This Week in Energy: Chevron, Seadrill, Continental and More

The offshore drillers caught a bid earlier in the week when crude prices rose past $50 per barrel. Transocean LTD (NYSE:RIG) surged to over $11.50 per share and Seadrill Ltd (NYSE:SDRL) rallied to almost $4.00 per share. Some traders were buying due to momentum while others were using the offshore drillers as a proxy for out-of-the-money call options. Although offshore drillers aren’t competitive at $50 per barrel, they are much more competitive at $60-$80 per barrel. Although $60-$80 per barrel seems unlikely right now, stranger things have happened in the energy sector, such as the current 80%+ rally.

The bullish price action in the offshore sector diminished later in the week, however, after Seadrill Ltd (NYSE:SDRL) announced another debt-for-equity swap. The driller will create 7.5 million more shares in exchange for reducing its principal debt by $50 million. Given the company’s debt load, Seadrill will need crude prices to rally substantially higher for the dilution to not hurt as much for future potential swaps. Shares of both companies also fell after WTI prices fell below $50 on Friday.

22 top funds in our database owned Seadrill on March 31, while 39 were long Transocean LTD (NYSE:RIG).

Weekly Stock Performance

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