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Drilling Down Into Why Seadrill Partners, California Resources Corp and NRG Energy
All Plunged More Than 20% This Week
It was a rough week in the energy patch, with dozens of stocks dropping by double digits. While most of the moves were oil-driven, there were a couple of company-specific
catalysts worth pointing out. Three of the bigger movers this week, according to S&P Capital IQ data, were Seadrill
Partners (NYSE: SDLP), California Resources (NYSE: CRC), and NRG Energy (NYSE: NRG).
What:Utility NRG Energy (NYSE: NRG) slumped more than 21% this week.
So What: Key driver: Long-time
CEO David Crane resigned, effective immediately
With the CEO abruptly leaving, and no reason given, investors bailed on the company
Now What: NRG was also slapped with a sell
rating by Citi, citing a low valuation for the company’s coal fleet
The rating was vindicated the next day after the company sold two power plants the next day – one being a coal-fired plant – for just $138 million
Key takeaway: With a weak fleet and its CEO fleeing, investors are jumping ship
What:Oil and gas producer California Resources (NYSE: CRC) dropped more than 21% this
week.
So What: Key driver: Another 5% slide
in oil prices, which are now south of $40 a barrel, is weighing heavily on the stock
Investors fear that the company’s high debt level and lack of geographic diversity are weakening its ability to manage through the downturn
Now What: The company’s main focus right
now is on deleveraging its balance sheet and it hopes to announce at last one asset monetization before the end of the year
Key takeaway: This stock will likely remain weak until investors see a meaningful improvement in both oil prices and the company’s balance sheet
What:Deepwater driller Seadrill Partners (NYSE: SDLP) slumped more than 25% this
week.
So What: Key driver: Seadrill Partners
was downgraded from outperform to perform at Oppenheimer
Despite adequate distribution coverage, Oppenheimer believes that Seadrill Partners will have no choice but to reduce its distribution
Now What: Given that investors aren’t
rewarding its high payout, the company is better off using the cash to bolster its balance sheet
Key takeaway: With a payout cut on the horizon, investors are fleeing before it’s too late
This could be the next billion-dollar iSecret