Offshore drilling company SeaDrill Ltd. (NYSE: SDRL) posted third-quarter 2014 results before markets opened on Wednesday morning. The company posted diluted earnings per share (EPS) of $0.31 on revenues of $1.29 billion. In the same period a year ago the company posted EPS of $0.60 on revenues of $1.28 billion. The consensus estimate from Thomson Reuters called for EPS of $0.67 on revenues of $1.23 billion.

Measured by market cap SeaDrill is the world’s largest offshore drilling company and part of the empire of shipping magnate John Fredriksen who also controls Frontline Ltd. (NYSE: FRO) among other shipping firms.

The headline news is that SeaDrill is suspending its $1.00 quarterly dividend (18.7% annual dividend yield) to focus on “debt reduction and value creating opportunities due to significant deterioration in the broader markets.” The company expects to improve its capital position by about $2 billion annually after suspending its dividend.

At the end of the second quarter the company told investors that SeaDrill’s dividend was safe at least through the end of 2016:

Since our last quarterly report a number of developments have affected these factors that dictate our dividend distributions. The most significant impact has been the uncertainty in the macro environment. 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. This, taken into account with the near term oversupply of drilling units makes it all the more important to build a strong balance sheet. In addition, the financing market has become incrementally worse, and although Seadrill still has significant access to funding, some markets have become unattractive.

SeaDrill said that the market for its ultra-deepwater rigs will be challenged by the drop in crude prices, but that only 9% of its floater fleet is still available for 2015. The situation is not so encouraging for the company’s premium jack-up rigs, where 65 newbuild rigs are expected to become available next year. SeaDrill said it doesn’t think that all those new rigs will find work and that the company is well-positioned due to its ability “to develop and execute on building a local presence through the Joint Ventures models that comply with strict local content regulations….”

The company had this to say about its fourth quarter outlook:

Fourth quarter EBITDA is expected to be higher than the third quarter results for the Seadrill Group on a consolidated basis and the Group is on track to earn approximately US$10 million in EBITDA per day by the end of the year. Expectations for the fourth quarter include approximately 100 days of downtime experienced on our deepwater rigs quarter to date.

SeaDrill’s shares are down more than 10% in Wednesday pre-market trading at $18.57 which would be a new 52-week low if it hold. The current 52-week range is $20.20 to $43.41. The consensus price target from Thomson/First Call is $31.60.

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