The offshore drilling market is in such bad shape that when a rival recently bought a rig for less than a 10th of its new-build cost, it probably overpaid, according to Seadrill Ltd. Chief Executive Officer Per Wullf. Shares in his oil-services company reversed gains to become the biggest losers in Oslo trading.
Shipping tycoon George Economou paid just $65 million for the 2011 vessel Cerrado last month, but it was still “probably too much” for a rig that hasn’t worked for a year, Wullf said in a phone interview. In the current market, the asset represents a “pure liability.”
Those comments, which illustrate how the collapse in crude prices has driven down the value of offshore drilling equipment, “would suggest that Wullf thinks that his own stock is grotesquely overvalued,” said Alex Brooks, an analyst at Canaccord Genuity Group Inc. The shares dropped 7.4 percent to close at 27.2 kroner in Oslo after trading up most of the afternoon following the publication of earnings that beat analyst estimates.