Seadrill Soars to Record After Company Gives Bullish Drilling Rig Outlook

Seadrill Ltd., owner of the second- largest fleet of deepwater rigs, climbed to a record in Oslo trading after Chief Executive Officer Alf Thorkildsen said rig rates are poised to gain.

Seadrill rose as much as 5.3 percent to 200.2 kroner, the highest since the stock started trading in May 2005, and was at 199.4 kroner as of 2:02 p.m. local time. The shares have rebounded 72 percent from this year’s low on July 1, valuing the Bermuda-based company at 82 billion kroner ($13 billion).

Thorkildsen said yesterday he expects day rates for rigs to improve, led by demand for newer vessels, as oil companies increasingly explore in technically demanding areas amid stricter safety regulations following the Macondo well disaster. Seadrill raised its dividend to $0.65 a share from $0.61 in the prior quarter, and said the fourth quarter indicated “good growth” and “solid profitability.”

Offshore exploration from West Africa to Brazil is generating demand for rigs after oil prices more than doubled since the end of 2008 and the financial crisis eased. Oil companies are “queuing up to submit requests” to resume drilling in the Gulf of Mexico after the moratorium was lifted by President Barack Obama a month ago, according to the International Energy Agency.

Recent Orders

Seadrill last month ordered two ultra deep-water drillships, which can reach 12,000 feet (3,700 meters), at $600 million each for delivery starting in 2013. It has options for two more. The company also ordered four jack-up rigs for $780 million since October, with options for six more, and bought a high specification jack-up from Petrojack IV Pte. Ltd. yesterday.

“The company’s strategic focus on technically superior assets should add value long-term given the attractive financial terms on their newbuilds and continued operator preference for higher-spec rigs,” Credit Suisse Group AG analysts Arun Jayaram, Tao Ly and Eduardo Royes said in a report. They raised the target price on the stock to 181 kroner from 150 kroner.

“The trend right now is to favor the type of rigs Seadrill has,” Carnegie ASA analyst Atle Hauge, who has an “outperform” rating on the stock, said by phone.

Citigroup Inc. today reiterated its “buy” recommendation on the stock and raised its target price to 265 kroner from 200 kroner.

Morgan Stanley raised its target to $40. The stock closed at $13.09 in New York yesterday.

‘Upside Opportunities’

“Seadrill’s defensive features and upside opportunities continue to make it an appealing income and growth stock, in our view,” Citigroup’s Kenan Najafov said in a report.

Seadrill yesterday issued a filing to the U.S. Securities and Exchange Commission regarding the signing of two forward contracts with DnB NOR ASA and Nordea AB for shares in Pride International Inc. Seadrill owns 9.4 percent in the U.S. rig company.

Seadrill yesterday issued a filing to the U.S. Securities and Exchange Commission regarding the signing of two forward contracts with DnB NOR ASA and Nordea AB for the purchase of shares in Pride International Inc. Seadrill owns 9.4 percent in the U.S. rig company.

Thorkildsen yesterday said the company was keeping its options open regarding its stake in Pride. Seadrill is engaging in organic mergers and acquisitions as well as “selective M&A depending on the asset and the order back-log attached to it,” he said.

“The wording in the filing just means we’re keeping all options open,” Jim Daatland, Seadrill’s head of investor relations, said by phone today. “The status on that hasn’t changed.”

The Wall Street Journal last month reported that Pride is looking at strategic options including a possible sale of the company and has held talks with Seadrill.

“I read this as just a confirmation of what the companies have been in discussions about for the past 2 1/2 years,” Hauge said. “It could happen, you never know, but most people I speak to believe it’s most likely that it won’t happen right now. It’s taken too long.”

To contact the reporter on this story: Marianne Stigset at mstigset@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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