Norwegian oilfield service firm Seadrill Limited (SDRL) secured a contract extension offer for its ultra-deepwater semi-submersible rig West Leo from Tullow Oil plc, a leading oil and gas exploration and production company. The deal has been extended for a period of two years from May 2016 to May 2018.
Management expects the extended contract to have a revenue potential of $450 million. The latest development is also expected to bring the total contract value to $1.13 billion.
Seadrill got the delivery of West Leo in early 2012 from the Jurong Shipyard in Singapore. The semi-submersible rig has been working for Tullow off Ghana, West Africa at a dayrate of $525,000 and is expected to work there at a dayrate of $616,000, after the latest deal. Until the end of the project, the rig is expected to remain in the West Africa play.
West Leo - a unit of Moss Maritime CS50 Mk II design - is suitable to work up to a water depth of roughly 10,000 feet and can drill up to a maximum depth of 35,000 feet.
Earlier, in November 2012, Seadrill received a contract for its newbuild rig West Mira from Husky Energy. The development extends for a period of five years and was estimated to have a revenue potential of $1.18 billion.
Based in Hamilton, Bermuda, Seadrill renders offshore drilling services, which include exploration, completion and maintenance of offshore wells; production and well maintenance; and well services to customers worldwide. As of June 30, 2012, the company's fleet included 43 offshore drilling units and 18 other units under construction.
Seadrill currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Energy firms, which are expected to significantly outperform the equity markets in the next one to three months are Seadrill Partners LLC (SDLP), Atlas Energy, L.P (ATLS) and Crestwood Midstream Partners LP (CMLP), all of which are maintaining Zacks Rank #1 (Strong Buy).