Seadrill (SDRL) Stock Closed Lower on Negative Offshore Drilling Market Outlook

NEW YORK (TheStreet) -- Shares of Seadrill (SDRL) closed down 3.72% to $10.87 on heavy trading volume on Thursday amidst a grim outlook of the offshore drilling market.

The market continues to have very few new contracts, falling dayrates and contract renegotiations, RBC Capital Markets analyst Robert Pinkard said, according to Barron's.

"We are not expecting a bottom in the overall offshore rig count until mid-2016 at the very earliest and expect rates and utilization to remain challenged in the interim," Pinkard noted.

Seadrill is an offshore drilling contractor that provides offshore drilling services to the oil and gas industry.

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 revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

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.
  • The debt-to-equity ratio of 1.25 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 0.82, which illustrates the inability to avoid short-term cash problems.
  • 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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