Investment Idea for a
Structured Product
Seadrill Share Growth
www.alpari.ru
Analysis of the current situation
Graph to show Seadrill share price
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08.03.2013
08.08.2013
08.01.2014
08.06.2014
08.11.2014
Seadrill is one of the world-leading contractors in deep water drilling.
Around 9,000 employees work for the company. Seadrill shares are
traded on the New York Stock Exchange (ticker: SDRL).
Consisting of 69 rigs, the company fleet can operate in all weather
conditions. The company has Norwegian roots and is a strategic partner
of Rosneft, as part of a project to extract resources from the Arctic
shelf. In terms of its order portfolio, the company was historically one of
the most powerful in its industry and paid out maximum dividends.
The plummeting price of oil has undermined the stability of
many oil companies, including that of Seadrill. Due to market
capacity surpluses, companies have had to reduce investment
expenditure. The demand for drilling rigs as part of the
company’s fleet is decreasing. As a result the company needs to
reduce its rental costs. All of this is having an effect on the
company’s net profit and its share price is falling.
Over the last 6 months the share price has lost 80% of its value.
This fall in share price is much steeper than that of the
company’s competitors whose share price has lost
approximately 45-50% of their value. However, it’s worth noting
that up to 2016 the company has a strong order portfolio.
Seadrill’s main risk is in its high debt burden, the payments of
which will peak in 2017. In our view, the market has already
factored in the company’s debt problems and incorporated them
into the share price. We are sure that if the price of oil recovers,
the share price for Seadrill will see a significant rise.
Taking all of the risks and the current exceptionally low price of
oil into account, even the most conservative of stock market
analysts, in particular those of the largest investment company in
the US, Oppenheimer, have said that a fair share price for
Seadrill is at the 20-25 dollar level. This is more than double the
current quotation price! Due to the asset’s significant volatility, it
is more worthwhile to invest in shares via a structured product
which has capital protection.
Investment ideas are for guidance only and as such do not constitute investment recommendations or guides for working on financial markets.
Alpari holds no responsibility whatsoever for incidental or consequential losses (or other forms of damage) which may arise from use of this
material.