Seadrill Ltd. (SDRL) climbed to a record in Oslo as Bank of America Merrill Lynch advised investors to buy the offshore driller due to rising demand and its order backlog.
The Bermuda-based company gained as much 2 percent to 254.6 kroner, the highest level since it first sold shares on May 31, 2005, making it the Bloomberg EMEA Oil & Gas Index’s biggest gainer. Bank of America raised its rating to buy from neutral.
“Seadrill has continued with a high paced expansion and optimization of the drilling fleet and we see this continuing to pay off over the long term,” Bank of America analyst Fiona Maclean said today in an e-mailed note. “With a strong macro environment in drilling, a high backlog with superior earnings visibility, Seadrill is an attractive long term investment.”
The stock traded 1.9 percent higher at 254.4 kroner as of 10:52 a.m. in the Norwegian capital.
The company, controlled by billionaire John Fredriksen, is expanding its fleet in anticipation of higher demand from energy companies that are extending the search for oil and gas reserves into deeper and harder-to-access regions. The company currently has 61 units, including drill-ships, jack-ups, semi-submersible rigs and tender rigs, and more than 20 under construction.
The driller also plans to expand its fleet, able to operate in shallow and deep-water areas, with acquisitions. On June 27, the company said it was seeking to take over Sevan Drilling ASA (SEVDR) and its rigs after buying more than half the company’s shares.
Seadrill increased its stake to 50.1 percent, buying 116.9 million shares at 3.95 kroner each, and said it will submit a mandatory offer for the rest. That price “undervalues Sevan Drilling’s assets and prospects, and represents a significant discount to latest analyst consensus net asset value estimates and target prices,” Sevan Drilling has said.
“Seadrill has invested heavily into its fleet and consequently, its young and premium fleet is one of its key differentiators versus peers,” Maclean said.
The company is the largest owner of ultra-deepwater drilling rigs after Switzerland’s Transocean Ltd.
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