SeaDrill (SDRL) Posts Weak Earnings In Q1, Revenues Lag

Offshore contract driller SeaDrill Limited (NYSE:SDRL) reported weak first-quarter 2016 results owing to underperformances by Jack-up Rigs and Floaters. The negative was partially offset by decreasing operating expenses.

Earnings per share – excluding one-time items − came in at 26 cents, missing the Zacks Consensus Estimate of 38 cents. The bottom line also decreased significantly from the year-ago adjusted figure of 86 cents.

Total operating revenue of $891 million was down 28.4% from $1,244 million in first-quarter 2015. The top line also failed to beat the Zacks Consensus Estimate of $902 million.

Segmental Analysis

Floaters: This segment reported revenues of $616 million compared with $832 million in the year-ago quarter. Net operating income came in at $237 million, significantly below the prior-year quarter figure of $376 million.

Jack-up Rigs: The segment registered revenues of $246 million compared with $377 million in the prior-year quarter. Net operating income plummeted from the first-quarter 2015 figure of $325 million to $86 million.

Other: Revenues came at $29 million, which is lower than $35 million reported in the prior-year quarter. Operating profit of $5 million, however, was up from the prior-year profit of $2 million.

Backlog

As of May 25, 2016, total order backlog for SeaDrill Limited was $4.3 billion.

Expenses

SeaDrill incurred operating expenses of $568 million in the reported quarter, reflecting a significant decline from the year-ago quarter figure of $731 million.

Capital Expenditure & Balance Sheet

As of Mar 31, 2016, SeaDrill had cash and cash equivalents of $1,092 million and long-term debt of $10,483 million (including current portion). The debt-to-capitalization ratio was approximately 52.7%.

Guidance

The company projects second-quarter 2016 operating income of almost $510 million, which is less than the first-quarter level of $528 million.

Zacks Rating

Headquartered in London, SeaDrill is one of the leading offshore drilling contractors in the world. Among all the offshore drilling contractors, the company has one of the youngest drilling fleet which is capable of operating in challenging environments.

The company currently carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players in the oil and gas drilling industry are Hercules Offshore, Inc. (NASDAQ:HERO) , Independence Contract Drilling, Inc. (NYSE:ICD) and North Atlantic Drilling Ltd. (NYSE:NADL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).