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SeaDrill: Avoid Despite Potential New Contract

Jul. 10, 2017 12:53 PM ETSeadrill Limited (SDRL)36 Comments


  • According to three sources, Norway's Statoil has shortlisted Seadrill and is on the verge of awarding a contract to secure a drillship, understood to be the West Neptune.
  • Seadrill topped rivals Transocean and Maersk Drilling, and is now expected to sign a contract with Statoil over the next few weeks.
  • SDRL is extremely difficult to trade and I do not recommend any investing or trading at this present stage.

Investment Thesis:

Sadly, filing for bankruptcy is now a familiar occurrence in the offshore drilling industry. After Hercules offshore, now gone, Paragon offshore (OTCPK:PGNPQ), Ocean Rig UDW (ORIG) and probably soon Pacific Drilling (PACD); we are waiting now for Seadrill (NYSE:SDRL) to release the "news".

Meanwhile, SDRL is extremely difficult to trade and I do not recommend any investing or trading at this present stage, because the risk is too high and the outlook is too blurry.

Everyone here knows that Seadrill and its subsidiaries such as North Atlantic Drilling (NYSE:NADL) are in the process of restructuring their huge debt (~$14 billion), either through an out-of-court deal or through Chapter 11.

We all expect an agreement by the end of July, after the company announced early April that it managed to get another delay to complete the restructuring plan.

As I said before, very often in these particular situations, shareholders will be offered a tiny percentage of the new stock, and I believe Seadrill restructuring plan will leave between 1% to 5% to present shareholders assuming a pre-packaged bankruptcy deal.

The company warned in April that shareholders will get a "minimal recovery" which implies that SDRL shareholders should expect for a "tiny stake" in exchange of their present shares -- obviously different from zero -- in the new reorganized Seadrill.

It is difficult to translate the word "minimal" in terms of value, especially depending on which side of the fence you are standing on. Furthermore, Seadrill may still come up with an out-of-court deal -- with the consent of the majority of the bondholders -- which is generally more favorable for present shareholders, in my opinion.

Basically, the major difference in this particular restructuring case is that the main player is John Fredriksen, worth over $9 billion, who owns 23.41% of the company stocks through

This article was written by

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As an experienced investor, I will help you stay on task more efficiently.

I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.

I live mostly in Sweden with my loving wife.

I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.

“Logic will get you from A to B. Imagination will take you everywhere.” Einstein.

Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am day trading SDRL on special occasions.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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