UPDATE 2-Seadrill sees growth and M&A after Q2 beat

Tue Aug 31, 2010 6:35am EDT

* Q2 EBITDA $493 mln vs $471 mln avg poll forecast

* Says eying investments as sector consolidation expected

* Analyst says Seadrill to benefit from modern fleet

* Seadrill shares down 1.1 pct vs 1.3 pct drop of benchmark

(Adds analyst comments)

By Walter Gibbs and Richard Solem

OSLO, Aug 31 (Reuters) - Norway's Seadrill Ltd (SDRL.OL), the world's number two deepwater oil rig group, is ready to throw its weight around now that the Gulf of Mexico oil spill has made life harder for smaller players.

"We see the current market volatility as a good opportunity to look for investment opportunities," the group controlled by shipping tycoon John Fredriksen said on Tuesday while reporting forecast-beating quarterly results.

Seadrill said the world's worst offshore oil spill from British oil major BP's (BP.L) Macondo well in the Gulf of Mexico increased the emphasis on operational experience, making it more challenging for new rig operators.

"The board is of the opinion that this could open up for further consolidation of the ultra-deepwater rig market," Seadrill said.

The offshore oil drilling sector has long been seen as ripe for takeovers, and conditions created by the oil spill should accelerate deals.

Most drillers smaller than the U.S. "big three" -- Transocean Ltd (RIGN.VX) (RIG.N), Diamond Offshore Drilling Inc (DO.N) and Noble Corp (NE.N) -- could be targets, investment bankers say. [ID:nN30218160]

Ingolf Gillesdal, an analyst at Nordea Markets, said Seadrill is better suited than most to weather the market setback from April's deepwater blowout in the Gulf.

"They should be better positioned now within the segment than before the spill because of their newer equipment and size," he said.

"They have an average fleet age of four to five years, versus 18 to 20 years by the competition," said Gillesdal, referring to competitors such as Transocean and Pride.

FLOATERS BOOKED

Seadrill said third-quarter results would likely show good growth after a bigger-than-expected rise in second-quarter earnings. Its third-quarter performance will be enhanced by four new rigs entering service and by a high fleet utilisation rate.

"All our deepwater floaters have secured employment throughout 2011, something that insulates us against any near-term volatility in this market segment," it said.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) in the three months to the end of June rose to $493 million from $438 million a year earlier, beating the $471 million average estimate in a Reuters poll of analysts.

Its shares fell 1.1 percent to 145.3 crowns by 1033 GMT, while Oslo's benchmark index .OSEBX fell 1.3 percent.

One trader said the quarter was somewhat flattered by the inclusion of one full month of results from acquired company Scorpion Offshore, but earnings were still better than expected.

Shares also fell in anticipation of Seadrill's weighting in the OSEFX mutual fund index .OSEFX being cut in a quarterly rebalancing at Tuesday's close, the trader said. (Editing by Sharon Lindores and Michael Shields)

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