What: Seadrill (NYSE:SDRL) rocketed higher on Thursday and by 11:00 a.m. EST the stock was up more than 26%. There was no news to fuel Thursday's surge leaving nothing but speculation as to why the stock is rocketing higher.
So what: Typically, on a no news day we can blame the price of oil for any volatility in Seadrill's stock, but that doesn't appear to be the case today. By the mid-morning oil was roughly flat with no catalysts to push crude either way.
With oil not fueling today's surge we're left to guess why the market is bidding up Seadrill's stock today. It could be nothing more than a short-squeeze with short-sellers bailing now that Seadrill's stock has stopped sinking after posting pretty decent fourth-quarter results last week. Further, in that report the company said that it was working on a plan to address its $10 billion in debt, and would announce a funding plan during the first half of this year. The fact that a funding plan is on the way could be giving short-sellers pause.
There's growing speculation that part of that funding plan will be rescue financing from leading shareholder and Board Chairman John Fredrikson. He has bailed out his companies in the past, and certainly has the cash to help bail out Seadrill now. In fact, on Wednesday he added $510 million to his $5.7 billion cash pile after selling part of his stake in salmon farmer Marine Harvest ASA. That sale could be fueling speculation that Fredrikson is about to inject cash into his beleaguered offshore driller.
Now what: Seadrill's future is predicated on two things going its way. First, it needs to address its debt situation and get that under control. Second, it needs to see oil prices increase to the point that oil companies once again start spending to drill offshore wells by locking up drilling rigs to long-term leases. Until either of those catalysts come to fruition, Seadrill's future remains very cloudy, which will only lead to continued stock price volatility.