Goldman Sachs Downgrades Seadrill Ltd. (SDRL) to Sell, Adds to Conviction List

Goldman Sachs downgraded Seadrill Ltd. (NYSE: SDRL) from Neutral to Sell. The stock was also added to Goldman's Conviction List. Analyst Henry Tarr warned of a possible breach of its debt covenant in 2016 and an equity issue.

"We would continue to avoid offshore, financial leverage and underappreciated operational leverage. We see balance sheet risk at several of our companies under coverage: we downgrade Seadrill to Sell from Neutral and add it to the Conviction List, and we downgrade PGS to Sell from Neutral on this basis," said Tarr.

"Although Seadrill has already cut its dividend, we believe there is still significant balance sheet risk due to high financing requirements for 2015/16 and beyond, as well as limited refinancing channels with the possibility of a higher cost of debt due to the challenging environment. We have also undertaken a scenario analysis at a US$70/bl Brent oil price in which Seadrill would be in breach of its debt covenant in 2016E, which could trigger an equity issue," added the analyst.

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 $12.16 yesterday.

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