Seadrill Sees Profits Fall in 4Q 2011

Norwegian-Bermudan deepwater drilling firm Seadrill announced its fourth quarter results Wednesday, reporting that its operating profit for 4Q 2011 was $436 million compared with $480 million for the preceding quarter.

The third quarter included a $23 million gain on the sale of West Juno, while the fourth quarter includes a non-recurring $16 million expense related to termination of a third party management agreement for two jackup rigs in the Middle East. Termination of the management contract will provide for cost savings more than offsetting the non-recurring expense during the remaining contract period for the two rigs, said Seadrill.
 
Net financial items for the quarter showed a loss of $501 million compared to a loss of $372 million in the previous quarter. This loss includes a $463 million non-cash impairment charge on the company's 39.9-percent ownership in Archer.
 
The investment is written down to reflect the share price as of Dec. 31, 2011. This loss is partly offset by a gain of $33 million on other derivative financial instruments for the quarter whereas we the previous quarter had a loss of $330 million on such instruments.
 
Income taxes for the fourth quarter were $17 million, down from $50 million in the previous quarter.
 
Net loss for the quarter was $82 million corresponding to a basic loss per share of $0.23.
 
"The market prospects for our industry are looking increasingly promising based on growth in rig demand due to our customers' significant exploration success and the prevailing favorable energy prices," said Seadrill Chief Executive Officer Alf C Thorkildsen. "We are of the opinion that this development will provide us opportunities to continue the growth of our company. The strong cash-flow from operations is supporting our growth and our cash dividend."
 
Highlights:
  • Seadrill generates fourth quarter 2011 EBITDA*) of $575 million.
  • Seadrill takes a $463 million non-cash mark-to-market impairment of its shareholding in Archer Limited.
  • Seadrill reports fourth quarter 2011 net loss of $82 million and loss per share of $0.23 as a result of a non-cash impairment.
  • Seadrill increases the quarterly cash dividend by 5% to S$0.80 per share.
  • Seadrill secures contracts for the ultra-deepwater rigs West Capricorn (DW semisub), West Leo (DW semisub) and West Aquarius (UDW semisub) with an aggregated revenue potential of $1.6 billion.
  • Seadrill secures contracts for the jack-up rigs West Ariel (400' ILC), West Callisto (400' ILC) and West Prospero (400' ILC) with an aggregated revenue potential of $115 million.
  • Seadrill secures contract for the semi-tender rig under construction West Esperanza with a total revenue potential of $127 million.
  • Seadrill raises $950 million in debt through two new secured credit facilities.
  • Seadrill acquires a 28.5-percent ownership stake in Sevan Drilling ASA.
  • Seadrill subsidiary Seabras completes the initial filing for its potential listing on the BM&F BOVESPA stock exchange in Brazil.
Subsequent events:
  • Seadrill secures contracts for the jack-up rigs Offshore Mischief (350' ILC), Offshore Defender (350' ILC), and West Leda (375' ILC) with an aggregated revenue potential of $311 million.
  • Seadrill completes a $225 million (NOK 1,250 million) unsecured bond at Nibor plus a 3.25-percent margin.
  • Seadrill orders two ultra-deepwater drillships at Samsung in Korea with a total project price of $1.2 billion.
  • Seadrill's 77 percent owned subsidiary North Atlantic Drilling Ltd (NADL) secures 18-month contract for the harsh environment ultra-deepwater drillship West Navigator (DW drillship) with a total revenue potential of $320 million.
  • Seadrill updates the process of listing of its Seabras subsidiary on the stock exchange in Brazil with new filing expected in March and listing anticipated in April 2012.


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