SeaDrill (SDRL), Rosneft Oil Drilling Deal Deadline Extended

Offshore drilling firm SeaDrill Ltd. (NYSE:SDRL) and its subsidiary, North Atlantic Drilling Ltd. (NYSE:NADL) recently extended the framework deal on oilfield development projects with Russian integrated oil major, Rosneft. The extension came on the back of continued western sanctions against Russia which have raised concerns and forced Rosneft to cancel many North Atlantic Drilling contracts.

The tripartite agreement, inked in Aug 2014, permitted North Atlantic Drilling to explore onshore and offshore growth opportunities in the Russian drilling market. In return, Rosneft was to acquire a 30% stake in North Atlantic Drilling. However, SeaDrill would have remained the majority stakeholder of North Atlantic Drilling with a 70% interest.

Under a separate agreement, North Atlantic Drilling – an offshore harsh environment drilling company – was to provide six offshore drilling rigs to Rosneft.

The long stop date for the closure of the transaction has already been extended twice, first to May 2015 and again to May 2017. Sanction against Rosneft by the European Union and the U.S. had put the $4 billion deal on hold. The deadline has now been again postponed for two years to May 2019. During this time, SeaDrill and its subsidiary can continue to market the offshore drilling rigs and enter into binding contracts with third parties.

Zacks Rank & Key Picks

Headquartered in London, SeaDrill is one of the leading offshore drilling contractors in the world.

The company has a good earnings surprise history. SeaDrill has surpassed the Zacks Consensus Estimate in each of the four trailing quarters, the average being 97.13%. However, the company’s price performance is not impressive. In the last one year, SeaDrill’s stock underperformed the Zacks categorized Oil & Gas-Drilling industry. During the aforesaid period, SeaDrill’s shares crashed more than 86% compared with 28% decline for the broader industry. SeaDrill currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the broader energy space include Canadian Natural Resources Ltd. (TO:CNQ) and Southcross Energy Partners, L.P. (NYSE:SXE) . Both the firms sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Natural Resources is expected to witness year-over-year growth of 47.41% and 702.38% in its revenues and earnings respectively in 2017.

Southcross Energy Partners reported average positive earnings surprise of 22.72% in the last four quarters.

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