Seadrill Third Quarter Reports Lower Profits vs Second Quarter

Seadrill, an international offshore drilling company with operations around the globe  announced its third quarter 2011 net income of US$58 million.  A major decrease in net income compared to second quarter net income of  US$645 million.

Consolidated revenues for the third quarter of 2011 amounted to US$1,029 million as compared to US$995 million in the second quarter. Operating profit for the quarter was US$480 million, up from US$430 million in the preceding quarter. The improvement is related to an increase in the number of units in operation and sale of the jack-up rig West Juno.

Net financial items for the quarter showed a loss of US$372 million compared to a gain of US$264 million in the previous quarter.

The adverse contribution is mainly related to a loss of US$330 million on derivative financial instruments for the quarter whereas the second quarter had a gain of US$416 million on realization of holdings in the former offshore drilling company Pride International Inc offset by a loss on derivative financial instruments of US$90 million. Income taxes for the third quarter were US$50 million in line with previous quarter.

Future Outlook

In response to the latest market development, the Board maintains its optimistic market view and expects that demand for advanced units to grow further. The tightening demand fits well with the five ultra-deepwater units the Company has available in the period October 2012 and October 2013.  The Board is presently evaluating several ways to expand the Company further including organic growth and M&A activities.

The Company is continuously looking at ways to enhance shareholder value through corporate restructuring. In addition to the planned listing of North Atlantic Drilling, Seadrill is evaluating the benefits of a separate listing of its activities in Brazil. Significant time has also been spent on the possibility of monetizing some of the Company’s long-term contracts through a master limited partnership or a similar structure. The Board anticipates that daily rates for ultra-deepwater units within the next six months will surpass US$550,000. The Company is very well positioned to continue to grow its earnings as well as increase the dividend distribution. The result for the fourth quarter is expected to confirm this trend.

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Offshore Nieuws Staff,  November 30, 2011;  Image: Seadrill