Seadrill Positioned for recovery....
If Seadrill is well positioned for an improving offshore drilling market and holds more upside than competitors, all investors need is higher oil prices. And therein lies the rub.
The longer oil prices stay low, the more investors seem to think oil will never recover. But as offshore drilling rigs come off their own contracts, they contribute to a slow decline in oil production globally, which will eventually mean a return of supply and-demand balance. In fact, U.S. oil production has already fallen 500,000 barrels per day since summer, which is about a quarter of what the market was oversupplied with globally at that time.
If oil prices recover by the end of 2016 or into early 2017, as I think the evidence indicates, you want to own companies that can survive until then intact, and who are well positioned when the recovery happens. I think that describes Seadrill's position in offshore drilling.
Of course, all of this is dependent on higher oil prices, and that's currently not something investors have much confidence in. But if oil prices recover by 2017, Seadrill should leave investors with big gains. If oil doesn't recover by then, this won't be the only company sinking in the energy space.
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