The Country Caller takes a look at why the Seadrill stock was up today
Seadrill Ltd (NYSE:SDRL) stock was skyrocketing on Thursday after reporting its financial results for the second quarter of the fiscal year 2016 (2QFY16). The current environment has been a grim one for companies involved in the oil and gas industry. Thus, for companies to report better than expected earnings, it is an anomaly in the current environment. Investors even rewarded the company accordingly, sending the stock price up as much as 5.14% as of 8:40 EDT.
Seadrill revealed its financial results before the opening bell of the market today. The company managed to report adjusted net income of $292 million surpassing the analyst’s expectations of $223 million. The earnings showed a significant improvement when compared to the previous quarter, where it reported net income of $130 million. However, on a year-over-year (YoY) basis, the earnings were still 32% lower.
The increase in the earnings could also be due to the company’s ability of cutting costs. One of the most common methods to cut costs comes from reducing employee headcount. As mentioned in Seadrill’s press release, the company has brought an 8% reduction from the employee levels at the end of 2015. In addition, Seadrill has also managed to bring its average operating costs by 17% and operational expenditures for Jackups by 28%.
The company for the full year has also brought about some optimistic assumptions. Seadrill expects the company to see a total cash savings of $390 million by the end of this year.
Seadrill in the latest quarter reported revenues of $868 million, falling from $891 million from the preceding quarter. The company in the press release highlighted that the decline was mainly because of the day rate reductions and due to the West Castor and West Prospero contracts ending. The company was also able to achieve a 98% utilization.
Per Wulf President and CEO of the company regarding the earnings said: “During Q2 2016 we have improved on the record uptime we achieved in Q1, reaching 98% economic utilization, whilst continuing to see our costs reduce quarter over quarter.” He also added: “Our priorities for the remainder of the year continue to be delivering safe and efficient operations for our customers whilst concluding on our financing plans.”