Seadrill Defies Rig-Market Gloom by Raising Payout, Outlook

Seadrill Ltd (SDRL), the world’s biggest drilling-rig company, increased dividends and said earnings will improve for the rest of the year even as oil explorers slow down spending to boost their margins.

The driller, controlled by billionaire John Fredriksen, raised the first-quarter dividend by 2 cents to $1 from the previous quarter, beating a Bloomberg estimate for an unchanged payout. Hamilton, Bermuda-based Seadrill expects earnings before interest, tax, depreciation and amortization “to show meaningful improvement” in the second quarter and increase further for the rest of the year as utilization rates rise, it said in a statement.

“Based on expected solid operational performance for the rest of the year and the commencement of additional drilling units, the board is pleased to see that Seadrill is on track to achieve Ebitda of $10 million per day,” the company said. “The board is highly confident that the dividend is sustainable in the coming years.”

The dividend increase came after Seadrill warned in February that it saw “limited value” in paying out more than 98 cents because of slowing growth in the rig market in 2014 and 2015. Oil companies such as Statoil ASA (STL) and Royal Dutch Shell Plc (RDSA) have scaled back spending to boost returns amid rising costs and stagnating energy prices.

‘Increased Inquiries’

While the market still “suffers from limited exploration drilling and delays in field developments,” Seadrill has “seen increased inquiries” in the past weeks, it said.

The company’s modern fleet is also well-positioned to take advantage of the exit of older rigs and is partly shielded from weaker rates thanks to contract coverage of 96 percent in 2014 and 66 percent in 2015 for its floating rigs, it said.

Seadrill’s net income increased to $3.1 billion in the first quarter from $440 million a year earlier on financial gains of $2.2 billion due to the deconsolidation of Seadrill Partners LLC (SDLP), it said. Consolidated Ebitda was $788 million in the quarter, beating estimates of $740 million.

Seadrill rose as much as 3.1 percent to 227.9 kroner in Oslo, the highest intraday level since Feb. 25, before paring gains and closing 1.1 percent higher.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alex Devine, Alastair Reed

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