Opinions
Srikanth Iyer
Seadrill Ltd.
SDRL-N
TOP PICK
Jul 09, 2012
Europe’s largest offshore drilling Company and 2nd largest globally by fleet size. Solid exposure to deep water drilling. 9.5% yield is extremely sustainable. Accumulate on Dips.
$35.700
Stock price when the opinion was issued
oil
gas
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SELL
Oil service as a group that is under pressure because of weak oil price. This company caters specifically to international offshore drillers and has a pretty good book of orders but you are swimming upstream in the sector. A lot of these stocks have rallied over the last month after the ECB came out with their package for Spain. He would use this strength as an exit point.
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DON'T BUY
Regarding oil, he sees Brent closing the year at around $100 and WTI somewhere in the $90 range. Ultra deep water drillers are able to book in a little bit better rates so he sees better opportunities for drillers like Diamond Offshore (DO-N) or Ensco (ESV-N), which are trading at better valuations.
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COMMENT
Another example of a leading indicator of what lies in store for the capital spend on the back of falling oil pieces. This is a Norwegian offshore, deep technology company for deep-sea drilling. Very interesting company an excellent technology. He questions the sustainability of the dividends. It looks good in the next quarter or so, and fundamentally the operating strength is very strong. Ability to maintain this level of dividend could be questionable if oil prices stay weak and the rig count declines, as we are seeing right now.
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