Shine A Light On Sapuracrest

The sustained buying in Sapuracrest over the past few weeks can be attributed to two things:

a) a counter-intuitive report from Citigroup calling for a buy on the stock (most of the other research houses have the company at neutral or sell)

b) the rapid collection by a substantial and influential shareholder in Seadrill Limited

As of yesterday, Seadrill owns 93.317m shares in Sapuracrest or a 9.13% stake. If you check the records, Seadrill has been buying aggressively. Seadrill is a Norwegian offshore drilling contractor providing services within drilling and well services. The company has 35 drilling units, of which 15 are under construction. Seadrill's versatile fleet includes harsh-environment semi-submersibles, jack-ups, shallow and deepwater tender rigs and deepwater drillships. In addition, Seadrill provides platform drilling, well intervention and engineering services. Seadrill is operating in 14 countries on four continents. Seadrill is listed on the Oslo Stock Exchange.

Seadrill recently reported revenues for the first quarter 2007 of US$479.2 million compared to US$387.1 million for the fourth quarter 2006. Revenues included a gain on the sale of the two FPSOs Crystal Ocean and Crystal Sea. Operating profit for the first quarter was, excluding gain on sales of the two FPSOs, US$82.2 million as compared to US$78.9 million in the fourth quarter 2006. Analysts at UBS maintain their "buy" rating on SeaDrill Ltd (ticker: S9A), while revising their estimates for the company. The target price has been raised from NOK133 to NOK140. The analysts mentioned that the company is expected to post revenue and EBIT growth of 46% y/y and 192% y/y, respectively, in 1Q07. SeaDrill’s net debt is expected to grow from US$2.9 billion in 1Q07 to US$3.3 billion in 2Q07, in view of the offer for Eastern Drilling as well as other acquisitions (including Sapuracrest). The EPS estimate for 2007 has been raised from US$3.90 to US$4.60. The EPS estimate for 2008 has been reduced from US$9.83 to US$9.77 to reflect recent contracts, several acquisitions during the year and equity issues.

Seadrill is a major player and its choice of Sapuracrest as a partner speaks volumes. The attraction: capacity and unique assets in Sapuracrest. Tired already, no strength to elaborate. Bodes very well for Sapuracrest.