SeaDrill (SDRL) Falls Despite New Contracts

NEW YORK (TheStreet) -- SeaDrill (SDRL) was losing 1.14% to $35.47 Tuesday despite securing five contracts for jack-up rigs in Mexico.

The offshore driller will rent out five of its jack-up rigs to Mexican oil company Pemex. The contracts are for a six-year period, and represent total potential revenue of more than $1.8 billion.

SeaDrill will establish a joint venture, called SeaMex, with an investment firm controlled by Fintech Advisory. SeaMex will own the five rigs Pemex will rent.

Read more: 3 Stocks Pulling The Energy Industry Downward

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

"We rate SEADRILL LTD (SDRL) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, compelling growth in net income, good cash flow from operations and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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

  • SDRL's revenue growth has slightly outpaced the industry average of 8.2%. Since the same quarter one year prior, revenues rose by 17.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 52.1% when compared to the same quarter one year prior, rising from $188.00 million to $286.00 million.
  • Net operating cash flow has increased to $533.00 million or 29.05% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.84%.
  • SEADRILL LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEADRILL LTD reported lower earnings of $2.32 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($2.77 versus $2.32).
  • You can view the full analysis from the report here: SDRL Ratings Report

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