SeaDrill Ltd. (NYSE:SDRL) Puts its Dividends to Halt After Weak Quarter
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SeaDrill Ltd. (NYSE:SDRL) has suspended its dividends after posting low revenue in its third quarter earnings. The company posted its third quarter earnings results on Wednesday before the market opened. The company’s Earnings per share were 0.31 dollar which is below substantial, upon revenue of 1.29 billion. A year ago, SeaDrill Ltd. (NYSE:SDRL) made o.60 earnings per share on revenue of 1.28 billion dollar. The market estimate was 0.67 earnings per share upon 1.23 billion revenue.
As far as market cap is concerned, SeaDrill Ltd. (NYSE:SDRL) is the world’s largest offshore drilling company; there were lots of expectations tied up, considering the scale of the company but suspending the dividends has dwindled the faith of the shareholders in the company. They’re having second thoughts and there are rumors that they might dumb the stock in secret.
The company is reportedly suspending its 18.7% annual dividends to focus on dealing with debt reduction and creating value and opportunities because the company has suffered a lot in the broader markets. The company has assured its investors that the SeaDrill Ltd. (NYSE:SDRL)’s capital will improve by 2 billion annually, if the dividends are stalled for some time. The decision isn’t popular with the shareholders, but it’s understood that it is essential for the company, especially in such trying times.
At the end of the second quarter, the company’s executives had told the shareholders that SeaDrill Ltd. (NYSE:SDRL)’s dividend was ironclad for the next years. The scenario has changed since then. SeaDrill Ltd. (NYSE:SDRL) is drenched in debts and other mounting priorities; halting the dividends came as a natural step because there was no other choice left. The company assured the investors that it will reimburse them in other ways for the time being.
SeaDrill Ltd. (NYSE:SDRL)’s deep water rigs will suffer because of the drop in the crude oil prices; only 9 percent will be available for 2015. The company’s jack-up rigs aren’t expected to find much market even though 65 new-build rigs are expected to be available by next year. SeaDrill Ltd. (NYSE:SDRL) also thinks that the market for these rigs will be quite narrow. Considering the situation, SeaDrill Ltd. (NYSE:SDRL) is in now, there isn’t much faith on part of investors in the company.
SeaDrill Ltd. (NYSE:SDRL)’s shares, as expected, were down by 10 percent on Wednesday. This shows that shareholders have already started backing out and investors have lost interest. Considering the stature of the company, it’s really a hard blow and SeaDrill Ltd. (NYSE:SDRL) now will have to cope with it all by itself. The 18.57 dollar share price is on the verge of its new 52 week low. The company is in a dire need for a turnaround. Let’s hope SeaDrill Ltd. (NYSE:SDRL) finds a way out of this mess and puts itself back on track. The consensus price for the company was 31.60 and SeaDrill Ltd. (NYSE:SDRL) is way below that. Things look quite bleak in the petroleum market and the situation is expected to remain monotonous.