UPDATE 1-Seadrill lifts dividend, shrugs off slower oil firm spending

Mon Nov 25, 2013 3:55am EST

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OSLO Nov 25 (Reuters) - Seadrill, the world's biggest offshore driller by market capitalisation, announced a higher-than-expected quarterly dividend, predicting a slowdown in spending by oil firms that held back third-quarter earnings would be temporary.

Seadrill, the crown jewel in shipping tycoon John Fredriksen's business empire, said on Monday its third-quarter operating profit rose 14 percent to $471 million, missing forecasts for $507 million in a Reuters poll of analysts.

With oil firms delaying investment to save cash, rig firms have also felt the industry's pain and their rates have flattened or fallen over the past three months.

Still, the company raised its quarterly dividend by four cents to 0.95 dollars per share, against analyst expectations for 0.91 dollars, and said the fundamental outlook for the offshore drilling industry remained firm.

"The pace of contract additions has undoubtedly slowed from the pace seen in 2012 as customers re-evaluate spending plans. The board is confident ... that this is a momentary pause before oil companies restart their spending," Seadrill said.

"Any meaningful reduction in capex by oil companies in the years to come will reduce production and likely lead to significantly higher oil prices," it added.

Deepwater firms such as Seadrill have been mostly immune from the slowdown until recently, but top rival Transocean last week said that 39 deepwater units would be off contract across the industry in 2014, an unusually high number, indicating a near-term slowdown.

Shares in Seadrill, worth $21.2 billion based on current market prices, rose 1.8 percent on the Oslo bourse, outperforming a 0.6 percent rise in the benchmark index.

The company's market value is up by 25 percent over the past 12 months, beating a 3 percent rise in the European oil and gas index. (Reporting by Terje Solsvik, Editing by Nerijus Adomaitis and Mark Potter)

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