Seadrill Results: Not So Pretty

By Travis Johnson, Stock Gumshoe, February 26, 2009

As one might expect, Seadrill’s report for the fourth quarter is not so positive.  Their operating earnings, which should be the bright spot given the new rigs that went into service, and the rising rates, even came in a bit below the estimates.  The big problem for Seadrill is not related to operating results right now, but to their holdings in other companies — like Seadrill, most drilling companies have seen their stocks fall dramatically over the past six months.  Seadrill continues to say that the shares they hold in Pride, Scorpion Offshore, and SapuraCrest are still good strategic holdings, and that they consider the shares significantly undervalued now, but they marked them down to market prices and took a big haircut on both their share holdings and their related positions in those firms.  Add on a charge for some interest rate swaps and Seadrill’s net loss easily swamps their operating earnings (chargeoffs and writedowns came to about $775 million, which led to a total net reported loss of $739 million, $1.86 per share).

So, no good news, of course, but no good news was expected — this is a bit worse than hoped for by analysts, so it appears likely the shares will fall a bit more in the near term.  As I reported earlier, I sold about a third of my position in Seadrill and continue to hold the balance.

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