Seadrill (SDRL) Stock Gains as Oil Prices Increase

NEW YORK (TheStreet) -- Shares of Seadrill (SDRL) were gaining 7.7% to $13.79 Thursday as oil prices were increasing.

WTI crude oil for July delivery was up 3.1% to $60.80 a barrel early Thursday afternoon, and Brent crude oil for July delivery was up 2.7% to $66.80 a barrel.

Oil prices were rising due to lower U.S. crude inventories and the fighting in Iraq, according to Reuters. On Wednesday the Energy Information Administration said U.S. crude oil supplies fell by 2.7 million for the week that ended May 15, marking the third straight week of declines.

Fighting between Iraqi security forces and the Islamic State also helped push up oil prices as it raises concerns about the stability of oil shipments from the country.

Seadrill is an offshore drilling contractor that owns and operates jack-up rigs, tender rigs, semi-submersible rigs, and drillships for operations in shallow, mid, and deepwater areas.

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 1.6%. 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 1.37 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 0.68, 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 to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: SDRL Ratings Report

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