Seadrill plunges after suspending dividend as rig market sours

Seadrill plunges after suspending dividend as rig market sours

MIKAEL HOLTER

HAMILTON, Bermuda (Bloomberg) -- Seadrill Ltd. fell the most in six years after the offshore driller controlled by billionaire John Fredriksen suspended dividends as the slump in oil prices hurts demand for rigs.

Hamilton, Bermuda-based Seadrill fell as much as 16%, the most since November 2008, to 118.8 kroner and traded at 118.9 kroner at 9:37 a.m. in Oslo. That’s the lowest level since July 2010.

The company, which paid owners $1 a share for the first two quarters this year and said in August that level was sustainable until at least the end of 2015, hasn’t reduced dividends since November 2009. Seadrill said net income fell 40% to $190 million in the third quarter, missing an analyst estimate of $324 million compiled by Bloomberg.

“The decision to suspend the dividend has been a difficult decision for the board,” Fredriksen, Seadrill’s chairman, said in a statement. “However, taking into consideration the significant deterioration in the broader offshore drilling and financing markets over the past quarter, the board believes this is the right course of action.”

Seadrill shares have fallen 50% this year as oil companies rein in spending, limiting demand for drilling rigs and creating overcapacity. That trend has been reinforced as crude prices dropped more than 30% since June. Transocean Ltd., one of Seadrill’s biggest rivals, earlier this month wrote down the value of its fleet by $2.76 billion because of the deteriorating market outlook.

Seadrill and its 70 percent-owned subsidiary North Atlantic Drilling Ltd. have also suffered from the uncertainty international sanctions have created for a deal with OAO Rosneft that includes $4.25 billion in offshore-rig contracts starting next year.