I don’t have any heartburn for SeaDrill but have to say that it does appear that they were too ambitious with their exponential growth and had no cushion for a downturn in the market
July 09, 2014
Oslo-listed Seadrill scrapped plans for a billion-dollar convertible bond issue after a fall in its share price and said its liquidity remained strong.
Shares in the world’s biggest offshore rig firm recouped on Wednesday the five percent fall of the previous day and the company said the planned debt issue had been an “opportunity”, not a need.
“Although the order book was covered, the adverse price movement led to an unattractive conversion price for the issue,” the firm said in a statement explaining its reason for cancelling the issue.
Seadrill, the crown jewel in shipping tycoon John Fredriksen’s business empire, had planned to issue a $1 billion 2019 convertible bond with a voluntary incentive payment offer to convert the existing $650 million 2017 bond on Tuesday.
“Normally you would see shares fall in such a situation, but 5 percent was probably too much,” said Baard Rosef, an analyst at Pareto Securities referring to the 5.4 percent drop in the share price on Tuesday. The shares rebounded on Wednesday as investors rushed to buy the stock back.
Rosef said Seadrill had other ways of raising any capital needed other than a convertible bond issue.
Seadrill said in a statement it would have a cash balance of approximately $1.5 billion by the end of July.
The firm had said it planned to use the proceeds from the bond issue to fund its new-build program and for general corporate purposes.
In May, the company said it predicted rates for new-generation vessels to fall to $425,000-$475,000 per day, well below their peak of around $650,000 per day last year as oil firms cut capital spending to protect margins.
Until the situation improved, Seadrill has said it would not order any more new rigs from yards on top of 19 rigs it already has on order.