Seadrill (SDRL) Suspends Dividend/Oil Rig Industry

scott

SDRL is arguably one of the more widely known dividend plays, as it has consistently offered a huge yield. The stock has tanked recently, but while a dividend cut was probably priced in, today the stock is -20% after the dividend was stopped. Shows what the environment is like for rig operators - worse than thought. Possibly a buying opportunity for those with a long (possibly quite long) time horizon if it falls towards the low teens. 52 wk high was around $45, 2008 low mid single digits.

http://seekingalpha.com/article/2713485-seadrill-ltd-collapses-after-suspending-its-dividend

http://www.zerohedge.com/news/2014-11-26/worlds-largest-rig-operator-recovery-now-worse-post-lehman-collapse

Edited to add: other plays down on the news, such as RIG (-7.5%)

Ted

Tell me about it !!!!!!!!!!!!!!!! Easy come, easy go ! Paid $39.00 a shares in 2013.
Regards,
Ted
MarketWatch Article: SDRL most actively traded stock today.
http://www.marketwatch.com/story/oil-services-sector-rocked-by-plunge-in-seadrills-stock-2014-11-26?siteid=yhoof2

expatsp

I bought some ESV @ 37.05. I think it's one of the more solid of the bunch and the dividend (a bit over 8%) looks sustainable, though yes, I know that's not a sure thing and I'm prepared to wait.

heezsafe

I hope this doesn't foreshadow a 1986 "deja vu all over again." So many of the small drillers, esp. the shale oil ops, are severely (over)leveraged; if OPEC drives oil down to $60 ...... many could be crushed, there could be more than a few blow-ups.

Update: well, whaddayaknow.....
http://www.bloomberg.com/news/2014-11-26/oil-bust-of-1986-reminds-u-s-drillers-of-price-war-risks.html

johnN

thinking of buying couple of rig bonds...hopefully they'll be ok in 3-5 yrs, interesting all rated BB+ to BBB+

heezsafe

@johnN
"hopefully they'll be ok in 3-5 yrs" Would that be when.... ummmm.... they start to pay you again? [hush my mouth!]