NEW YORK (TheStreet) -- Shares of Seadrill (SDRL) - Get Report were gaining 1.8% to $5.72 on Tuesday as oil prices were rebounding from recent losses on expectations that the recent slowdown in U.S. oil production will accelerate.
WTI crude oil for November delivery was up 1.96% to $45.30 a barrel mid-day Tuesday, and Brent crude oil for November delivery was up 2.13% to $48.35 a barrel.
In a note to investors, analyst firm Deutsche Bank said that "revised supply estimates that non-OPEC supply will contract next year for the first time since 2008."
Deutsche Bank analysts said they expect the oil market to "remain oversupplied in 2016" despite an anticipated contraction from non-OPEC countries. The analyst firm expects the oil market will continue to be oversupplied by about 1 million barrels a day in the first half of 2016, falling to a deficit of 310,000 barrels a day in the second half of the year.
OPEC members and other major oil producers such as Russia are still expected to produce oil at high levels, according to the Wall Street Journal.
Seadrill is an offshore drilling company that's incorporated in Bermuda and managed from London. The company has operations in Angola, Brunei, the Republic of Congo, Indonesia, Malaysia, Nigeria, Norway, Thailand, Brazil, Saudi Arabia, the U.S., and the U.K., among others.
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 deteriorating net income, 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 22.5%. 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.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Energy Equipment & Services industry. The net income has significantly decreased by 37.4% when compared to the same quarter one year ago, falling from $605.00 million to $379.00 million.
- 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. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: SDRL