Seadrill Signs 3-Year Rig Extension for AOD III Jackup – December 30, 2016


Hamilton, Bermuda-based offshore drilling firm, SeaDrill Limited (SDRL Free Report) recently reported that it has entered into a three-year agreement extension with Saudi Aramco for the AOD III jackup rig at a rate of $102,740 per day. The contract will now expire in Dec 2019.

The extension of this agreement is expected to add approximately $112.5 million in contract backlog. Also, this follows the three-year contracts extensions of two sister rigs AOD I and AOD II that are set to expire in Jun 2019 and Jul 2019, respectively. The three units have been working for Saudi Aramco since 2013. The ownership of these rigs lie with Asia Offshore Drilling – a partnership venture between Seadrill and Mermaid Maritime – that own 66.24% and 33.76% equity interest, respectively.

Headquartered in London, SeaDrill is one of the leading offshore drilling contractors in the world. The company owns or has partial ownership interests in 68 mobile offshore drilling rigs comprising jackups, semi-submersibles, drillships, tender rigs and semi-tender rig.

Year to date, the Zacks categorized Oil and Gas Drilling industry has registered an impressive growth of 20.57%. However, shares of SeaDrill have underperformed the industry by registering growth of only 4.14%.

Despite a difficult operating backdrop, SeaDrill has managed to beat estimates in three of the last four quarters. The offshore rig company’s performance has been supported by sustained cost cuts and impressive utilization. Nevertheless, SeaDrill shares are expected to remain soft until oil prices rebound sufficiently, as deepwater/ultra-deepwater drilling – with its associated risks and steep costs – require a far higher oil price than the prevailing levels.

As a result, SeaDrill currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players from the broader energy sector include Braskem S.A. (BAK Free Report) , Suncor Energy (SU Free Report) and McDermott International Inc. (MDR Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last four quarters, Braskem posted an average positive earnings surprise of 105.5%.

Suncor, on the other hand, delivered an average positive earnings surprise of 40.55% in the last four quarters.

In the last four quarters, McDermott posted an average positive earnings surprise of 250.00%.

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