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Seadrill (SDRL) Q2 Earnings Break Even, Sales Down Y/Y

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Offshore contract driller SeaDrill Limited (SDRL - Free Report) reported a break even in the second quarter earnings, which compared favorably with the Zacks Consensus Estimate of a loss of 6 cents. 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 59 cents per share owing to lower revenues and high restructuring costs

Total operating revenues of $577 million in the reported quarter was down 34% from $868 million in second-quarter 2016. Lower revenues are attributed to the lower day rates along with West Tucana and Sevan Louisiana drillships which remained idle during the quarter.

EBITDA in the reported quarter was $264 million, as compared with $557 million in the year-ago quarter.

Seadrill Limited Price, Consensus and EPS Surprise

 

Seadrill Limited Price, Consensus and EPS Surprise | Seadrill Limited Quote

Segmental Analysis

Floaters: This segment reported revenues of $375 million compared with $610 million in the year-ago quarter. Net operating income was $46 million as compared to the prior-year quarter figure of $270 million.  

Jack-up RigsThe segment registered revenues of $179 million as against $234 million in the prior-year quarter. The segment reported a net operating loss of $148 million as against operating income of $92 million in the year ago quarter.

OtherRevenues of $23 million were lower than $24 million reported in the prior-year quarter. Operating income of $2 million remained unchanged from the year ago quarter. 

Backlog

As of Aug 24, total order backlog at SeaDrill was $3.1 billion. This comprised $1.2 billion for the floater fleet and $1.9 billion for the Jack-up fleet. The average contract duration is 10 months for floaters and 30 months for Jack-ups.

Expenses

SeaDrill incurred operating expenses of $517 million in the reported quarter, reflecting a marginal increase from the year-ago quarter level of $509 million. The decrease is primarily attributed to the lower vessel and rig operating expenses which was partly offset by increasing general/administrative and depreciation costs.

Capital Expenditure & Balance Sheet

As of Jun 30, 2017, SeaDrill — which counts Diamond Offshore Drilling, Inc. (DO - Free Report) , Helmerich & Payne, Inc. (HP - Free Report) and Ensco plc (ESV - Free Report) as some of its peers —had cash and cash equivalents of $1,345 million and long-term debt of $5,284 million. The debt-to-capitalization ratio was approximately 35.9%.        

Guidance

The company projects second-quarter EBITDA to decrease to $175 million due to a couple of drilling rigs which are expected to become idle including West Tucana and Sevan Louisiana. Lower day rates and higher restructuring costs are also likely to adversely impact the EBITDA. The company forecasts net income of $40 million in the second quarter.

Restructuring Updates

SeaDrill which reported a net loss of $15 million in the quarter and is battling with huge debt and liabilities is in advanced discussions with lenders regarding the restructuring of debts. The company is likely to file for Chapter 11 within three weeks. In July 2017, the company reached an agreement with its bank group to extend the date to Sep 12 by which a comprehensive restructuring plan must be agreed upon.

On Aug 15, SeaDrill — which carries a Zacks Rank #3(Hold) — announced the completion of the amendment of three credit facilities to protect its subsidiary Seadrill Partners LLC from going bankrupt. You can see the complete list of today’s Zacks #1 Rank stocks here. With the amendment, the partnership sets itself free from the possibility of default by Seadrill restructuring process, wherein the lenders cannot take any action against the partnership’s assets during negotiations.

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