In a report published today, BofA Merrill Lynch downgraded shares of Seadrill Limited (SDRL) from Buy to Neutral and cut its price target from $46.00 to $36.00, suggesting 9 percent upside.

“We downgrade Seadrill to Neutral as we are no longer confident the driller can be resilient to the downturn in offshore drilling demand. We reduce utilisation rates for some rigs this year and pull down our dayrate assumptions to US$500k for all ultra deepwater uncontracted capacity. This leads us to cut our earnings by 15% 2014-16E, leaving Seadrill the most expensive offshore driller, trading on a PE of 9.2x15E, a 33% premium. As a result of the cuts our PO falls to NOK215/US$36.” BofA Merrill Lynch said

“Whilst a yield of 12% looks attractive, and despite management’s assurance that the dividend is safe, we question how sustainable the quarterly DPS of US$0.98 would be if offshore drilling is set for multi- year period of weakness” it added

Shares of Seadrill Limited (SDRL) closed at $33.13 on Wednesday.

For more Analyst Ratings Click here