ConocoPhillips (COP), Seadrill Ltd (SDRL): Why I’m Finally Buying This Stock

One of the levers it can pull is to drop down assets into Seadrill Partners . The company has already identified several assets with contract lengths of more than five years that would be ideal candidates to sell into Seadrill Partners. This flexibility, when combined with the backlog, helps alleviate much of the pressure from the debt worries.

A final risk, and perhaps the company’s greatest unknown, is that of disaster similar in size and scope to the one that hit BP plc (ADR) (NYSE:BP) and Transocean LTD (NYSE:RIG) in the Gulf of Mexico. Not only did the disaster have a devastating effect of the Gulf region but it also greatly affected the operations of both BP plc (ADR) (NYSE:BP) and Transocean LTD (NYSE:RIG). That’s why the overall risk of a similar disaster for Seadrill Ltd (NYSE:SDRL) or one of its competitors remains to something to watch, especially given the company’s high debt load.

The Foolish bottom Line
Despite these risks, I’m convinced that deepwater drilling will continue to grow in importance. That means no shortage of opportunities for Seadrill to increase its contracted backlog, and its dividend in the future. One final note of full disclosure, I am writing puts to start my Seadrill Ltd (NYSE:SDRL) position. While I have no problem buying shares at its current price, I wouldn’t mind picking them up a little cheaper.

The article Why I’m Finally Buying Seadrill originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of ConocoPhillips. Matt DiLallo has the following options: Short Jul 2013 $35 Puts on Seadrill. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Seadrill and Transocean.

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