Seadrill will release its quarterly report on Monday, and investors have watched happily as the offshore drilling company's shares have jumped over the past six months. Yet in a cutthroat competitive environment, can Seadrill fend off Transocean and Noble to make the most of the profit opportunities under the sea?

Seadrill has benefited greatly from its emphasis on deepwater drilling, with the company being among the first players to develop and emphasize its deepwater and ultra-deepwater expertise in light of some massive finds around the world. But the threat that it and rivals Transocean and Noble all face is that oil prices could fall far enough to make expensive deepwater drilling uneconomical. Should Seadrill worry about that possibility, or will its customer contracts lock in profits to ride out any short-term price swings? Let's take an early look at what's been happening with Seadrill over the past quarter and what we're likely to see in its report.

Stats on Seadrill

Analyst EPS Estimate

$0.68

Change From Year-Ago EPS

55%

Revenue Estimate

$1.26 billion

Change From Year-Ago Revenue

15.3%

Earnings Beats in Past 4 Quarters

2


Source: Yahoo! Finance.

How deep can Seadrill's earnings growth go?
In recent months, analysts have had mixed views on Seadrill earnings, cutting third-quarter estimates by a penny per share but boosting their full-year 2013 and 2014 projections by 6% and 2%, respectively. The stock has kept climbing, with a rise of 7% since late August.

Most of the gains came early in the quarter, as the company's second-quarter earnings results boosted enthusiasm about the stock. Seadrill saw a 5% rise in operating income from 13% higher revenue, with the company having further shifted its emphasis toward ultra-deepwater drilling with the sale of its shallower-water tender fleet during the quarter. Those shifts are consistent with what we've seen from Transocean and Noble, with Transocean having sold off some of its jack-up rigs while Noble has increased construction of deepwater equipment and recently announced it would spin off its older rigs into a separate company.

The challenge, though, is whether Seadrill can maintain the torrid pace of growth. So far, Seadrill has a huge advantage via a fleet that is much newer than Noble, Transocean, and other peers. But Seadrill has taken on substantial debt to gain that competitive position. Right now, the sky-high prices that customers are paying to use Seadrill's equipment justify its aggressive moves, but it'll be important to bring new equipment online as quickly as possible in order to lock in those high prices while such favorable market conditions persist.

Another big question facing Seadrill is whether competitors will follow its lead in spinning off assets into master limited partnership subsidiaries. Seadrill took that approach with its Seadrill Partners MLP, and Transocean said earlier this month that it would do the same with its own MLP offering in the middle of next year. For investors, MLPs mean more dividends, but they can also give companies like Seadrill ways to apportion assets and take maximum advantage of favorable tax rules.

In the Seadrill earnings report, watch to see how well the company does at rolling out new equipment and refocusing its efforts on the ultra-deepwater. With a substantial lead, Seadrill's aggressive approach could give it a lasting competitive advantage over Transocean and Noble.

Look on land for great energy deals, too
Both offshore and on land, record oil and natural gas production is revolutionizing the United States' energy position. To help you find the best plays, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Click here to add Seadrill to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

The article How Seadrill Could Outdo Transocean and Noble originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Seadrill and Transocean. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Investing in Real Estate

Learn the basics of investing in real estate.

View Course »

Behavioral Finance

Why do investors make the decisions that they do?

View Course »