Seadrill Limited CEO Discusses Q3 Results - Earnings Call Transcript
Seadrill Limited (SDRLF.PK)
Q3 2010 Earnings Call
November 30, 2010 9:00 a.m. ET
Executives
Alf Thorkildsen - CEO
Esa Ikäheimonen - CFO
Livar Voll - Group Controller
Jim Daatland - Vice President, Investor Relations
Analysts
Lukas Daul - Enskilda
Ian Macpherson - Simmons
(Christian Mannick) - Deutsche Bank
Monroe Helm - Barrow Hanley
George Berman - JP Turner & Company
Peter Tester - One Investments
Dave Wilson - Howard Weil
Judd Bailey - Jeffries
Fiona Maclean - Merrill Lynch
Kenan Najafov - Citi
Ole Slorer - Morgan Stanley
Eliecer Palacios - Maxim Group
Arun Jayaram - Credit Suisse
Presentation
Operator
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Good day and welcome to the Seadrill Third Quarter 2010 Results Presentation. Today’s conference is being recorded. At this time I’d like to turn the call over to your host today, Mr. Jim Daatland, Vice President, Investor Relations. Please go ahead sir.
Jim Daatland
Thank you and welcome to Seadrill’s Third Quarter 2010 earnings conference call. A copy of the quarterly report has been posted on our Web site seadrill.com along with supporting material for this call. Firstly today we have our CEO Mr. Alf Thorkildsen, our CFO, Mr. Esa Ikäheimonen and our Group Controller Mr. Livar Voll.
Before I turn the call over to Alf I’d like to remind everyone that during the course of this call we may make certain forward-looking statements regarding various matters related to our business and company that are not of historical fact. This could include future financial performance, operating results and the prospects for the contract drilling business in general.
Please note that such statements are made under the Safe Harbor provisions provided by the federal securities regulation. For further and more detailed information on all the risks associated with our company and industry, please see our most recent Form-20F as well as other filings with the U.S. Securities and Exchange Commission. Should one or more of these risks and uncertainties materialize or underlying assumptions prove incorrect, actual results may materially vary from this information indicated.
I’ll also remind people that today we have the opportunity for you to ask one question but please limit your follow up questions to one question. Thank you. That concludes the preliminary details. I’ll now turn the call over to Alf.
Alf Thorkildsen
Thank you so much and good afternoon and good morning to some of you. I would start with some overall comments to the results and company developments through the quarter including subsequent events. Esa will then take us through the finer details of our financial accounts. I will thereafter discuss our market review over recent new bill orders, our contract backlog, dividend distribution and close with some summary remarks. Next page please.
We are pleased to deliver a record EBITDA of some US$560 million, the highest in the Seadrill story so far. Our net income for the quarter was US$358 million corresponding to earnings per share of 85 cents, up from 77 cents in the previous quarter. We continue our payout of regular quarterly cash dividends and the board decided to increase the payout from 61 to 65 cents per share.
The third quarter was characterized by further two deep water new builds commencing operations, a full quarter of contribution from the acquired seven jack-up rig company Scorpion and reasonable operational performance from oil rigs in operation. We saw improved economic utilization rates for all rigs (leased) quarter on quarter with 95% up time for our floaters, 97% for our jack-ups, whereas the utilization of the tender rigs was more or less unchanged at 87. And that is due to the T-8 being idle.
We were not able to maintain the same extent, the reduction in operating expenses we delivered in second quarter. However, we remain focused on this issue and further progress should be expected as the size of the fleet increases. Next page please. In October we took advantage of improved conditions in the debt market by issuance of a $350 million bond and a $650 million convertible bond at attractive prices to position the company for new investments and further growth.
Our strategy has since incorporation in 2005 been to focus our fleet on new and premium off-shore drilling units through new bill orders and targeted acquisition of modern assets. Earlier this year we took advantage of prevailing uncertainty and acquired a new harsh environment jack-up rig under construction and the seven jack-up rig company Scorpion Offshore Limited at what has proven to be favorable prices.
Since then the market for premium jack-up rigs has continued to strengthen with renewed focus on enhanced technical capabilities and operational reliability. This development in combination with attractive yard prices supported by high oil prices led us to order four new premium jack-up rigs for an all-in price of US$790 million. Also the Macondo incident has increased the focus and requirement for new and more advanced equipment for deep water operations significantly. At the same time yard prices for deep water units have fallen by some $200 million, taking us back to 2005 prices adjusted for improved specifications.
This change in market demand sparked us to order the first two seventh generation ultra deep water drill ships from the Samson Shipyard at an all-in price of US$600 million a piece to (use those) units but improve order debt, increase accommodation capacity, higher crew capability and the first new bill to be outfitted with seven RAM configuration of the blow up prevention pack.
We view these events to be unique opportunities to position the company for further growth superior to any corporate or asset acquisitions. At the same time as we increase our exposure to new rigs, we took the opportunity to (hybrid) our fleet through sale of the 1984 built jack-up West Larissa for a total consideration of $55 million. I’m also pleased to announce that we today have acquired the 2009 built 370-foot jack up rig Petrojack IV for a total consideration of $180 million. The unit has a 3-1/2 year contract with PTT in Thailand at a day rate of 109,500.
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