drilling down into why seadrill partners, california resources corp and nrg energy all plunged more...
TRANSCRIPT
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