Canaccord Slashes Price Target for Seadrill Ltd Following 4Q Results


In a research report published today, Canaccord Genuity analyst Alex Brooks reiterated a Sell rating on SeaDrill Ltd (NYSE:SDRL) and reduced the price target to NOK70.00 (from NOK75.00), following the company’s fourth-quarter earnings report.

Brooks explained, “Seadrill’s 4Q EPS of $0.78 was a comfortable beat against our expectation of $0.69, thanks to a decent reduction in quarterly operating costs and a high level of uptime for the fleet. However, poor working capital means that the net debt, at $10.0bn (Seadrill Limited), was around $400m worse than we had expected, and we believe investors need to remain focussed on the part of Seadrill that actually matters: its pile of debt, plus unconsolidated debt in Seadrill Partners, plus committed newbuild capex.”

Furthermore, “We are cutting our target to NKr 70 (US$8.65), which is consistent with Seadrill trading at 8.0x 18E EV/EBITDA, the trough year. We continue to believe the offshore drillers are under-pricing the risk – which is not in our numbers – of substantial contract repudiations and cancellations.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Alex Brooks has a total average return of 46.4% and a 100.0% success rate. Brooks has a 46.4% average return when recommending SDRL, and is ranked #2017 out of 3511 analysts.

 

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