DOW JONES & COMPANY, INC. 9:35 AM ET 11/28/14 Symbol Last Price Change GS 188.8down +0.88 (+0.47%) ATW 31.52down -2.57 (-7.54%) DO 30.64up -1.58 (-4.9%) SDRL 14.81down -1.18 (-7.38%) QUOTES AS OF 09:36:06 AM ET 11/28/2014
On Nov. 26, Seadrill ( SDRL) sent investors fleeing when the offshore driller eliminated its dividend. Yesterday, Goldman Sachs(GS) decided it was the perfect time to upgrade Seadrill's shares. Analyst Henry Tarr and team explain why:
We upgrade Seadrill to Neutral from Sell following sharp
underperformance. The stock fell 18% yesterday (November 26) after the company suspended its dividend distributions due to the challenging market conditions. By cutting the dividend the company will improve its balance sheet and now has good visibility through 2015 with c.90% of floater capacity contracted. Seadrill is trading close to replacement cost and to the peer group on 2015E EV/EBITDA. Since adding the stock to the Sell List on September 25, 2014, it is down 33% vs. the sector down 14% and the FTSE World Europe up 5.9% (in Nkr terms).
The upgrade hasn't helped shares of Seadrill--or other offshore drillers today, for that matter, especially those like Transocean ( RIG), Atwood Oceanics(ATW) and Diamond Offshore Drilling(DO) ( DO) that could also cut their dividends. Seadrill has dropped 6.9% to $14.89 at 9:34 a.m., while Transocean has plunged 8.1% to $21.39, Atwood Oceanics(ATW) has tumbled 7.5% to $31.52 and Diamond Offshore Drilling(DO) has fallen 3.9% to $30.97.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.