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Seadrill Warns of Impending Bankruptcy; Shareholder and Bond Investors Likely to Lose Significantly

Rising oil prices apparently are not enough to save the once-promising master limited partnership (“MLP”) Seadrill Limited.  Seadrill stock plummeted, going down 54% on April 4, 2017 as the company announced that it will likely file for bankruptcy.

The most ominous news from Seadrill was its warning to investors of its substantial debt load and its expectation that shareholders are “likely to receive minimal recovery for their existing shares.”

Seadrill, as many oil and gas companies, has seen its value drop dramatically over the last three (3) years.  But the company was once highly-valued by Wall Street, with a market capitalization of $23.7 billion as recently as 2013.  Today, the company has dropped approximately 98% in value and sits at a market capitalization of just under $400 million.

Seadrill followed a blueprint that many oil and gas companies followed, which was to buy up assets and smaller companies and expand.  Unfortunately, like many other oil and gas companies, Seadrill over-extended its credit line and has approximately $8.5 billion in debt – an MLP bankruptcy with that much debt would slightly trump Linn Energy as the largest MLP bankruptcy.

Now, Seadrill has the most “sell” ratings among its similarly-situated peers.  For many investors, the damage has already been done.

Many brokerage firms were high on Seadrill the past three (3) years.  This includes Morgan Stanley (CRD# 149777); Citigroup Global Markets Inc. (CRD# 7059); Wells Fargo Securities, LLC (CRD# 17438); Credit Suisse Securities (USA) LLC (CRD# 816); Barclays Capital Inc.(CRD# 19714); and RBC Capital Markets, LLC (CRD# 31194), all of which were underwriters in one or more Seadrill public offerings.

Morgan Stanley was one of the major underwriters and book-runners of Seadrill’s initial public offering (“IPO”) in October 2012 and had an option to purchase a large block of Seadrill shares.  Seadrill was also book-running manager and underwriter of a 2014 Seadrill offering.

Morgan Stanley has been connected to Seadrill in other instances as well.  In March 2016, Seadrill hired Morgan Stanley to advise it in negotiations on restructuring its multi-billion load of loans and bonds.  As recently as February 2017, Morgan Stanley analyst Ole Slorer upgraded Seadrill from “equalweight” to “overweight” with a price target of $8.00.

If you have lost money investing in Seadrill Limited or its related entities with Morgan Stanley or any other broker-dealer, contact us.  Our lawyers have litigated hundreds of cases through FINRA arbitration and won millions of dollars on behalf of aggrieved investors.  Our lawyers represent investors nationwide in securities cases and FINRA arbitration to recover investment losses.  There is no fee unless we recover money for you.

For more information about the law firms, the lawyers, and our oil and gas investment practice area, please visit our website at www.oilgasfinraarbitration.com.  Contact Scott L. Silver at (800) 975-4345 for a free, confidential consultation.

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