Please ensure Javascript is enabled for purposes of website accessibility

Seadrill Ltd Stock is Rocketing Higher Today

By Matthew DiLallo - Mar 3, 2016 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The offshore drilling is off to the races despite no news and stable oil prices.

Image Source: Seadrill Ltd. 

What: Seadrill (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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SeaDrill Limited Stock Quote
SeaDrill Limited

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.