Why Rowan, an Offshore Driller, Should Be Able to Weather Falling Oil Prices

This article was originally published by TheStreet on November 14, 2014

By Sarfaraz A. Khan

NEW YORK (TheStreet) -- Rowan Cos.  (RDC) is in a better position than most of its rivals in the offshore drilling market, thanks to the high quality of its modern rig fleet.

The market has been going through a rough patch because of overcapacity that caused double-digit drops in daily rental rates for floaters -- rigs that are used for drilling in deep waters -- and for jack-ups -- rigs that usually work on depths of less than 600 feet.

How Are Seadrill And Diamond Offshore Positioned To Tackle The Difficult Market?

This article was originally published by Seeking Alpha on November 6, 2014. Seadrill subsequently suspended its dividends three weeks after the publication of this article. Diamond Offshore has not announced any dividend cuts so far. 

By Sarfaraz A. Khan 

Summary: The offshore drilling industry has been struggling with over capacity. The deteriorating oil prices could extend the market’s woes.How are industry titans Seadrill and Diamond Offshore positioned to tackle this challenge?

The past few months have been awful for offshore drillers such as Diamond Offshore (NYSE:DO) and Seadrill (NYSE:SDRL).

Tough Environment

The deepwater market has been plagued by overcapacity due to the arrival of newbuild rigs that were ordered during better times. This has pushed day rates lower. For some ultra deep water rigs, the day rates have dropped from peak levels of $650,000 in 2013 to between $375,000 and $500,000. And according to Rune Lundetrae, CFO of Seadrill, the biggest player in the sector in terms of market cap, things could get worse next year before they start stabilizing from 2016. Similarly, Esa Ikäheimonen, Transocean's CFO, has also warned that the business environment will remain difficult over the next twelve to eighteen months.

On the other hand, the market for jack-up rigs, used in water depths of under 600 feet, has shown relatively fewer signs of weakness. Moreover, industry executives are optimistic about the future of jack-ups, despite the addition of 139 rigs in the market by 2017, according to Seadrill's estimates. However, Deutsche Bank's analysts have warned that the jack-up market is also going on the same road as deepwater floaters.

It is worth mentioning here that the aforementioned projections from industry executives were made back in September, when West Texas oil futures ... read full article on Seeking Alpha. 

Seadrill’s Strong Dividends Could Sink in Stormy Seas, Analyst Warns

This article was originally published by TheStreet on November 1, 2014. Seadrill subsequently suspended its dividends less than four weeks later after the publication of this story. 

By Sarfaraz A. Khan

NEW YORK (TheStreet) -- Seadrill (SDRL) , one of the leading providers of drilling rigs to oil and gas producers for offshore projects, offers a juicy yield of more than 17%. But this might not be sustainable.

In an email interview with TheStreet, Longdley Zephirin, principal and analyst at the research company Zephirin Group said that for Seadrill, the chances of a dividend cut in the near future are "high; however, the chance of the company skipping a quarterly dividend payment is even higher."