Seadrill : valuation and financial statement analysis of Seadrill limited

Abstract

This paper takes on the valuation of the drilling operator Seadrill Limited. The valuation takes basis in strategic analysis and financial statement analysis. The paper has the perspective of a global well-diversified investor. The strategic analysis concludes that Seadrill has the highest industry exposure to the very favourable UDW segment, and is well positioned for further growth. Discounted cash flow model (DCF) has been used as main valuation approach, with focus on the free cash flow to the firm (i.e. total capital). This valuation is supported by relative valuation and asset based valuation. The DCF model arrives at a value of NOK 93.7 per share. This is further backed by the relative valuation (P/E) of NOK 102.2 per share and the asset based valuation of NOK 84 per share. As the main target price only offers a 3 % upside potential in the share price, it is concluded with a neutral recommendation.