NEW YORK (TheStreet) -- Shares of Seadrill Ltd (SDRL) are sinking, down 8.04% to $20.47 in early market trading Tuesday, after the company announced earlier today that it is selling drill ship West Vela for $900 million to Seadrill Partners (SDLP) .
Seadrill Partners owned subsidiary, Seadrill Capricorn Holdings LLC will acquire all of the ownership interests in the entities that own and operate West Vela.
The implied purchase price of acquisition is $900 million, less $433 million of debt outstanding.
The deal is expected to close within three days, and will be accomplished through a series of purchases, contributions and assumption of debt.
Seadrill Partners stock is also down 3.52% to $23.58 today.
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 and expanding profit margins. 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:
- 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 gross profit margin for SEADRILL LTD is rather high; currently it is at 58.59%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 49.50% significantly outperformed against the industry average.
- SDRL, with its decline in revenue, underperformed when compared the industry average of 12.7%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. 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 when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 65.0% when compared to the same quarter one year ago, falling from $1,727.00 million to $605.00 million.
- The debt-to-equity ratio of 1.30 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 0.70, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: SDRL Ratings Report