On the heels of Canaccord analyst Alex Brooks considers “an uneventful quarter” for Seadrill Ltd (NYSE:SDRL), the analyst puts forth a research report, reiterating a Sell rating on shares of SDRL with a NOK1.00 price target.

However, Brooks notes that following results, he increases EPS estimates on lower costs, by $0.17 for 2017 estimates and by $0.18 for 2018 estimates, though the analyst does not find that “many rig investors are focused on EPS.”

From Brooks’ eyes, the offshore drilling giant calls to mind comparisons to Transocean, and does find cash flow to be a positive surprise, praising maintained improvement as far as debt reduction, peaking in first quarter of 2014 at over $14 billion and now cut to below $12 billion at the close of the second quarter. Brooks attributes this to an absolute halt on investment.

The main issue lies with whether pricing recovery can be realistically achieved in the next two years. Despite a slight boost in enquiries, ultimately, Brooks believes the answer is no, and comments, “This does not make for a robust environment for rig capital values.”

“Seadrill continues to teeter on the edge of insolvency – or it could represent a cheap option on a recovery in oil prices for some investors, but we remain focussed on past and well known balance sheet woes. We don’t believe there was much in the 2Q results (released 25 August) to change minds either way, and although we are making modest changes to our earnings (see below) we continue to believe the single most likely outcome is a highly dilutive re-capitalization in which some current debt holders become the majority equity holders in the business, and some current debt holders recover little. In such a scenario, it is difficult to see how equity holders recover much value,” the analyst concludes.

According to TipRanks, which measures analysts’ and bloggers’ performance based on how their calls perform, five-star analyst Alex Brooks is ranked #116 out of 4,147 analysts. Brooks has a 95% success rate and yields 43.4% in his yearly returns. When recommending SDRL, Brooks earns 49.4% in average profits on the stock.

TipRanks analytics exhibit SDRL as a Sell. Based on 4 analysts polled in the last 3 months, 1 maintains a Hold on SDRL, while 3 issue a Sell. The consensus price target stands at $3.50, marking a 45% upside from where the shares last closed.