Seadrill Ltd (SDRL) Pressured by Falling Oil Price and Lack of Financing

January 7, 2015

Seadrill Ltd (SDRL) suffers from declining demand due to the strong fall of oil prices and increasingly challenged access to capital, leading Darren Gacicia, Director and Senior Analyst at Guggenheim Securities, LLC, to downgrade the oil and gas service company to a “neutral.”

“If you think back about my view on the names say six months ago, I have looked at it and said, if oil’s in $100, if capital markets are open, my thought on how IOCs will proceed with the projects would be fairly favorable,” Gacicia said. “You don’t have to turn on the TV and see what’s happened with the oil price and what’s happened with OPEC not coming to support the market, and maybe the implication that has over the next say six to 12 months on people’s outlook for the commodity.”


Gacicia says SDRL cut the dividend, further signaling difficulty accessing capital to finance growth or fleet renewal. He has dropped the bullish stance on the company for the time being, and he is waiting for a catalyst before he can be more positive on the stock again.

“It was time to rethink our bullish bias and think about kind of moving to the sidelines until we see a catalyst to get things moving in the direction. I think the first signs of that catalyst, again, referring to your last question, will be seeing rig retirement help the supply side of the equation,” Gacicia said.