Do You Think Limited Supply and Increasing Demand Favor Seadrill Limited (SDRL)?
Patient Capital Management, a value investing firm, released its “Patient Capital Opportunity Equity Strategy” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. During the quarter the strategy returned 17.6% net of fees compared to the S&P 500’s 11.7% return. The portfolio's outperformance can be attributed to a three-factor model, where interaction, selection, and allocation effects all played a significant role. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Patient Capital Management featured stocks such as Seadrill Limited (NYSE:SDRL) in the fourth quarter 2023 investor letter. Headquartered in Hamilton, Bermuda, Seadrill Limited (NYSE:SDRL) is an offshore contract drilling services provider to the oil and gas industry. On January 30, 2024, Seadrill Limited (NYSE:SDRL) stock closed at $44.20 per share. One-month return of Seadrill Limited (NYSE:SDRL) was -6.26%, and its shares gained 4.00% of their value over the last 52 weeks. Seadrill Limited (NYSE:SDRL) has a market capitalization of $3.224 billion.
Patient Capital Management stated the following regarding Seadrill Limited (NYSE:SDRL) in its fourth quarter 2023 investor letter:
"We purchased a new energy name in the quarter, buying shares in Seadrill Limited (NYSE:SDRL). Seadrill is the fourth largest pure play deepwater drilling specialist. The company emerged from bankruptcy in February 2022 with a net cash position. The company is set to benefit from limited supply and increasing demand in the deepwater drilling rig market. Nearly half of all deepwater drilling rigs in the world were scrapped during the last decade. In addition, player consolidation puts the industry in a more rational position than we have seen historically. As land-based oil production growth comes under pressure, offshore production is receiving renewed interest. With a highly specialized rig base, the company is benefiting from increasing prices which are leading to strong FCF yields given the limited need for capital expenditures (CAPEX). The company has committed to returning 50% of FCF to shareholders via dividends and buybacks. Since September 2023, the company has repurchased 8% of shares outstanding. As old contracts roll-over and new contracts are signed at the higher day rates, operating profit and FCF are expected to expand dramatically. Seadrill could either consolidate the space or be acquired."
Drilling rig silhouetted against a setting sun in an offshore location.
Seadrill Limited (NYSE:SDRL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held Seadrill Limited (NYSE:SDRL) at the end of third quarter which was 30 in the previous quarter.
We discussed Seadrill Limited (NYSE:SDRL) in another article and shared the list of high growth energy stocks to buy. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
