Seadrill Axes Dividend as Drilling Market Slumps

Norwegian offshore driller Seadrill suspended dividend payments on Wednesday to cut debt as oil companies continued to curtail spending as the price of crude plunged.

Seadrill, controlled by shipping tycoon John Fredriksen, said the cut would save $2 billion a year, improving its balance sheet as it pays for new vessels on order, while enabling the firm to make acquisitions.

Though a dividend cut was expected by markets, investors did not anticipate a complete suspension, and shares in the world's top offshore driller by market value fell 17 percent to a four and a half year low in early trade.

"The board views the deterioration in oil prices as an indicator of more broad demand growth concerns and must approach the current macro environment with an element of caution," it said.

It added that the market was now oversupplied with new rigs, which puts pressure on charter rates, while the financing market is worsening, a difficulty as the company has 16 rigs under construction with $4.7 billion yard instalments still due.

Analysts on average had expected a dividend of $2.46 per share in 2015.

The offshore drilling market soured this year as energy companies have cut expenditure to save cash, and the 30 percent oil price fall since June pushed them to initiate a fresh wave of cost cuts.

Rig rates, which peaked at $650,000 per day in 2013 for top specification deepwater units, are now below $400,000 per day and the market is expected to be weak for years to come.

Seadrill's third-quarter earnings before interest, taxes, depreciation and amortisation met expectations, falling 4 percent to $635 million in the quarter.