Seadrill (SDRL) Stock Falls as Oil Prices Drop Following Three-Day Rally

NEW YORK (TheStreet) -- Shares of offshore oil driller Seadrill  (SDRL) fell 5.44% to $13.57 in morning trading Thursday as oil prices declined following a three-day rally.

Crude prices dropped as the dollar strengthened and investors took profits following the rally.

Oil prices hit an almost five-month high on Wednesday after the U.S. Energy Information Administration released weekly inventory data that showed crude oil stockpiles fell for the first time since last year. The data confirmed expectations that the crude oil oversupply in the U.S. is prepared to shrink thanks to reduced spending on exploration and production on the heels of last year's plummet in prices.

The dollar strengthened as initial U.S. jobless claims stayed near 15-year lows. Oil becomes more expensive for buyers who use foreign currencies as the dollar gets stronger.

WTI crude fell 2.72% to $59.27 at 11:10 a.m., while Brent crude fell 2.38% to $66.16 at 11:10 a.m., according to CNBC.

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. When compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • SDRL, with its decline in revenue, underperformed when compared the industry average of 2.3%. 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

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