Seadrill Reports: Q1 and Extraordinary Dividend

(KBHM) John Fredriksen's rig company Seadrill (SDRL:NO) beat analysts estimates today when they released their results for the first quarter. Seadrill reported profits of $439 million for the quarter, versus $879 million the previous year. The consensus was $368 million.

The company also reported a quarterly dividend of $0.82 per share. An unexpected extraordinary dividend of $0.15 was also reported.Carnegie analyst Frederik Lunde said "They're showing confidence for the future by raising the dividend". 


Seadrill also noted they wish to reach profits of $4 billion before 2015.They're report also says "Day rates have now reached 2007 levels. Compared to 2007, we are seeing a significant number of large and independent oil companies wishing to secure capacity. The driver is mainly the shift from exploration to production with a focus to start production at the correct time".


Seadrill currently trading at NOK 211,50, down one per cent.

The AMSC Rollercoaster

(KBHM) American Shipping Company (AMSC:NO) has had some very turbulent, but interesting few weeks on the Oslo Stock Exchange. The stock soared from NOK 0,89 on April 18^th, to NOK 6,46 on the 4^th of May, equalling an increase of 626%. Kudos to those who made a killing, but for the others who entered at the peak, have endured a decrease of roughly 60%. Ouch.

Despite the huge decrease, the stock is still up 162% for the year.

American Shipping Company operates in the US Jones Act Market. Meaning it only serves domestic American ports. In the first quarter of 2012, Jones Act product tanker rates were 40% higher than the equivalent in the year before. First quarter 2012, the rates averaged $51 700 per day.

These fantastic rates allowed AMSC to release impressive first quarter results. They achieved a net profit of $8,2 million, versus -$5,5 million for the same period in 2011.

Today the company could also announce that their lenders have agreed to increase leverage on their ships, which should lead the way for new investments in product tankers. Is the performance for the year done, or will we see increased activity and results going forward?

AMSC:NO currently trading at NOK 3,15, up 0.32%.

Oil News

(KBHM) Oil has declined for the sixth consecutive day in New York, the longest run of declines in almost two years. This is mainly due to crude stockpiles increasing in the US, the world’s largest consumer of the commodity.

The last five days, oil futures are down 8.6 per cent. US inventories currently stand at 378 million barrels, up 7.8 million barrels the last week. This is the highest inventory the US has held since August 1990. Societe Generale said in a report that refiners are poised to increase crude oil purchases thus making a rebound in crude prices.

Crude for June delivery fell as much as $1.23 and is currently trading at $95.78 a barrel in electronic trading on the New York Mercantile Exchange.

On a linked note, China, the world’s second-largest oil consumer, will cut retail gasoline and diesel prices tomorrow for the first time since October after international crude costs fell to a government threshold for adjusting fuel rates.

The maximum price at which gasoline can be sold to motorists will be reduced by 330 yuan ($52) a metric ton, that is a reduction of as much as 3.5 percent, according to Bloomberg.

This cut will increase financial pressure on China’s oil refiners. China Petroleum & Chemical Corp. (600028), the nation’s biggest processor, had a 16-fold increase in its refining loss to 9.2 billion yuan in the first quarter compared with a year earlier.

Vale vs. Cosco

(KBHM) Brazilian company Vale (VALE3:BZ), the worlds largest iron-ore producer is refusing to use China Ocean Group Co’s (Cosco) vessels, as a protest to a Chinese ban on Vale’s mega-ships. The boycott has been going on for two months already, and Vale is said to have chartered more expensive vessels from other owners. State-owned company Cosco, China’s largest dry-bulk operator, is expecting a large impact on operations from the boycott, and is considering filings complaints with the Ministry of Commerce.

Cosco President Ma Zehua said “many recent steps taken by Vale aren’t rational, we believe their decisions are based on their perception that Cosco is doing something to lobby the government and not allow Valemaxes into Chinese ports.”

Vale has plans of spending $8 billion on a fleet of 35 mega-ships, hitting other shipowners earnings by creating new competition. These vessels, Valemax’s, are thought by Cosco to not be safe. The vessels are 400 000 dead weight ton iron-ore carriers, and almost the size of the Bank of America Tower in New York, and twice the size of traditional Capesize vessels. Vale has stated they expect to eventually win Chinese permission to use these vessels.

Vale has already taken delivery of 10 Valemax vessels, and the miner has set up a transit port in the Philippines where iron-ore can be loaded off the mega-ships and loaded onto smaller vessels.

It remains to be seen if these monster carriers will be accepted by the Chinese government, and if so, what effects they will bring to the already devastated Capesize rates. 

Stocks up on Putin news

(KBHM) Russian stock futures climbed as Vladimir Putin returned to Russia’s presidency for a third term promising to forge ahead with state asset sales and improve the nation’s investment climate. 

These valuable state assets being sold could create great business opportunities for Russians and foreigners alike. It remains to be seen if they will be given to "preferred businessmen" i.e. Putins oligarchs? Or will there be a honest and fair sale procedure?

Putin, whose first eight years in the Kremlin saw average economic growth of 7 percent as oil prices rose fivefold, signed at least a dozen decrees after being sworn in yesterday and said the world’s biggest energy exporter was beginning a “new stage” in its development. 

Russia’s Micex Index has tumbled 20 percent since Putin passed on the presidency to Dmitry Medvedev in May 2008 because of term limits. Gazprom, Russia’s state-run natural gas monopoly, rose two percent to $11.01 in New York yesterday, after slumping to $10.79 on May 4th, the weakest since December 30th.

This continues my thought to the fact that Putin may very well be bad for Russians, but good for Gazprom?

"The Beginning of the End of Putin"

(KBHM) Great article about Putin in the previous edition of The Economist. 

I especially like their list of reforms Putin must do to be remembered favourably in history:  

• Promise not to run for President again in 2018
• Offer to hold a fresh parliamentary election
• Establish the rule of law and reform the economy (which he has previously promised)
• Reinstate wholly free elections for regional governors as a step towards greater decentralisation of power
• Release Mikhail Khodorkovsky, the jailed former boss of the Yukos oil company 
• And instead of Mr Medvedev, choose as prime minister a relative liberaliser such as Alexei Kudrin, a former finance minister who has sought to engage the protesters

If Putin were to complete these suggested reforms, Russia could be heading toward a brighter future. With public spending accounting for 40 % of their GDP, which is high for a middle-income country. Russia's federal budget in 2007 needed oil prices of $30 per barrel to balance. 2012 however, Russia will need a number closer to $130. 

Oil WTI, currently trading at $107.6 per barrel. 

Trøim Comments on Recent SDRL Sale

(KBHM) As I noted the other day, Fredriksen recently sold 24 million Seadrill shares, totalling a little under $1 billion. He is rumoured to use this money for building a larger position in commodity carriers, among others oil product vessels. 

His right hand man Tor Olav Trøim comments on the sale to Reuters: "John wants to have large liquidity to expand in commodity shipping but it won't be tomorrow or next month". 

He goes on to say "He is looking further out and expects markets to improve in 2014 or 2015. If you want to get newbuilds in 2015, you have to order them and make down payments in 2012-13". Does this mean we have to hold off until 2014-15 for better freight rates? 

Seadrill (SDRL) currently trading at NOK 220.50, up 1.38%.