$11 Billion Fredriksen Deal: Market "Very Close to the Bottom"

by Ship & Bunker News Team
Friday September 14, 2012

John Fredriksen, chairman of Norwegian shipping company Seadrill Ltd., is investing $7 billion in 18 oil rigs and $4 billion in nearly 50 new vessels to transport liquefied natural gas, gasoline, propane, and other fuels, Bloomberg reports.

Bloomberg calls the deal a "bet-the-company move" based on Fredriksen's belief that the shipping market has hit bottom.

"I think as we are sitting here we are very close to the bottom of the market, and I like to be a buyer at the bottom," Fredriksen said. "This is the game."

Over the seven years since Fredriksen founded Seadrill, it has grown from $200 million in equity and five rigs to 48 rigs and an $18.7 billion market capitalization.

Fredriksen said the new investment is based not on forecasts for petroleum prices but on the falling cost of vessels, with a deep-water rig in Singapore down 31 percent since 2008 to $535 million.

Seadrill, which had a profit of $992 million on revenues of $2.2 billion in the first half of 2012, predicted in its second-quarter earnings report that demand for offshore drilling services will continue to grow at double-digit rates in 2013 while oil companies struggle to bring supply levels up.

"The backlog of development opportunities that built up after the 2008 financial turmoil is diminishing," the company wrote.

"Coupled with oil companies' strong balance sheets we believe this should result in increased exploration and development drilling across all our market segments."

Ship & Bunker News Team
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