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Seadrill (NYSE: SDRL) was once the darling of the offshore oil and gas industry, with a fleet of modern rigs to lease, and several more under construction to support further growth. Then crude oil prices started to crash, and the narrative around the company changed from "industry disruptor" to "debt-laden business with more cash obligations than it can pay." It went into Chapter 11 bankruptcy in September 2017, and reemerged from a restructuring in July. And on Tuesday, investors for the first time got to see a set of that revived Seadrill's quarterly results.
Now that the drilling giant has a more secure balance sheet, should investors consider buying Seadrill stock? Let's take a look at the company's most recent financials, and consider what management had to say.
By the numbers
This was Seadrill's first earnings report since it reemerged from bankruptcy, so there is no directly applicable year-ago quarter to which we can compare its numbers. But for some context, let's stack up the numbers from the most recent quarter next to the results from the first nine months of 2018, and the same period in 2017.
| Metric | Q3 2018 | First 9 months of 2018 | First 9 months of 2017 |
|---|---|---|---|
| Revenue | $249 million | $961 million | $1.66 billion |
| Operating income | ($106 million) | ($719 million) | ($47 million) |
| Net income | ($245 million) | ($4.10 billion) | ($413 million) |
| Diluted EPS | ($2.40) | ($10.11) | ($0.61) |
Data source: Seadrill Ltd earnings release. EPS= earnings per share.
It's pretty much impossible to do an apples-to-apples comparison of Seadrill's results because it has been completely restructured, and many of its financials have been reset. For example, it wrote down about $6.64 billion in assets as part of the bankruptcy proceedings, a reflection of how far management thinks the future value of its current fleet has deteriorated.
The one thing, though, that remained relatively consistent is the company's fleet status. As of the end of Q3, 58% of its fleet was utilized. Management also went out of its way to note that economic utilization (the percentage of days those rigs under contract were working and not undergoing maintenance) was 98%, which is good because it means it's getting the most out of its contracted fleet.
From the beginning of the quarter to the day it released earnings, Seadrill was able to secure eight contract extensions and exercised options on its rigs. These additional contracted days increased the company's backlog by $296 million to a total of $2.1 billion.
Image source: Getty Images.