Seadrill upgraded to Buy on greater takeout potential at Citi

Citi upgraded Seadrill to Buy from Neutral with a price target of $52, down from $60. The firm says the offshore drillers “present a conundrum for energy investors.” If demand expands by just a handful of rigs in 2026, then free cash flow yields look very attractive at 20%-plus, the analyst tells investors in a research note. However, Citi’s updated forecasts include fewer reactivations, more 2025 downtime and slightly lower sixth generation floater rates, which indicate additional downside to 2025 EBITDA expectations, the analyst adds. Nonetheless, the firm believes the recent pullback along with recent investor conversations suggests this is increasingly priced into the stocks. Citi reset its preference order to reflect buyback and takeover potential, resulting in an upgrade of Seadrill and downgrade of Transocean (RIG). The firm cites confidence in Seadrill renewing its Brazilian rigs at solid rates and greater takeout potential for the upgrade.