I’ve just finished selling off about 1/3 of my position in Seadrill, the deepwater oil rig owner, at prices between $8 and $9. This represents a significant loss from my average purchase price, though I have held these shares for years and bought at very different levels — and it’s a very large loss from my most recent purchases in the $30s, and the price that the shares held (nearly their all-time high, unfortunately) when I wrote about Seadrill as my first “idea of the month” just a month or two before the oil price peaked.

I continue to hold the rest of my position, and my sentiment is that oil prices in the next five years will be higher than they are now, and that we will continue to need to reach the difficult deepwater reserves that lie offshore Brazil, in the deepwater Gulf of Mexico, in the North Sea and offshore China, among other places. But with the shares recovering from their truly dramatic lows of last Fall it seemed a good time to lighten the position.

Seadrill is currently, it seems to me, hunkering down and hoping to make it through this credit crisis and oil price shock — they have suspended their generous dividend, which must make John Fredriksen (the majority shareholder) crazy, given his predilection for turning cash flow into cash in shareholders’ pockets, and they have been able to secure needed financing in recent months, but it hasn’t been pretty — they had to pay a high rate to get funding for the wave of newbuild rigs that have been and/or will soon be delivered. All of these rigs have contracts in place and, assuming that none of the contracts are cancelled, will be contributing to the bottom line very soon if they aren’t already doing so.

So in the main I’m willing to be patient and let Seadrill wait it out, but given the strange nature of these markets and the extraordinary global depression that we’re in now I don’t want to assume too much — it’s possible that their clients (mostly majors like Petrobras and ExxonMobil) will cancel deepwater projects, and it seems likely that rates for new deals will be lower than the historic highs we saw last summer. Selling now could be a mistake, of course, and Seadrill continues to own scarce and valuable assets, ...