Stock Update (NYSE:SDRL): Seadrill Ltd Receives Notice of Contract Cancellation for the West Pegasus

Seadrill Ltd (NYSE:SDRL) has received a notice of termination from Pemex Exploracion y Servicios (“Pemex”) for the West Pegasus drilling contract (the “Contract”) effective 16 August 2016.  Seadrill has disputed the grounds for termination and is reviewing its legal options.

During the second quarter of 2015 Seadrill signed a provisional commitment for a two year extension to the Contract with Pemex for the West Pegasus. In conjunction with the extension, the dayrate for the remaining term of the initial contract was reduced. The extension of the Contract was finalized during the first quarter of 2016.

As part of this agreement, Seadrill and Seamex Limited (“Seamex”), our 50% owned joint venture with Fintech, agreed to reduce the dayrate on five jack-ups for a period of 365 days. The agreement to reduce the dayrates of the existing contracts was contingent upon final confirmation of the two year extension of the West Pegasus by Pemex management.

Recommended article: Canaccord Bearish on Seadrill Ahead of 2Q:16 Results

In the event of termination, Seadrill and Seamex are entitled to recover the dayrate concessions as well as the demobilization for the West Pegasus.  In addition, Seadrill will seek reimbursement of certain costs incurred in anticipation of the extension. (Original Source)

Shares of Seadrill closed last Friday at $2.73, down $0.06 or -2.15%. SDRL has a 1-year high of $8.22 and a 1-year low of $1.57. The stock’s 50-day moving average is $2.97 and its 200-day moving average is $3.22.

On the ratings front, Seadrill has been the subject of a number of recent research reports. In a report issued on August 19, Canaccord analyst Alex Brooks reiterated a Sell rating on SDRL. Separately, on May 31, Merrill Lynch’s Fiona Maclean reiterated a Sell rating on the stock and has a price target of $1.70.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Alex Brooks and Fiona Maclean have a total average return of 40.3% and 4.0% respectively. Brooks has a success rate of 90.0% and is ranked #138 out of 4025 analysts, while Maclean has a success rate of 75% and is ranked #2323.

Seadrill Ltd. is an offshore drilling contractor providing offshore drilling services to the oil and gas industry. Its primary business is the ownership and operation of drillships, semi-submersible rigs, jack-up rigs, tender rigs for operations in shallow, mid, deep, and ultra deep-water areas, and in benign and harsh environments. It operates through the following segments: Floaters, Jack-up Rigs, and Tender Rigs. 


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