SeaDrill Ltd. & TOTAL in $1.1B Deal - Analyst Blog

Norwegian oilfield service firm, SeaDrill Limited SDRL has signed a five-year contract with international oil and gas major TOTAL S.A.'s TOT Nigerian arm, Total Upstream Nigeria Ltd. The market responded favorably to the news, with SeaDrill Ltd.'s shares gaining about 1.2% in the NYSE.

Per the contract, TOTAL will employ SeaDrill Ltd.'s ultra-deepwater drillship West Jupiter for its EGINA ultra-deep offshore project in Nigeria. The deal is expected to garner $1.1 billion in revenues, including mobilization costs. With this deal in the basket, SeaDrill has about $20 billion in total backlog.

West Jupiter, a 6^th generation drillship, will likely be delivered in Aug 2014 from the Samsung Heavy Industries shipyard, located in Geoje, South Korea. This drillship will have the capacity to work at a water depth of up to 12,000 feet and drill to a depth of 37,500 feet. The newbuild is one of eight such drillships under construction at SeaDrill Ltd.

SeaDrill Ltd.'s management has stated that the aforementioned contract has given the company an opportunity to strategically increase its presence in the Nigerian market. Another drillship of SeaDrill Ltd, West Capella, has already been working offshore Nigeria, in the Usan field, since 2008.

Hamilton, Bermuda-based SeaDrill Ltd. primarily provides services related to offshore drilling activities to customers worldwide. Currently, the company is operating about 69 drilling units.

At present, SeaDrill Ltd. has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the U.S. equity market over the next one to three months.  

Meanwhile, one can consider better-ranked players in the oil and gas drilling industry like Pioneer Energy Services Corp. PES and Patterson-UTI Energy Inc. PTEN. While Pioneer Energy sports a Zacks Rank #1 (Strong Buy), Patterson-UTI holds a Zacks Rank #2 (Buy).