SDRL Stock Makes Its Biggest Gains in One Year: New Joint Venture

SDRL stock

SDRL stock is having the best day in at least the past year after Seadrill Ltd (NYSE:SDRL) announced a 50-50 joint venture with Gulf Drilling International.

Important for Seadrill

Over the past few weeks, plenty of offshore oil driller stocks have been on the move due to the rising price of crude oil and other global factors. One of the better known American companies in that regard is Seadrill, which has been in the business for a long time, and today, the company made a major announcement.

Seadrill announced that it has entered into a joint venture with Gulf Drilling International and according to the terms of the deal, the jointly held rig venture will be used for oil exploration work for Qatar Petroleum. The drilling work for Qatar Petroleum will commence in 2020 and is going to continue up until 2024.

The venture, in which will both Seadrill and Gulf Drilling International will have equal 50% stakes, has already bagged a lucrative contract with Qatar Petroleum. According to the press release, the total value of the contract is a whopping $656 million, and the joint venture will conduct drilling in as many as five separate rigs. However, no announcement has yet been made with regards to the location of the said rigs.

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At the time of writing, SDRL stock is up by a whopping 29% at $2.70.

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Qatar Petroleum is one of the biggest energy firms in the world and owned directly by the Qatar Government. The most important thing to keep in mind regarding this deal is the fact that Qatar Petroleum will have the option to extend this deal if it so wishes and then the fresh contract is going to be worth $700 million.

Downgraded by BTIG

Earlier on this week, SDRL stock had been downgraded to neutral from buy by BTIG, and on August 13, the stock opened at its lowest level in history. The BTIG analyst stated that Seadrill had recently come back from bankruptcy, and currently, the company has too much debt on its books to be engineering any meaningful turnaround.

Additionally, the analyst doubted whether offshore drilling business can pick up the pace quick enough for the company to manage its finances well. That being said, Seadrill has managed to strike a good deal to end the week after such a report.

Despite today’s big rally, SDRL stock is still down over 70% since the beginning of the year.

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Featured image: DepositPhotos © 3dmentat

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