Citigroup upgrades Seadrill (SDRL.US) to "Buy" and names it its top pick in offshore drilling companies
1min read Citi published a research report, upgrading Seadrill (SDRL.US) to "buy" from "neutral", and rated it as the top stock in offshore drilling companies, but adjusted its target price to US$52 from US$60.
Citi expects the company's free cash flow yield to exceed 20% by 2026, the best in the industry.
Analyst Scott Gruber also noted that Seadrill has strong acquisition potential, Transocean (RIG.US) is considered a potential buyer, and believes Seadrill will update its drilling platforms in Brazil at a "steady" pace.
Secondly, Gruber is bullish on Noble Corporation (NB.US), as the Diamond Offshore acquisition is completed, and expects repurchases to increase, with revenue of US$4.3bn in fiscal 2026, EBITDA of US$1.88bn, and free cash flow of US$1.14bn, followed by Valaris (VAL), which has the highest quality idle capacity.
Citi downgraded Transocean's rating to neutral from buy, with a new target price of US$4.50, saying the company has the largest inventory coverage, so the risk of correction to its updated estimates is minimal, but its stock has a premium to the bank's more conservative estimates, and repurchases "have not yet appeared".
