LONDON (Bloomberg) - Seadrill Ltd. was raised to "neutral" from "sell" at UBS AG following a price decline, UBS AG said in a report.

Seadrill has stated its intention of making increased payouts to shareholders in the second half of 2008, "an action which has in the past been generously rewarded by the equity market", UBS analysts Alex Brooks and Jon Rigby said in an e-mailed note.

Bermuda-based Seadrill has slumped 18 percent since peaking at 179.75 kroner on May 22. It closed at 146.25 kroner on Monday.

"Seadrill remains one of the European oil service stocks where we are most cautious: we believe that the company is entering a period of elevated risks and high costs, running through to end 2009, which we do not believe are being fully factored in by the equity market," the analyst said.