Oil drilling company Seadrill Ltd (NYSE:SDRL) has been in the news over the past week, and SDRL stock is up 15% this morning after the company announced its Q2 2019 earnings.
SDRL Beats Estimates
Seadrill has struggled for several years due to the plunge in oil prices, but in the second quarter this year its losses proved to be lower than market expectations, and naturally, the investors reacted positively to that development. In addition to that, the company projected that things are going to improve significantly in the third quarter. On the other hand, earnings after adjusting for EBIDTA stood at $69 million, which proved to be much higher than the company’s own projection of $55 million.
Seadrill has also stated that earnings adjusted for EBIDTA for Q3 2019 will be in the range of $70 million and $75 million. Analyst estimates peg that same metric at $61 million. More importantly, Seadrill has managed to cut costs in the quarter, and that is possibly one of the biggest positives. The operating expenses in the quarter came down to $321 million from $348 million in the prior-year quarter. The company also informed that the remuneration for long projects are increasing currently and that should prove to be a positive for the company as well.
In morning trade, SDRL stock was up by as much as 15% at $3.10. The stock has soared 48% since Friday.
Joint Venture with Gulf Drilling
Last Friday, SDRL stock experienced its biggest gains after Seadrill signed a major 50-50 joint venture with Gulf Drilling International. While the rising price of oil has been one of the triggers for the rise in oil drilling stocks, Seadrill stock rose significantly following the announcement of this joint venture.
However, the most important thing about the development is that the joint venture will get to work on projects belonging to Qatar Petroleum, which is directly owned by the Qatar government. The contract begins in 2020 and ends in 2024, and the value of the contract is an impressive $656 million.
Despite the recent rally, SDRL stock is still down about 70% since the beginning of the year.
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