Seadrill Partners versus crude oil
Seadrill Partners (SDLP), an MLP formed by Seadrill Limited (SDRL) to own, operate, and acquire offshore drilling rigs, has a one-year correlation with crude oil of 0.32 as of June 6. The correlation between Seadrill Partners and crude oil has increased to 0.49 and 0.66 during the past three-month and one-month periods. Seadrill Partners has a higher correlation with oil when crude oil prices are rising.
A rise in crude oil prices from here is expected to drive higher offshore drilling activity. Higher activity is expected to drive Seadrill Partners’ earnings and stock performance. According to Baker Hughes, the total US offshore rig count has increased to 19 as of June 1—compared to 12 by the end of the first quarter of 2018.
For a detailed analysis of Seadrill Partners’ first-quarter earnings, read Diving into Seadrill Partners’ Q1 2018 Results.