Seadrill (SDRL) Stock Rises as Oil Prices Gain

NEW YORK (TheStreet) -- Shares of Seadrill (SDRL) were gaining 2.5% to $12.63 Tuesday as oil prices increased as a result of lower shale oil production forecasts.

WTI crude oil for July delivery was up 3 % to $59.87 a barrel early Tuesday afternoon, and Brent crude oil for July delivery was up 3.2% to $64.67 a barrel.

Oil prices were falling after the U.S. Energy Information Administration said it expects shale oil production to fall by 91,000 barrels a day to 5.5 million barrels a day in July when compared to June production rates, according to the Wall Street Journal.

High shale oil production in the U.S. contributed to the recent record high U.S. oil stockpile levels and helped bring down oil prices last year.

Seadrill is an offshore drilling company incorporated in Bermuda and managed from London with operations in the U.S., U.K., Norway, Thailand, Brazil, Indonesia, and other countries.

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 revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

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

  • SDRL's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • SDRL's debt-to-equity ratio of 0.99 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
  • 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 86.1% when compared to the same quarter one year ago, falling from $3,068.00 million to $427.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: SDRL Ratings Report

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