.0 million. The beat was due to lower depreciation and amortization expenses.

Expenses

Seadrill recorded operating expenses of $774.0 million for this quarter, up by 30.3% as compared to the year-ago quarter.

Dividend

Seadrill declared first-quarter cash dividend of 88 cents, representing an increase of 3.5% as compared to the dividend paid in the previous quarter. The increased dividend will be paid on Jun 20, 2013.

Capital Expenditure & Balance Sheet

During the quarter, Seadrill’s capital expenditure was $2,654.0 million.

As of Mar 31, 2013, Seadrill recorded cash and cash equivalents of $328.0 million and long-term debt of $11,416.0 million (including current portion). The debt-to-capitalization ratio was approximately 63.6%.

Seadrill currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

In the energy sector, firms that are expected to significantly outperform the U.S. equity market over the next one to three months are InterOil Corp (IOC - Snapshot Report), EPL Oil & Gas Inc. (EPL - Snapshot Report) and EQT Midstream Partners LP (EQM - Snapshot Report). All three firms currently carry a Zacks Rank #1 (Strong Buy).

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