Morgan Stanley Remains Positive On Seadrill Following Meeting With Chairman
In a research report sent to investors today, Morgan Stanley analyst Ole Slorer maintained an Overweight rating on shares of SeaDrill LTD (NYSE:SDRL), after hosting a few investor group meetings with Chairman Fredriksen and SDRL’s senior management. No price target was given.
Slorer noted, “Discussions centered around SDRL’s high payout ratio, rig market outlook vs. SDRL’s positioning, cash flow and funding; as well as the Chairman’s commitment to the company.” He continued, “In coming months, we believe SDRL will demonstrate the values of its differentiated fleet profile, financing capability and industry relationships relative to competitors with older fleet profiles. While arguably talking their “own book”, management advocated bifurcation to the point where traditional 5G or “first generation deep water rigs” will prove obsolete on a large scale.”
The analyst added, “Fredriksen purchased 2mm SDRL shares ~at $28 on Sept 23rd, and remains open to raising his current 23.3% stake at today’s price. More importantly, we believe SDRL’s Chairman is ready for the company to make a big expansion move into a likely 2015/16 industry trough, should the right “modern rig” opportunity become available.”
Furthermore, “SDRL financial flexibility in the event of an extended downturn, as a result of the Chairman’s unique relationships with Asian yards and major lending banks, was an enlightening debate, in our view. Nevertheless, we believe consensus feedback that a lower payout ratio would be more optimal, might resonate with the board.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ole Slorer has a total average return of -2.3% and a 35.9% success rate. Slorer has a -16.0% average return when recommending SDRL, and is ranked #2900 out of 3405 analysts.