NEW YORK (TheStreet) -- Shares of Seadrill Ltd. (SDRL - Get Report) are down by 4.71% to $8.69 at the start of trading on Monday morning, as the decline in oil prices is pushing some stocks within the energy sector lower today.
Crude oil (WTI) is retreating by 2.21% to $43.85 per barrel and Brent crude is slipping by 2.41% to $53.35 per barrel this morning, according to the CNBC.com index.
The commodity's price is declining on increasing global inventories and the possibility of a nuclear deal with Tehran, which could result in more oil exports out of Iran, Reuters reports.
Western countries are looking for concessions from Iran that could aid in securing an agreement in nuclear discussions, after the U.S and European powers expressed a willingness to work out suspensions of U.N sanctions.
Global oil supplies are growing at a rate of 1.6 million barrels per day, Societe Generale estimates, Reuters notes. The French bank forecasts that the growth will jump to 1.7 million bpd in the second quarter.
Jim Cramer, Portfolio Manager of the Action Alerts PLUS charitable trust, commented on Seadrill in a recent post on RealMoneyPro.com. Here is what Jim Cramer had to say:
You know why it is so tough to beat the S&P 500? Because it's always outdoing itself, getting better and better with each change.
The combination of new picks from the S&P mid-cap group that have outgrown their compadres and the deletion of stocks that have shrunk in size or have been acquired at a big premium is a very compelling combination. It's as if the S&P mid-cap is the farm team, the minor leagues, and when that index produces phenoms they get promoted to the Bigs to replace either washed-up, second-rate performers or inductees to the S&P Hall of Fame because they received hefty takeover bids.
Worse: offshore rates are collapsing, as you know, from the declines in Transocean (RIG - Get Report), Seadrill, Diamond Offshore (DO - Get Report) and Ensco (ESV). This one may be among the least desirable in the entire godforsaken industry.
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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 14.6%. 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