Seadrill Ltd Earnings Call Nuggets: Jack-Up and Ultradeep Markets
Seadrill Ltd (NYSE:SDRL) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
Michael Urban – Deutsche Bank: So, you’ve expressed, obviously a pretty confident view in the Jack-up market which you’ve signaled with ordering some additional newbuilds. I would agree that it’s been a very strong market here in the near term, but what gives you the long-term confidence to make those types of investments, I think deepwater, everybody agrees it makes sense, clear tailwind there from all the discoveries that have been made, just would be interested on your thought process on the longevity and the sustainability of the Jack-up market.
Fredrik Halvorsen – CEO and President: So, I think first of all, I think we are looking at the overall aging profile of the fleet, with more than 60% of the premium units being 25 years or older. So, we do see now a move towards a lot newer units and I think that’s where a lot of this confidence is coming from. Now, of course, we are also in active discussions and so, with our marketing competence, we do see that a lot of operators are moving quite aggressively to new types of units for operating concerns and for safety concerns. So, taking those two together, we remain quite bullish on this segment.
Michael Urban – Deutsche Bank: In the nearer term, you’d mentioned Mexico as a potential emerging source of strength in the Jack-up market, I think that’s been a case for a while. They’ve expressed a need for additional rigs in the particular newer units but haven’t really been willing to pay for high-spec assets. Is there anything you’re seeing that that might be changing there or a potential change in their attitude or is it more just their – discussions that you had with them in terms of their expressing a need for additional units?
Fredrik Halvorsen – CEO and President: I think – we think it’s changing, both West Africa and Mexico we see us, as strong drivers going forward and that is on top of demand we are seeing out of Saudi and Asia.
Ryan Kauppila – Citigroup: You mentioned in your press release that you anticipate increasing diversity of contract terms in the ultradeep market. Just wondering, what you think that’s driving that? Are the majors now being patient for lower rates on longer-term? As far as your strategy, do you see an opportunity or an environment where you may shift more towards shorter-term higher rate over the near-term?
Fredrik Halvorsen – CEO and President: So I think, we have fairly good visibility at this point and we are very confident that there are some good long-term drilling opportunities out there and we are going after several of them. So I think that the first comment is I don’t think a lot has changed. I wouldn’t preclude us doing some short-term work for some of the units. But if I were to summarize it, I would say being probably a little bit on the aggressive side, as we get to the other side this summer we would probably have only a couple of rigs open for ’14.
Ryan Kauppila – Citigroup: With regards all the newbuilds coming online in ’14, as you’re hiring out for your vessels, have you noticed an uptick in attrition at Seadrill, and generally how are you finding your ability to source labor?
Fredrik Halvorsen – CEO and President: So, the question is around joist being able to attract the best people to run all the newbuilds, yeah?
Ryan Kauppila – Citigroup: Well, yeah. Have you noticed over the last call it six months an increase in your attrition rate?
Fredrik Halvorsen – CEO and President: No, we have not seen an increase in attrition. We have however, I think very proactively gone in and installed a lot of extra incentives to make sure we can train people very effectively out on the rigs using simulators and so forth. So, we can utilize some people that are already – old people and couple that with some of the new people we have coming in. So, I think one of the benefits here is having a big fleet with quite a few units, and with sound operations in all geographies. So, we have that scale from which to recruit and train people as we take delivery of new rigs.