Seadrill could be headed for a dividend cut, Wells Fargo says

|By:, SA News Editor

Seadrill (SDRL -3.3%) may fail to secure the sales prices and external financing required to sustain its current dividend as equity and asset values are slipping, Wells Fargo worries as it downgrades shares to Underperform from Market Perform.

The firm says SDRL's aggressive dividend policy has never been funded solely by the operations of its high-quality fleet, but instead through the sale of equity and convertible debt, equity in sponsored entities such as North Atlantic Drilling (NADL -1.3%) and Seadrill Partners (SDLP -1.5%), and the outright sale of rigs.

The dividends of other drillers, including Ensco (ESV -0.9%), Noble (NE -0.2%), Transocean (RIG -0.2%) and Diamond Offshore (DO -0.2%), look safer for now, the firm says.