SeaDrill Stands To Benefit From Offshore Rig Shortage
Disclosure: I am long SDRL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
In its second quarter 2012 report, SeaDrill (SDRL) provided its industry outlook for the offshore drilling industry as a whole. The company also provided an expanded outlook in its conference call. Overall, it is a very good time to be in the offshore drilling industry. The company notes that demand is continuing to outstrip supply as it has in past quarters. Additionally, some of the company's smaller and less established rivals are experiencing difficulty in getting the needed financing to carry out their respective newbuild programs. This presents some opportunities for larger, more established, and well-financed firms such as SeaDrill to secure additional newbuilds to drive growth.
SeaDrill states that the market for ultra-deepwater floaters has tightened even further since the first quarter. At this point, there are no remaining floater rigs available in 2012. The company estimates that less than five floater rigs are available in 2012 and these are likely to be contracted out shortly. Thus, for all practical purposes, there are no more floater rigs available until 2014. Oil companies are now being forced to lengthen their planning horizons due to the supply shortage. As a result, these companies are now in discussions to secure rigs that will not become available until 2014. Thus, offshore drilling contractors are in a position to secure their revenues for several years with large oil firms that are more than capable of paying. This is quite an enviable position to be in. READ FULL ARTICLE HERE