This Week in Energy: SM Energy, Continental Resources, Chesapeake and More

Offshore Drillers Lag Both Crude Futures and Sector

Although many E&P’s showed relative strength this week, the offshore sector woefully lagged. Seadrill Ltd (NYSE:SDRL) and ENSCO PLC (NYSE:ESV) mostly disappointed bullish investors this week, as shares of Seadrill fell by 7.3% and shares of ENSCO retreated by 4.3%. One reason for the under-performance was that WTI crude futures fell from $47 per barrel to $44 this week. Wednesday’s EIA report came in below estimates and the U.S. crude rig count increased again, this time by one to 407. Another reason is that some investors remain concerned about Seadrill’s large amount of bonds maturing over the next two years. Barring a major surge in crude prices, Seadrill might need to issue more shares or sell assets to raise enough funds to pay bond holders. Given the company’s balance sheet, ENSCO’s weakness this week is a bit surprising however.

According to our records, 17 hedge funds owned shares of Seadrill Ltd (NYSE:SDRL) at the end of the second quarter, down by five funds from the end of the previous quarter, while the number of funds with holdings in ENSCO PLC (NYSE:ESV) rose by one quarter-over-quarter to 30 at the end of June. Robert Henry Lynch‘s Aristeia Capital owned 5.27 million shares of Seadrill on June 30, up by 36% from March 30.

Disclosure: None