Seadrill (SDRL) Stock Falls as Oil Prices Decline - TheStreet

NEW YORK (TheStreet) -- Shares of Seadrill (SDRL) - Get Report were falling 5.9% to $6.10 on Tuesday as oil prices fell to two-month lows due to concerns about oversupply.

WTI crude oil for December delivery was down 2.14% to $43.04 a barrel Tuesday afternoon, and Brent crude oil for December delivery was down 1.66% to $46.75 a barrel.

Analysts expect the U.S. Energy Information Administration to announce that U.S. crude inventories grew for the fifth week in a row on Wednesday, according to the Wall Street Journal. Anticipation of the larger stockpiles brought down prices of the commodity.

"The market is bracing for what would almost assuredly be another big storage build tomorrow," Bob Yawger, director of the futures division at Mizuho Securities USA, told the Journal. "It's going to put us close to record numbers."

U.S. crude stockpiles reached 476.6 million barrels on October 16, according to the EIA. Stockpiles hit a record high of 490.9 million barrels in April.

Seadrill is an offshore drilling company incorporated in Bermuda and managed from London.

TheStreet Ratings team rates SEADRILL LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate SEADRILL LTD (SDRL) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for SEADRILL LTD is rather high; currently it is at 61.55%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 33.04% significantly outperformed against the industry average.
  • Despite the weak revenue results, SDRL has outperformed against the industry average of 31.2%. Since the same quarter one year prior, revenues slightly dropped by 6.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market on the basis of return on equity, SEADRILL LTD has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The debt-to-equity ratio of 1.10 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, SDRL maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.
  • You can view the full analysis from the report here: SDRL