Shares of offshore-drilling contractor Seadrill Ltd (NYSE:SDRL) fell 10.7% on September 19. This marks another volatile day for the company's stock, which has moved either up or down -- mostly down -- by more than 5% every day this week. While most offshore-drilling stocks have been highly volatile in recent years, this has been a particularly busy week for Seadrill shares and a painful one for investors.
After today's close, Seadrill's stock has lost almost 18% of its value this week, starting off with a bang on Monday, following this weekend's attacks on a major Saudi Arabian oil processing facility that sent uncertainty through the industry and pushed oil prices up 15% on Monday.
Today, there's not any clear reason Seadrill's stock sold off. Oil prices, which fell on Tuesday and Wednesday after Monday's massive gains, went up about 1.4% today as the global supply picture gets clearer with each passing day after the Saudi attacks. Neither Seadrill nor any of its peers made any big (or small) announcements, and there's no material industry news that's clearly behind today's sell-off.
This is probably a bit frustrating, but it's another reminder that investing in energy stocks can be challenging, particularly for companies like Seadrill with a history of financial struggles and weak cash flows. Seadrill has burned $291 million in negative operating cash over the past 12 months. And after emerging from bankruptcy last year, it has been slow to deliver improved operating results, even as demand for offshore-drilling work has started improving.
That's not to say Seadrill is dead in the water: It has a much-improved balance sheet today versus prior to bankruptcy, with less than $7 billion in debt and more than $1.2 billion in cash and equivalents, which give it breathing room to get more of its fleet under contract.
But before I'd consider it a buy, it's probably worth waiting to see the company's operating results improve. Today, investors would likely be better off with one of its cash-positive peers like Transocean (NYSE:RIG).