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Seadrill’s Management on the Offshore Drilling Outlook

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Conference call insights

In this article, we’ll examine Seadrill’s (SDRL) 3Q16 conference call insights regarding the current developments in the offshore drilling (OIH) space. The company also expanded on its view of the industry’s future.

Studying these developments can help us to gauge the future of Seadrill and the futures of its parent company Seadrill Limited (SDRL) and its peers Diamond Offshore Drilling (DO), Atwood Oceanics (ATW), Rowan Companies (RDC), Transocean (RIG), and Noble (NE).

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Management statement

Seadrill’s CEO and president, Per Wullf, stated, “The offshore drilling market continues to be challenging however we are seeing improvement in the level of bidding activity. Most of the new work is for short term contracts at or near cash flow breakeven level, and 2017 is expected to remain challenging. However, we expect the market to gradually improve as costs have been reset across the value chain and more drilling activity will be needed to avoid accelerated production declines.”

Offshore industry

Some of the key points Seadrill made about the offshore drilling industry were as follows:

  • Oil prices remained in the range of $40–$50 in 3Q16, not sufficient to reverse the falls in oil companies’ capital spending.
  • Seadrill expects upstream spending to fall again in 2017, but the reduction will be less than 27% in 2016 and 24% in 2015.
  • The forecast fall in spending marks another challenging year for the offshore drilling industry.
  • The company believes the resetting of costs across the value chain may facilitate increased activity with only a marginal rise in commodity prices.
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