by Travis Johnson, Stock Gumshoe | August 27, 2008 3:12 pm
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No big news from earnings this time out — the fact that they have had preliminary discussions with Pride doesn’t seem to me to be as big a deal as the media coverage implies, an actual merger is still a pretty long shot in my opinion (though they might make some strategic deals, I suppose, and I wouldn’t put anything past John Fredriksen when it comes to dealmaking). It looks increasingly likely that the next deal will be with Scorpion, since Seadrill already owns such a big portion of that one and it looks like the Arab bidders might pull out, or with Sapuracrest, which they have been buying in small bites nearly every day for months.
Still, the earnings beat estimates according to most analysts, though one analyst downgraded the shares to hold this morning because they think the consensus estimates going forward will come down. There was no big news on the dividend or future sale/leaseback transactions, and though there were some additional minor delays in the newbuildings there was no big chunk of bad news as there was last time around — they appear confident that they can manage the newbuildings better going forward, though of course there’s always a chance that delays will crop up. They also noted that demand remains wildly high for deepwater rigs, and that their few remaining rigs that are available for 2010 should see some nice bids, and they are already getting inquiries.
So … the dividend was kept at .60 a share, which is an annualized $2.40 for a yield of about 8% on the current price of $27.50 (the pink sheets shares spiked up following earnings yesterday afternoon, but the bulk of trading, in Oslo, gave Seadrill just a small boost following earnings this morning, and they’re actually down a hair at this moment).
The dividend is not quite supported by earnings yet, but this is and will remain a cash flow story, not an earnings story (the earnings will catch up quickly, with all the new rigs coming online over the coming year, but the focus is likely to remain on dividending out positive cash flow). Fredriksen’s companies have always cared most about the amount of free cash flow they can generate, in party by using significant leverage, not about what the accountants say they can announce as earnings (since most of his businesses are in huge capital equipment — rigs and ships — things like depreciation play a significant role in earnings).
I’m seeing Seadrill at $24.45 on Yahoo today, although I’m never sure about the accuracy of their charts for this stock. Is there a site that offers up to the minute charts for this one?
I haven’t purchased any stock yet…mainly because Zecco doesn’t allow trading of foreign stocks. But this price looks like a great time to jump in! What is the best way to buy this stock…Etrade? I assume it probably takes time to transfer my money and I might miss this price by the time the transaction is completed. But better late than never.
Thanks for your help.
Jim