SDRL stock is moving higher in pre-market trading on August 20, 2019, after the company reported an earnings beat, but is it too little too late?
Highlights From Earnings Report
• Solid operational performance in the quarter with 96% economic utilization
• Revenue up 6% at $321 million with increasing reimbursable revenues
• Operating Loss of $73 million
• Adjusted EBITDA of $69 million
• Reported net loss of $206 million equivalent to net loss per share of $2.03
• Total cash of $1.5 billion following completion of the Senior Secured Notes tender offer
• Order backlog of $1.9 billion as at 30 June 2019
On August 16, 2019, Seadrill and GDI said that they have entered into a 50:50 joint venture, GulfDrill, which will initially manage and operate five premium jackups in Qatar with Qatar Petroleum commencing throughout 2020. The five firm well based contracts will have staggered commencements throughout 2020 with initial terms concluding in 2023 & 2024 respectively. The total contract value is expected to be $656M. Each contract has five single well options which could add up to an estimated 13.7 cumulative years of term and an additional contract value of $700M. GulfDrill will initially bareboat charter the West Telesto and West Castor from Seadrill and has secured bareboat charters for three additional units from a third-party shipyard. Anton Dibowitz, CEO, commented: “We are excited to establish a significant presence in an important Jackup market and to partner with GDI. GulfDrill will give us the opportunity to improve our access to a market that is expected to show significant growth over the next years and strengthen our relationship with Qatar Petroleum.”
SDRL stock in the daily time frame is in a downtrend as the stock has been under distribution for quite awhile.
What caused the decline? Carnegie Investment Bank slashed its target price on the offshore drilling specialist by 88% to just 25 Norwegian kroner per share, or less than $3. Seadrill has a significant amount of debt on its balance sheet, and even though the company has made strides toward a recovery as oil prices have climbed from their lows a few years ago, Carnegie fears that improvements won’t come fast enough to allow Seadrill to pay down or refinance its financial obligations. Unless crude oil can bounce back from recent setbacks, Seadrill will find it tough to move forward aggressively.
SDRL stock does not meet the minimum requirements for inclusion in the GST Portfolio at this time.
Disclosure: I do not hold any position in SDRL stock.