12-02-2014, 11:12 AM
Rob, I feel your pain as well. I bought SDRL in the 30's, and now it is where it is in the situation it's in. I'm also weighing my options in either holding or selling. On one hand, having a company that pays no dividend is not something that I want in my portfolio. On the other hand, given the situation, the suspension of the dividend might be good for the company and put it in a place where it can pay them within a couple years.
As an oil driller in a world with a major oil dependency, I don't think Seadrill is going to up and go under. It seems to me that current economic factors (prolonged reduced oil prices) are teaming up with their ungodly debt to kick the company's ass. I understand that oil drilling is pretty capital intensive and that some debt had to be assumed, but they completely failed to keep it manageable (or perhaps high earnings due to high oil prices meant that they didn't really need to keep it manageable) and now concessions have to be made, namely the suspension of the dividends. Since they aren't some new little tech company hoping that their newest computer software will be the next technological thing or something, I think we can say that companies like SDRL will be quite necessary as long as we use oil. So, to me at least, if they can ride out the next few years of low oil prices by keeping their costs under control while chipping away at that debt, we might see a reinstatement of the dividend (I can't say what they will be paying, but I think it will be paid and be raised over time as they have done in the past). The fact is that they are still earning money drilling for oil in a world that runs on oil, so those revenues will be coming in one way or another.
I know I'm probably over-simplifying the situation a bit, not really addressing the fact that they said the dividend should be good through next year, and not addressing other factors SDRL is likely dealing with, but for me that seems to be the basics of the situation, if I'm reading everything right. Also, I'm with Dividend Watcher in that I'm young and don't need the income to live, hence my decision to hold for now. I'm in my 20's (very late 20's, but still my 20's) and I have the ability to wait years for my investments to payoff.
This is why I diversify my portfolio. This is why I have a portfolio filled with companies like Coca-Cola, Johnson and Johnson, Exxon Mobil, and all the rest. So I can take measured risks on companies like SDRL and ARCP. I wasn't too thrilled to hear the news, but with Seadrill only being a small part of my portfolio, it was a high-risk investment that I was willing to make.
As an oil driller in a world with a major oil dependency, I don't think Seadrill is going to up and go under. It seems to me that current economic factors (prolonged reduced oil prices) are teaming up with their ungodly debt to kick the company's ass. I understand that oil drilling is pretty capital intensive and that some debt had to be assumed, but they completely failed to keep it manageable (or perhaps high earnings due to high oil prices meant that they didn't really need to keep it manageable) and now concessions have to be made, namely the suspension of the dividends. Since they aren't some new little tech company hoping that their newest computer software will be the next technological thing or something, I think we can say that companies like SDRL will be quite necessary as long as we use oil. So, to me at least, if they can ride out the next few years of low oil prices by keeping their costs under control while chipping away at that debt, we might see a reinstatement of the dividend (I can't say what they will be paying, but I think it will be paid and be raised over time as they have done in the past). The fact is that they are still earning money drilling for oil in a world that runs on oil, so those revenues will be coming in one way or another.
I know I'm probably over-simplifying the situation a bit, not really addressing the fact that they said the dividend should be good through next year, and not addressing other factors SDRL is likely dealing with, but for me that seems to be the basics of the situation, if I'm reading everything right. Also, I'm with Dividend Watcher in that I'm young and don't need the income to live, hence my decision to hold for now. I'm in my 20's (very late 20's, but still my 20's) and I have the ability to wait years for my investments to payoff.
This is why I diversify my portfolio. This is why I have a portfolio filled with companies like Coca-Cola, Johnson and Johnson, Exxon Mobil, and all the rest. So I can take measured risks on companies like SDRL and ARCP. I wasn't too thrilled to hear the news, but with Seadrill only being a small part of my portfolio, it was a high-risk investment that I was willing to make.