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Seadrill (SDRL) Down 13.6% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Seadrill Limited (SDRL - Free Report) . Shares have lost about 13.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
First Quarter 2017 Results
SeaDrill Limited reported first-quarter 2017 earnings per share – excluding one-time items – of $0.06. The bottom line surpassed the Zacks Consensus Estimate of a loss of $0.05. The better-than-expected results came on the back of lower operating expenses during the quarter. The company delivered a strong 97% economic utilization of its floater fleet and 98% on its jack-up fleet.
However, the bottom line deteriorated from year-ago adjusted earnings of $0.26 per share owing to lower revenues.
Total operating revenue of $569 million in the reported quarter was down 36% from $891 million in first-quarter 2016. The top line also missed the Zacks Consensus Estimate of $584 million. Lower revenues are attributed to the West Vigilant and West Epsilon drillships which remained idle during the quarter.
EBITDA in the reported quarter was $291 million, as compared with $528 million in the year-ago quarter.
Segmental Analysis
Floaters: This segment reported revenues of $369 million, compared with $616 million in the year-ago quarter. Net operating income was $49 million as against the prior-year quarter figure of $237 million.
Jack-up Rigs: The segment registered revenues of $181 million, as against $246 million in the prior-year quarter. Net operating income plummeted to $33 million from the first-quarter 2016 figure of $86 million.
Other: Revenues of $19 million were lower than $29 million reported in the prior-year quarter. Operating income of $1 million compared unfavorably with the prior-year profit of $5 million.
Backlog
As of May 24, 2017, total order backlog at SeaDrill was $3.4 billion. This comprised $1.4 billion for the floater fleet and $2.0 billion for the Jack-up fleet.
Expenses
Like other offshore contract drillers, SeaDrill has also decided to focus on controlling costs amid plummeting crude prices. The company has trimmed its headcount from 6,995 at year-end 2015 to 5,196 at the end of the first quarter.
SeaDrill incurred operating expenses of $491 million in the reported quarter. This reflects a decline of 13.6% from the year-ago quarter figure of $568 million. The decrease is primarily attributed to the lower vessel and rig operating expenses which decreased about 27% in the quarter from the year ago figure of 290 million.
Capital Expenditure & Balance Sheet
As of Mar 31, 2017, SeaDrill had cash and cash equivalents of $1,462 million and long-term debt of $5,948 million. The debt-to-capitalization ratio was approximately 38.3%.
Guidance
The company projects second-quarter EBITDA to decrease to $240 million due to three important drilling rigs which are expected to become idle in the second quarter. The company forecasts net income of $40 million in the second quarter.
Restructuring Update
SeaDrill which is battling with a total of $14 billion debt and liabilities is in advanced discussions with lenders regarding the restructuring of debts ahead of Jul 31.
The company has also elected Anton Dibowitz as its new CEO effective Jul 1. Dibowitz will replace Per Wullf who will continue to serve as the director of the company.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted downward by 66.7%.
At this time, Seadrill's stock has a subpar Growth Score of 'D', while it is doing a lot better on the momentum front with an 'A'. The stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable for value and momentum based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Seadrill (SDRL) Down 13.6% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Seadrill Limited (SDRL - Free Report) . Shares have lost about 13.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
First Quarter 2017 Results
SeaDrill Limited reported first-quarter 2017 earnings per share – excluding one-time items – of $0.06. The bottom line surpassed the Zacks Consensus Estimate of a loss of $0.05. The better-than-expected results came on the back of lower operating expenses during the quarter. The company delivered a strong 97% economic utilization of its floater fleet and 98% on its jack-up fleet.
However, the bottom line deteriorated from year-ago adjusted earnings of $0.26 per share owing to lower revenues.
Total operating revenue of $569 million in the reported quarter was down 36% from $891 million in first-quarter 2016. The top line also missed the Zacks Consensus Estimate of $584 million. Lower revenues are attributed to the West Vigilant and West Epsilon drillships which remained idle during the quarter.
EBITDA in the reported quarter was $291 million, as compared with $528 million in the year-ago quarter.
Segmental Analysis
Floaters: This segment reported revenues of $369 million, compared with $616 million in the year-ago quarter. Net operating income was $49 million as against the prior-year quarter figure of $237 million.
Jack-up Rigs: The segment registered revenues of $181 million, as against $246 million in the prior-year quarter. Net operating income plummeted to $33 million from the first-quarter 2016 figure of $86 million.
Other: Revenues of $19 million were lower than $29 million reported in the prior-year quarter. Operating income of $1 million compared unfavorably with the prior-year profit of $5 million.
Backlog
As of May 24, 2017, total order backlog at SeaDrill was $3.4 billion. This comprised $1.4 billion for the floater fleet and $2.0 billion for the Jack-up fleet.
Expenses
Like other offshore contract drillers, SeaDrill has also decided to focus on controlling costs amid plummeting crude prices. The company has trimmed its headcount from 6,995 at year-end 2015 to 5,196 at the end of the first quarter.
SeaDrill incurred operating expenses of $491 million in the reported quarter. This reflects a decline of 13.6% from the year-ago quarter figure of $568 million. The decrease is primarily attributed to the lower vessel and rig operating expenses which decreased about 27% in the quarter from the year ago figure of 290 million.
Capital Expenditure & Balance Sheet
As of Mar 31, 2017, SeaDrill had cash and cash equivalents of $1,462 million and long-term debt of $5,948 million. The debt-to-capitalization ratio was approximately 38.3%.
Guidance
The company projects second-quarter EBITDA to decrease to $240 million due to three important drilling rigs which are expected to become idle in the second quarter. The company forecasts net income of $40 million in the second quarter.
Restructuring Update
SeaDrill which is battling with a total of $14 billion debt and liabilities is in advanced discussions with lenders regarding the restructuring of debts ahead of Jul 31.
The company has also elected Anton Dibowitz as its new CEO effective Jul 1. Dibowitz will replace Per Wullf who will continue to serve as the director of the company.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted downward by 66.7%.
Seadrill Limited Price and Consensus
Seadrill Limited Price and Consensus | Seadrill Limited Quote
VGM Scores
At this time, Seadrill's stock has a subpar Growth Score of 'D', while it is doing a lot better on the momentum front with an 'A'. The stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable for value and momentum based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.