Seadrill still a Buy on revenue resilience, Citi says


Even as deepwater rig markets are softening, Seadrill (SDRL -0.4%) has created a workable path for “resilient earnings” in the next three years, Citigroup analysts say, including the premium SDRL can charge for part of its drilling fleet and its ability to secure a multi-year contract with Rosneft that isn’t affected by current sanctions against Russia.

Given the combination, Citi sees more than 70% of SDRL's revenues covered through 2016, giving SDRL earnings power 10% above the current consensus over that period; positive macro industry trends also could boost the stock over time, the firm says.

Citi's stance is in the minority: Deutsche Bank downgraded several offshore drillers yesterday (not SDRL), and Global Hunter downgraded SDRL last week.

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Comments (20)
  • tennis44
    , contributor
    Comments (70) | Send Message
     
    Sdrl is a great buy Right now, short sellers abound
    5 Aug 2014, 12:28 PM Reply Like
  • hhmcdon
    , contributor
    Comments (324) | Send Message
     
    I think the recent price drop is a result of the new issue associated with bond retirement. Soon that event will be absorbed. I would add more SDRL to my portfolio but it is a core holding and it's quantity is already maxed out.
    5 Aug 2014, 12:44 PM Reply Like
  • Stock Market Mike
    , contributor
    Comments (3649) | Send Message
     
    May I ask what percentage you have in SDRL?

     

    I have very little oil exposure right now (I trade a lot of positions, so I was in heavy earlier in the year) - but I'm considering bumping my SDRL/NADL position up again, to around 10%. I may hold it this time for long term appreciation and dividends, since I'm seeing a lot less opportunities in the market now. 10-13% dividends are pretty good.

     

    -Mike
    5 Aug 2014, 02:13 PM Reply Like
  • dbl410
    , contributor
    Comments (45) | Send Message
     
    With Norway joining the EU’s sanctions, it is hard to see how any deal with Putin’s Rosneft won’t end in tears. NADL may be based in the Bahamas, but they operate out of Norway.
    5 Aug 2014, 12:52 PM Reply Like
  • The Rebel
    , contributor
    Comments (2713) | Send Message
     
    The deal was signed before any sanctions went into effect.
    5 Aug 2014, 12:58 PM Reply Like
  • Robin_Bermuda
    , contributor
    Comments (19) | Send Message
     
    Bermuda; not Bahamas BIG difference!
    5 Aug 2014, 01:14 PM Reply Like
  • Energysystems
    , contributor
    Comments (2112) | Send Message
     
    Both NADL/SDRL HQ'd in Bermuda, not Norway.
    5 Aug 2014, 01:48 PM Reply Like
  • harball
    , contributor
    Comments (437) | Send Message
     
    Fredriksen has such an influence in Norway, there is no way Norway will push NADL to abort this deal.
    5 Aug 2014, 02:08 PM Reply Like
  • dbl410
    , contributor
    Comments (45) | Send Message
     
    SDRL has its office in London, NADL runs out of Norway. Both are registered in Bermuda (never been there myself). Political pressure for sanctions is gaining ground in Norway and already expressed in Briton. Fredriksen is gambling with your money that Putin will not nationalize foreign assets.
    6 Aug 2014, 02:23 AM Reply Like
  • Debutant
    , contributor
    Comments (2839) | Send Message
     
    "Bahamas"?, ...... "Briton"?, ....... serious?
    6 Aug 2014, 05:21 AM Reply Like
  • long_on_oil
    , contributor
    Comments (1363) | Send Message
     
    When you buy this sector, you assume risk; it is just a matter of how much risk you feel comfortable with. You are being paid a 11% dividend to assume the risk, if that is not enough buy something else that allows you to sleep nights like ATT or Berkshire.
    People will give up eating before they give up their phones and BRK has a .26 beta. Both investments are better than cash.
    Another thing you have to consider when you buy SDRL is, are you basing the percentage of your portfolio on cost or current market. SDRL is 10% of my portfolio investment but it is currently 20% of my portfolio market value. This is because I do not sell as the stock pays dividends and increases in unrealized capital gains.
    I count dividends as a return on my investment.
    5 Aug 2014, 02:44 PM Reply Like
  • Debutant
    , contributor
    Comments (2839) | Send Message
     
    "When you buy this sector, you assume risk; ........ and you are paid dividends"

     

    They do not buy the sector, they do not receive the dividends. They are only telling you and me that we are doing wrong receiving a ton of dividends every quarter.

     

    Big difference in $$$$$$$$ in our favor between their choice and ours.
    6 Aug 2014, 05:28 AM Reply Like
  • long_on_oil
    , contributor
    Comments (1363) | Send Message
     
    I should have said any company within the sector. You could probably buy the actual sector my purchasing an ETF relating to the sector. I realize dividends are not payment for risk but the price of the stock which produces the high yield is related to the risk.
    6 Aug 2014, 08:56 AM Reply Like
  • Dave Shafer
    , contributor
    Comments (631) | Send Message
     
    Wow, Citigroup analyst actually did some analysis on the company instead of just lumping the drillers together with some half-thoughts on future demand. Good for them:

     

    1. Fredriksen moved his companies to Bermuda for a reason. He didn't want Norway nor Great Britain handcuffing his business
    2. Sanctions will last as long as Europe doesn't need Russian resources [oil], which is about 4 months.
    3. Call me skeptical, but most sanctions are written in a way to allow for business to continue to be done with backdoors wide open.
    4. SDRL would do just fine without the deal with Rosneft. Makes life much easier though for NADL/SDRL.
    5 Aug 2014, 04:09 PM Reply Like
  • Debutant
    , contributor
    Comments (2839) | Send Message
     
    5. The EU has imposed these sanctions reluctantly; not willingly. They will lift them at the first opportunity, because the sanctions are hurting the EU.

     

    6. The sanctions have NOT been linked to Russia's annexation of Crimea; a done deal that is irreversible. Instead, the sanctions have been linked to "Russia's support to separatist local groups in Ukraine".

     

    7. Do the newly married couples in NYC, Chicago, Los Angeles, London, Frankfurt, Bologna, Lille, Lisbon, La Valetta, Vienna, ...., etc, visit the local tomb of the unknown soldier (for having given away his life for the country so that the next generations could live happily) right after their wedding ceremony? Well, Russian couples from Moscow to the smallest village do! Because the average Seeking Alpha commentator does not know that or the psychology behind that, he/she wrongly thinks that Russians will give in in the face of these sanctions.

     

    Disc.: Invested in offshore drillers. Not Russian or pro-Russian. Lived and worked in Russia for about 4 years; learned the Russian mentality and modus operandi.
    6 Aug 2014, 04:25 AM Reply Like
  • Debutant
    , contributor
    Comments (2839) | Send Message
     
    [From the press this morning] :

     

    "....... Russia said on Wednesday it would ban all food imports from the United States and all fruit and vegetables from Europe, in a sweeping response to Western sanctions for Moscow's support for separatists in Ukraine. ..... "

     

    http://bit.ly/V08d8X

     

    The Russian patriotism and solidarity which I had witnessed during my work years there will not let the local businesses of McDonalds, CocaColas, Pepsis, PizzaHuts, etc. .... remain unaffected from Russia's economic counteroffensive, even though the Russian measures that have been announced yesterday are made to sound as if they are limited to only the "importation" of foodstuffs.

     

    Russia, the EU, the USA will all be affected economically by the sanctions.
    7 Aug 2014, 06:12 AM Reply Like
  • long_on_oil
    , contributor
    Comments (1363) | Send Message
     
    Putin has been pushing a new currency backed by oil instead of the current US dollar. I wonder if this has anything to do with the sanctions being imposed. Just a thought.
    6 Aug 2014, 08:59 AM Reply Like
  • sethmcs
    , contributor
    Comments (3565) | Send Message
     
    US currency is backed by oil. Try to buy oil without dollars.
    6 Aug 2014, 10:07 AM Reply Like
  • sayid
    , contributor
    Comments (4) | Send Message
     
    China is doing so. They gonna have crude oil fut exchange launching probably at the end of this year. I am expecting oil price soaring up by that. Also China manufacture PMI is 17 months new high and I am expecting the oil demanding from asia will boom up soon. Chinese politicians are trying to push money out of real estate market back to manufacture industry. So don't be fooled by the American media, they only report non-manufacture (include real estate) pmi was dropping.
    6 Aug 2014, 09:01 PM Reply Like
  • Dave Shafer
    , contributor
    Comments (631) | Send Message
     
    NADL/SDRLs West Alpha started drilling in the Arctic the other day for Exxon/Mobile.
    So it has started. When they find oil, there will be many rigs drilling.
    10 Aug 2014, 08:27 AM Reply Like
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