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NEW YORK (TheStreet) -- Shares of Seadrill (SDRL) - Get Seadrill Ltd. Report are down 5.% to $11.97 as crude oil prices resumed their fall on Monday, as a production glut continued to fuel a sell off, MarketWatch reports.

Over the weekend, the Saudi energy minister Ali al-Naimi said that the Persian Gulf nation will maintain its oil production and may even increase it if a new client emerges. The comment is the latest signal that the largest oil producer is unlikely to cut production in response to a massive drop in prices, MarketWatch said.

On the New York Mercantile Exchange, West Texas Intermediate for February delivery slid 1.28% a barrel to $56.40 at 9:19 a.m. in New York. February Brent crude declined by 1.22% to $60.63.

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Separately, the Bermuda-based driller already cut its dividend and Goldman Sachs analysts believe there is still significant balance sheet risk due to high financing requirements for 2015/16 and beyond, as well as limited refinancing channels with the possibility of a higher cost of debt due to the challenging environment.

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 revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow."

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

  • SDRL's revenue growth trails the industry average of 16.1%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 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.
  • The gross profit margin for SEADRILL LTD is rather high; currently it is at 55.61%. Regardless of SDRL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.52% trails the industry average.
  • The debt-to-equity ratio of 1.33 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 0.84, which illustrates the inability to avoid short-term cash problems.
  • Net operating cash flow has decreased to $397.00 million or 25.51% 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

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