Shareholders and creditors alike will watch keenly the outlook for oil and gas contractor Seadrill Ltd (NYSE:SDRL) as it reports on its second quarter on Tuesday.
Having exited its latest Chapter 11 bankruptcy process in November 2022, for the second time in two years, the rig-and-crew service provider last week refinanced with a ne US$500mln loan (carrying 8.375% interest and maturity in 2030) along with US$225 million in revolving credit and a US$100 million accordion.
Slaughter and May, Seadrill’s corporate council, in a statement last week, noted that this latest refinancing was on improved terms reflecting its successful exit from the Chapter 11 process.
The borrowings are secured against a fleet of rigs owned by Seadrill.
What exactly is happening with that fleet of rigs will, naturally, be a key focal point for investors.
The market for rigs is always closely aligned to the level of activity and risk appetite among oil and gas companies – and, of course, by how much the market is currently spending on projects.
Whilst last year’s soaring oil and gas prices would ordinarily be a major catalyst for expenditure on new projects, commensurate with demand for petroleum, as those following the sector will know, these aren’t ordinary times.
Amidst ESG and the so-called ‘net zero’ era, larger oil and gas companies have poured lucrative cash flows back in the direction of shareholders – via bumper stock buy backs and elevated dividends.
Some leading energy companies have at the same time invested more in a ‘transition’ toward sustainable energy businesses and the ‘circular economy’.
What that means for the likes of Seadrill, which is essentially a maritime company specializing in the drilling of deep holes, in the search for and development of hydrocarbons, remains an evolving story.
Investors and creditors will closely watch metrics and guidance on fleet utilization, and, cost management, along with the usual financials as Seadrill reports on Tuesday.
Wall Street consensus expects to see second quarter earnings of US$0.51 per share, according to Zacks Investment Research.