Sevan Drilling ASA rose the most in five months in Oslo as Pareto Securities ASA said a recent drop in its shares offers a chance for Seadrill Ltd. to boost its stake and as the driller reduces investor concern about funding.
Sevan Drilling, an operator of deep-water drilling rigs, gained as much as 13 percent, the most since Nov. 26, and traded 11 percent higher at 3.55 kroner as of 11:40 a.m. That makes the Arendal, Norway-based company the biggest gainer on the Oslo stock exchange’s All-Share Index.
The shares have lost half their value in 12 months amid concerns about the company’s ability to fund its rig program and after delays at the Sevan Brasil unit. Seadrill, controlled by Norway’s John Fredriksen, has paid about 3.95 kroner ($0.67) a share on average for its 30 percent stake, or a premium of about 32 percent to today’s price, Pareto said.
“The recent sell-off provides Seadrill with an opportunity to add additional ultra-deep-water capacity at a significant discount,” Pareto analyst Frank Harestad said by e-mail today.
Sevan Drilling has ordered two more units as it bets on rising demand from oil companies which are extending the search for resources into deeper and harder-to-access parts of the world. Shares in the company dropped in August after it said it had breached one of its bank loan covenants due to costs associated with the mobilization of Sevan Brasil.
The stock is also benefiting from a plan to finance its new builds through a combination of bank and bond debt, Carnegie AS said in a note. “Financing has weighed on the stock and we believe good first-quarter utilization and a financing deal are key catalysts.”
Carnegie has a buy recommendation on Seven Drilling and a 12-month price target of 7 kroner.