Has Seadrill Ltd (SDRL) Become the Perfect Stock?

In particular, Seadrill has hitched itself to some promising long-term offshore plays. Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) has contracted several submersible rigs to develop its Santos and Campos Basin holdings off the coast of Brazil, while similar plays across the Atlantic off the west coast of Africa have similar promise.

Most interesting is Seadrill’s decision to offer shares of Seadrill Partners LLC (NYSE:SDLP) as a way to get direct exposure to particular drilling rigs. Yet despite the word “partners” in the name, the entity is organized as a limited liability company and has elected to be taxed as a corporation, removing many of the benefits that master limited partnerships enjoy. With the dividend yield below that of the original company, Seadrill Partners doesn’t appear to pose a threat to Seadrill’s attractiveness as an investment.

For Seadrill to improve, it needs to get its debt under control and work on boosting revenue further. Continued growth should push normalized earnings up and bring valuations down, but until that happens, Seadrill may not get much closer to perfection.

The article Has SeaDrill Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Petrobras and Seadrill and owns shares of Seadrill and Transocean.

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