Seadrill Ltd (NYSE:SDRL) has long been in talks for a deal worth $4.1 billion, with Rosneft Oil Co, in Russia, on mutual cooperation. Previously the deal had suffered a delay of two years, with further two years being added recently. The deal was to be made by Seadrill’s subsidiary, North Atlantic Drilling. The company announced the delay for further negotiating the terms of the agreement.
Seadrill has suffered over 62% in stock value, since the past year and with the falling oil prices the demand for drilling services has also declined. Recently, the company also suffered a decline in rigs count. Re-negotiating the old deal, with new terms would have been beneficial for the company in these hard times.
Unfortunately, the deal faces tough resistance from home. The west has imposed sanctions that prevent technical expertise in the US to be moved to Russia. The deal would have allowed North Atlantic to operate six rigs in Russia, until 2020. In return, Rosneft would sell 150 of its land rigs to North Atlantic. Additionally, Rosneft would have gained 30% stake in the company. Unfortunately, the sanctions have made the very first aspect of the deal impossible.
Subsequently, the delays have further infused fear in the investors that the deal might eventually be called off. Especially since this has been the case with Rosneft and North Atlantic dealings recently. A statement from North Atlantic had also cited, that all parties have agreed to extend the termination date. Additionally, any of the two parties can terminate the agreement or any offshore drilling contract, before May 31, 2017, at no costs.
This makes things worse for the Seadrill stock, since things keep on remaining bleak. The stock is already taking a toll due to recent cuts and falling oil prices and a loss in operations at any time may trigger further decline. Seadrill has 71% shares in North Atlantic Drilling, while North Atlantic Drilling has stated that it is free to carry out business dealings as it pleases.
Seadrill Ltd (NYSE:SDRL) closed at $13.09 after gaining 7.65%. The company has 492.76 million shares in the market, with a 52-week range of $8.58-$40.44.