SDLP Seadrill Partners LLC

Norwegian oilfield service firm, Seadrill Ltd’s (SDRL) subsidiary, North Atlantic Drilling Ltd, plans to offer unsecured senior notes worth $600 million, due to mature in 2019.  

The Seadrill subsidiary plans to use the funds to be generated from the offering to lower its debt levels and to meet other general corporate expenses.

Seadrill renders services related to offshore drilling activities, which include exploration, completion and maintenance of offshore wells; production and well maintenance; and well services to customers worldwide. The company operates globally with its 69 unit fleet comprising of drillships, jack-up rigs, semi-submersible rigs and tender rigs.

The company offers a lucrative dividend yield of almost 9.5% and has been consistently increasing it for the past several quarters. This may attract investors looking for a steady income. On the valuation front, the company has a forward PE ratio of 10.8, slightly higher than the peer group average of 10.64. However, it is Seadrill’s debt levels that pose a concern. As per third quarter reports, the company had a debt-to-capitalization ratio of approximately 62.1%.

Last quarter Seadrill reported disappointing results, missing the Zacks Consensus Estimate by 7 cents per share. For the current quarter, we expect earnings to be in line with the Zacks Consensus Estimate of 78 cents per share, when the company reports results on Feb 28, 2014.

Hamilton, Bermuda based Seadrill currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked energy players like Seadrill Partners LLC (SDLP), Helmerich & Payne, Inc. (HP) and Ocean Rig UDW Inc. (ORIG). Seadrill Partners sports a Zacks Rank #1 (Strong Buy), whereas Helmerich & Payne Ocean Rig have a Zacks Rank #2 (Buy).

 
HELMERICH&PAYNE (HP): Free Stock Analysis Report
 
OCEAN RIG UDW (ORIG): Free Stock Analysis Report
 
SEADRILL PTNRS (SDLP): Free Stock Analysis Report
 
SEADRILL LTD (SDRL): Free Stock Analysis Report
 
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