Seadrill Ltd (NYSE:SDRL) has notified Hyundai Heavy Industries Co Ltd. (“the Shipyard”) that it has exercised its right to cancel the contract for the construction of the West Mira, a sixth generation ultra-deepwater harsh environment semisubmersible drilling unit (“West Mira” or “the Unit”).
The Unit was ordered during the second quarter of 2012 and the delivery date stated in the construction contract was by December 31, 2014. Due to the Shipyard’s inability to deliver the Unit within the timeframe required under the contract, the Company has exercised its cancellation rights.
Under the contract terms, Seadrill has the ability to recoup the $168 million in pre-delivery instalments to the Shipyard, plus accrued interest.
In the fourth quarter of 2012 Seadrill was awarded a 5 year contract for the West Mira with Husky Oil Operations Limited (“Husky”) for operations in Canada and Greenland. As stated in the Company’s second quarter earnings report, due to the late delivery of the Unit, the Company had tentatively agreed with Husky to reduce the dayrate of the West Mira drilling contract. Seadrill remains in discussions with Husky to find an alternative solution to meet its drilling requirements. (Original Source)
Shares of Seadrill closed yesterday at $6.46. SDRL has a 1-year high of $31.03 and a 1-year low of $6.15. The stock’s 50-day moving average is $7.73 and its 200-day moving average is $10.29.
On the ratings front, Seadrill has been the subject of a number of recent research reports. In a report issued on September 3, Credit Suisse analyst Gregory Lewis downgraded SDRL to Sell, with a price target of $5, which represents a potential downside of 23% from where the stock is currently trading. Separately, on September 2, Canaccord Genuity’s Alex Brooks reiterated a Sell rating on the stock .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Gregory Lewis and Alex Brooks have a total average return of -15.2% and 25.0% respectively. Lewis has a success rate of 30.6% and is ranked #3647 out of 3757 analysts, while Brooks has a success rate of 83.3% and is ranked #608.
Seadrill Ltd provides drilling & well services to the offshore industry. It has a fleet of drilling units that is outfitted to operate in shallow water, mid-water and deepwater areas, in benign & harsh environments.