Goldman Sachs Downgrades Seadrill Ltd. (SDRL) to Sell

September 26, 2014 7:56 AM EDT
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Price: $0.51 --0%

Rating Summary:
    3 Buy, 14 Hold, 11 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 38 | Down: 18 | New: 7
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Goldman Sachs downgraded Seadrill Ltd. (NYSE: SDRL) from Neutral to Sell. Analyst Henry Tarr warned about potential impact of a dividend cut.

said, "We downgrade Seadrill to Sell (from Neutral) and cut our 12 month target price to Nkr155 (from Skr232) as we believe the deteriorating environment, combined with the high level of financial leverage, is likely to lead to a dividend cut in 2016. We also believe that the company’s current premium multiple (10.8x 2015E EV/EBITDA vs. global drilling peers on 6.7x) will compress further as the company cuts its dividend."

"We see three main catalysts. First, we expect continuing negative news flow from the sector, with rates continuing to be weak and utilisation ticking down, lowering expectations for future earnings. Second, we expect to see the dividend cut for 2016. While this is some time away, if it becomes clear that the current dividend is unsustainable, we would expect the market to start to discount the near-term yield further. Third, we expect slightly weaker results going forward, with the tougher environment impacting delivery and new contracts," he added.

For an analyst ratings summary and ratings history on Seadrill Ltd. click here. For more ratings news on Seadrill Ltd. click here.

Shares of Seadrill Ltd. closed at $26.97 yesterday.

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