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Thursday, June 16, 2016 11:44:57 PM
Don't Even Think About Buying Seadrill Stock Right Now
? The stock may rise on heavy short covering but each rise will be met by heavy selling pressure.
Richard Saintvilus
Jun 16, 2016 9:45 AM EDT
Shares of contract offshore driller Seadrill (SDRL) continue to sink. After closing at Wednesday at $3.19 they fell in the premarket Thursday to $3.10 and are now down another 2% to $3.13.
Don't even think about buying this stock because things can still get worse.
Based on Wednesday's closing price, shares are now down 8% since I recommended taking profits at $3.47 on June 7. When factoring its high of $5.21 reached on April 29, the stock has lost almost 40% of its value in just seven weeks. The stock has shown a recent trend to bounce higher after falling to its support level of around $3 per share. It's too early to predict if a bounce higher will come, but it's safe to wager on $3 being reached sooner rather than later.
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Given that SDRL currently trades at $3.19, a move to $3 appears small in dollar terms, but it amounts to a 6% decline when $3 has become a solid area of support. From a technical perspective, if the shares were to fall below $3, look out below.
The reason? Seadrill does not trade on fundamentals, and has not done so for over a year. Not only does the company have a massive debt level of about $10 billion (less $1.4 billion in cash), Seadrill has limited routes to grow revenue and profits to service its debt. The recent rally in oil prices, which raised its prospects a month ago, has now begun to fade. Oil prices have fallen for five straight sessions.
Accordingly, Seadrill shares have a consensus sell rating and an average price target of $3, the support level. In other words, if the stock were to fall below $3, where its technicals become broken, $2.50 or even $2 per share becomes possible.
So while the trend of bouncing off $3 may continue, Seadrill must still grow both revenue and profits to pay down its debts. Meaning, $3 shouldn't be seen as a "buy point." The stock may rise because of heavy short covering, but each rise will be met by heavy selling pressure, until oil prices stabilize again. Even that is no longer a guarantee.
Successful Trading is the art of minimizing long term risk and maximizing capital allocation.
Recent SDRL News
- Seadrill Initiates Extension of Share Repurchase Program • Business Wire • 06/25/2024 10:16:00 PM
- Seadrill Completes Divestment of Jack-Up Rigs • Business Wire • 06/25/2024 06:14:00 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 06/17/2024 08:18:49 PM
- Form SC 13D/A - General statement of acquisition of beneficial ownership: [Amend] • Edgar (US Regulatory) • 06/14/2024 12:30:11 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 06/10/2024 08:22:12 PM
- Seadrill Announces Voluntary Delisting from Oslo Stock Exchange, Following Oslo Bors Approval • Business Wire • 06/07/2024 09:38:00 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 06/03/2024 08:11:23 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 05/20/2024 08:13:25 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 05/16/2024 11:22:08 AM
- Seadrill Enters Agreement to Sell its Qatar Jack-Up Fleet and Expands Share Repurchase Program • Business Wire • 05/16/2024 11:13:00 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 05/14/2024 09:15:09 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 05/14/2024 08:37:58 PM
- Seadrill Announces First Quarter 2024 Results • Business Wire • 05/14/2024 08:15:00 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 05/13/2024 08:21:01 PM
- Form SC 13D/A - General statement of acquisition of beneficial ownership: [Amend] • Edgar (US Regulatory) • 05/10/2024 10:00:31 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 05/07/2024 09:10:53 PM
- Seadrill Announces Two New Drillship Commitments • Business Wire • 05/07/2024 09:00:00 PM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 05/06/2024 08:18:48 PM
- Seadrill Announces First Quarter 2024 Earnings Release and Conference Call • Business Wire • 04/23/2024 08:30:00 PM
- Seadrill Limited Files its 2023 Annual Report on Form 20-F • Business Wire • 03/27/2024 10:12:00 AM
- Seadrill Announces Fourth Quarter and Full Year 2023 Results • Business Wire • 02/28/2024 10:15:00 PM
- Seadrill Announces Fourth Quarter and Full Year 2023 Earnings Release and Conference Call • Business Wire • 02/05/2024 07:30:00 AM
- Seadrill Provides Commercial Updates on West Vela, West Capella, and West Auriga • Business Wire • 01/29/2024 09:20:00 PM
- Seadrill 2024 Annual General Meeting of Shareholders • Business Wire • 01/23/2024 04:18:00 PM
- Seadrill Announces Contracts for West Auriga and West Polaris in Brazil • Business Wire • 12/22/2023 04:17:00 PM
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