Analyst Gregory Lewis mentioned Seadrill’s West Callistor jackup added back about $130 million in Saudi Arabia, “with a 4-month extension and an incremental contract at $123k/d<” representing a 9 percent decline from the current rate.
The West Elara jackup “no longer has its two-year option for extension work in Norway and the rig is expected to roll off in March 2017,” Lewis added.
The Drilling Space
Although the drilling industry does not appear optimistic about 2016, Seadrill expects some recovery in 2017, following two years of high customer spending.
Given that global floater utilization is estimated at 65 percent, Lewis believes customer rig spending would need to increase 30 percent from the expected spending levels for 2016 for the spending levels to return to the 2015 levels.
Lewis also mentioned that while the company’s balance sheet was “ok today,” net debt to EBITDA was likely to rise through 2017.
The EPS estimates for 2015 and 2016 have been reduced from $1.40 to $1.20 and from $2.30 to $2.15, respectively, “to account for updated downtime and utilization assumptions.”
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