Energy

Report by BWS Financial

An overhang for drill ship owners has been the energy producers slowing contract activity on the expectation there would be more supply, especially from recommissioning stacked drill ships. However, Hamed Khorsand does not believe this will be the case since many of these assets have been stacked for several years and owners have used them as a source for parts. Supply constraints should persist for the foreseeable future and push day rates above the $500,000 threshold on a consistent basis this year. SDRL would further benefit from such a scenario with 40% of its fleet due for contract renewals next year. Hamed increases his TP to $80 (60% upside).

Energy

Report by BWS Financial

A sea of profits - with expectation of no new ship builds to saturate anytime soon the current day rates should hold over the next 2-3 years. SDRL emerged from bankruptcy protection in early 2022 and listed its shares in Oct. Since then, it has undertaken asset sales to increase its cash balance, which has resulted in the group having more cash than debt - a rare trait for the industry. However, despite the lean balance sheet, the stock continues to trade at a discount to peers. Furthermore, the pending purchase of Aquadrill will substantially increase SDRL's liquidity and earnings power. TP $59 (40% upside).