NEW YORK (TheStreet) -- Shares of Seadrill Ltd. (SDRL) - Get Report are down by 3.38% to $9.27 in early afternoon trading on Friday, as declining oil prices push some energy and related stocks lower today.
Crude oil (WTI) is slumping by 2.64% to $50.07 per barrel and Brent crude is falling by 2.13% to $57.93 per barrel this afternoon, according to the index provided by CNBC.com.
Oil prices are in the red today as concerns ease regarding the possibility of supply disruptions resulting from Saudi Arabia's airstrikes against rebels fighting in Yemen. On Thursday the conflict saw oil prices rally.
Goldman Sachs (GS) - Get Report said that the bombings in Yemen would have little effect on oil supplies as the country is only a small crude exporter and tankers could avoid passing through its waters in order to reach their destination, Reuters reports.
The bigger impact on oil would come from a nuclear deal with Iran, which could end up resulting in the relaxing of Western sanctions against Tehran and an increase in its oil reserve exports, Reuters noted.
Between June 2014 and January 2015 oil prices fell by more than 50% on global supply glut concerns. In November OPEC announced it had no intention of cutting its production rate, sending prices down further. In February oil prices steadied and have gone back and forth between the red and green in March.
Separately, 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 notable return on equity, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- SDRL, with its decline in revenue, underperformed when compared the industry average of 14.5%. Since the same quarter one year prior, revenues fell by 14.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The debt-to-equity ratio of 1.35 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, SDRL has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Net operating cash flow has decreased to $287.00 million or 41.66% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: SDRL Ratings Report