Seadrill: ‘In a Bit of a Pickle,’ Credit Suisse Says

Shares of Seadrill (SDRL) have tumbled after Credit Suisse cut its rating on the offshore driller, noting that the company is “in a bit of a pickle.”

Bloomberg

Credit Suisse analyst Gregory Lewis and team explain why they downgraded Seadrill:

We are downgrading [Seadrill] to Neutral (from Outperform) and lowering our target price to $30 (from $40). [Seadrill] has a lot of wood to chop in terms of contracting newbuild rigs, paying for newbuild rigs and managing hefty debt repayments all under a backdrop of softening floater dayrates. [Seadrill] got a bit greedy, having misjudged the market, and now has 5 newbuild drillships, 2 newbuild semis and 8 newbuild jackups, all without contracts. It is our understanding the company is actively marketing some of its newbuild rigs for potential resale – which is never a good thing.

While [Seadrill] will continue to lean on [Seadrill Partners (SDLP)] and potentially [Ship Finance International (SFL)] to meet its funding requirements, a lot has to break right for [Seadrill] to meet these funding requirements.

Shares of Seadrill have dropped 2.7% to $32.99 at 2:33 p.m. today, while Seadrill Partners has dipped 0.3% to $28.94 and Ship Finance International has fallen 2% to $16.86. Transocean (RIG), which has adopted something of a Seadrill model, has fallen 2.7% to $39.51.