NFSHF - Northern Offshore

[DTEJD1997]

Hey all:

 

Anyone following or invested in Northern Offshore (NFSHF)?

 

I would like to give props to Dave @ OTCadventures for bringing my attention to this one.  He wrote an excellent writeup on it.

 

It is a minor position in one of my portfolios and I would like to add the following thoughts:

 

A). I don't think it is as high a quality company as Awilco.  These were the guys who were going to buy Awilco's rigs originally, but at a MUCH higher price...

 

B). I think a lot of the investment thesis is going to hinge on the drillship being leased off the coast of Nigeria.  This has the possibility to throw off a TREMENDOUS amount of cash flow for the next 12-24 months.  If it does, I would expect management to RAISE the dividend.

 

C). The balance sheet appears to be in excellent condition.  HOWEVER, they will have to pay for a couple of jack-up rigs in the upcoming 24 months.  I would guess they will paid for by a combination of retained earnings, debt financing, and perhaps some ship yard financing.  Presumably, these things will get leased ASAP and will be paying for themselves also...

 

I think this is a higher risk stock than Awilco, but has the potential to pop up if the Nigerian situation goes well AND the dividend gets raised.

 

Anybody have any thoughts or anything to add?

[Daytripper]

Thanks for starting the topic DTEJD1997.

 

I purchased both NFSHF and Awilco after reading Dave's research at OTCAdventures (Thanks Dave).

 

I'm not willing to judge Northern's management about the rig-deal that Awilco ended-up with.  It sounds as if the seller had to get rid of the rigs in a hurry, and therefore the fire-sale price.  I did notice that Northern has a gazillion shares outstanding.  A reverse-split might make the company more available for institutional investment.

 

 

 

[Radio Free Cash Flow]

Dave here, glad you guys enjoyed my writeup. Northern doesn't have great assets or great management, but it does have a strong balance sheet, good cash flow and a valuation that is not pricing in the upcoming increased cash flow from the new drillship contract. I believe the stock will reprice once the company reports its first quarter of earnings including the drillship, and announces how it plans to finance its newbuild jackups. The chief risk is that management makes a boneheaded acquisition financed by the new cash flows.

[DTEJD1997]

Dave here, glad you guys enjoyed my writeup. Northern doesn't have great assets or great management, but it does have a strong balance sheet, good cash flow and a valuation that is not pricing in the upcoming increased cash flow from the new drillship contract. I believe the stock will reprice once the company reports its first quarter of earnings including the drillship, and announces how it plans to finance its newbuild jackups. The chief risk is that management makes a boneheaded acquisition financed by the new cash flows.

 

Yes, I think it is KEY that management dividend out most of the increase in cash flow.  That will hopefully get some notice to the stock...Although we may see some of the same things that happened with Awilco.

 

For example, I've gotten into "discussions" with investors who claim that Awilco does not pay a dividend.  If Yahoo! does not show a dividend, then how could it pay a dividend?  "I also checked with my broker and it does not show a dividend!"  YOU MUST BE MISTAKEN.  I then reply, "I sure hope I don't have to give back all that money I've received!"

 

So, you have a LOT of potential investors that don't know or feel uncomfortable with something that is outside their usual scope of experience...

[Daytripper]

Energy Searcher drillship waiting approval to drill in Nigeria.

 

CAMAC Energy Inc. has informed that the Northern Offshore Energy Searcher drillship is currently located offshore Cameroon, where it is awaiting final clearance by the Nigerian Department of Petroleum Resources (“DPR”) to enter Nigeria and commence drilling operations at the Oyo Field.

 

Full story:  http://www.offshoreenergytoday.com/energy-searcher-drillship-waiting-approval-to-drill-in-nigeria/

[Packer16]

How would you handicap this versus Awilco?  I see Awilco as having a higher dividend yield and better management (more focused on value) so why not buy/hold Awilco vs. Northern Offshore?

 

Packer 

[DTEJD1997]

How would you handicap this versus Awilco?  I see Awilco as having a higher dividend yield and better management (more focused on value) so why not buy/hold Awilco vs. Northern Offshore?

 

Packer

 

Packer:

 

Believe me, I'm in Awilco, heavily into Awilco.  Depending on the vagaries of my portfolio, it has grown into either my #1 or #2 position.  I am bullish on Awilco, and I still think it has room to run.

 

I think Northern Offshore is a higher risk/higher reward situation.  IF the Nigerian situation pans out AND the market stays OK.  Northern could be pulling a LOT of cashflow.  I imagine some of this cashflow will be used to pay for the new rigs, but some of it could be used to pay a dividend increase.

 

If that happens, we could see the stock price increase substantially.  I don't think it is outside the realm of possibility to see Northern Offshore jump a point in the next twelve months.  You also get to collect a dividend.

 

Awilco definitely has good management and is a safer bet...but I've got a ton of it already.  So my #2 choice would definitely be Northern Offshore over something like SDRL.

[siddharth18]

Hi all,

 

Since we're on the topic of offshore drillers - what about SeaDrill Ltd [sDRL]? It's John Fredriksen's marquee company sporting an assortment of the latest ultra-deep-water rigs (among others) and a top-class management.

 

This one got hit recently by the "analyst" downgrades due to weakness in future day-rates in the short to mid term due to cut in cap-ex from oil majors. Apparently oil majors' shareholders have decided to increase capital returns and in turn decided to put capex on the back burner. If you take a long-term view, there's a lot SDRL is offering. For one, it has the youngest and most sophisticated fleet. Also, as a company that has a large % of its rigs already contracted over the next couple of years, it's one of the last companies to be hit hard if there's an oil crash or a crash in day-rates. Majors will still need to drill and there'll always be need for latest rigs (due to safety). The weakest participants (with the oldest rigs) like Transocean will bear the brunt.

 

I bring this up because it's offering close to 12% yield. If one's confident about oil prices, day-rates and wants excellent management, Seadrill can give NFSHF a run for its money. Definitely one worthy of considering with a successful billionaire at the helm, and by your side.

 

Any thoughts?

[Daytripper]

I own them both, but my Awilco stake is double the size of my Northern.  Both are small stakes in my Roth.  I like high dividends so I'm long a lot of small stakes in companies like the aforementioned, plus mortgage reits and oil trusts.

 

SeaDrill is a first-rate company, maybe you should start a topic for it.

[rainman]

How you guys feel about Atwood Oceanics ( NYSE:ATW) ?

[DTEJD1997]

Hey all:

 

Earnings came out today. Looks good to me. Earnings of $.06/share. Dividend of $.05/share. Management says that cashflow should increase substantially very soon.

 

Interesting comment is that they are looking to spin off ownership of Northern Producer into a separate publicly traded company? Seems kind of thin to have only the one asset in a new company…

 

“With respect to the Northern Producer, our client EnQuest has plans to drill another development well this year in the Don SW field, and is producing a Field Development Plan (“FDP”) for the Don NE field. Should the FDP result in additional development drilling in Don NE, earnings from the Northern Producer could increase substantially. As such, our board of directors recently requested that management investigate the possibility of spinning off the Northern Producer and its life-of-field contract. The board believes that a spinoff of the Northern Producer could unlock value for the shareholders and allow the remaining company to focus exclusively on growing its contract drilling business.

The intent would be to establish a publicly traded company to own and operate the Northern Producer, with a focus on cash distributions to the shareholders. Initially the plan is to consider distributing approximately 20% of this new company to the shareholders of Northern Offshore. This company would also consider the acquisition of similar assets with long-dated contracts to enhance dividends.”

 

They also started cutting steel in China for the first of the new jackup rigs.

 

So generally good news all the way around. Probably another quarter till we see revenue from the ship off of Nigeria.

 

I imagine the stock will start to move higher….especially if more cash flow comes in the next quarter AND the dividend gets raised  :D

 

[watsa_is_a_randian_hero]

How you guys feel about Atwood Oceanics ( NYSE:ATW) ?

 

I like it!

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/atwood-(atw)/

[DTEJD1997]

Hey all:

 

Energy Searcher has FINALLY started operating off the coast of Nigeria. 

 

CAMAC Energy Spuds Oyo-8 Development Well Offshore Nigeria, please see:

 

http://www.marketwired.com/press-release/camac-energy-spuds-oyo-8-development-well-offshore-nigeria-nyse-mkt-cak-1920690.htm

 

So now NFSHF will have $100MM in additional revenue for the upcoming year.  How much of that will be cash flow/earnings?

 

Even after NFSHF's recent increase in price, this is only a $250MM market cap company.

 

NFSHF is also contemplating spinning off one their ships into a separately traded publicly traded MLP for dividend yield.

 

If everything goes according to plan, this stock could have an increased dividend yield AND even more capital gains.

 

We will see!

[DTEJD1997]

Hey all:

 

Surprised nobody is talking about the bid news with NFSHF!

 

They just signed a 2.5 year contract with Rostneft for the Energy Endeavor.  The contract is worth about $150MM, which is pretty significant for a company the size of NFSHF.

 

This should give some insight into future earnings.

 

Hopefully, with addition of the ship off the coast of Nigeria, this should be a very good, very welcome development.

 

Of course, the stock didn't move much...it is actually down a bit.

 

Any thoughts?

[Palantir]

OH wow, didn't realize there was a thread on this. I have been looking at this one, on trailing, it doesn't look as cheap as AWILCO, on forward it looks better. Don't you find it concerning that all their rigs are on 1-2 yr contracts or is that normal? Another concern for me is that Energy Searcher is in a relatively saturated African Market.

[DTEJD1997]

OH wow, didn't realize there was a thread on this. I have been looking at this one, on trailing, it doesn't look as cheap as AWILCO, on forward it looks better. Don't you find it concerning that all their rigs are on 1-2 yr contracts or is that normal? Another concern for me is that Energy Searcher is in a relatively saturated African Market.

Well yes, this is not as good a company as Awilco...but then how many are?

 

Yes, I would prefer them to have longer contracts than 2-3 years...but it is not the end of the world.  The contracts that Northern Offshore has are not as high quality as Awilco's...but that does not disqualify it as an investment.

 

I am going to be SHOCKED if the dividend is not raised in the upcoming 12 months.  The ship off Africa is going to be adding a lot of cash flow.  The Energy Endeavor is also leased for another couple of years at about the same day rate, so we will have stability there.

 

You also have the new tax situation with Great Britain and the North Sea.  That is going to be extremely good for drillers/operators going forward.

 

All in all, I think NFSHF has good potential for the upcoming year.

[DTEJD1997]

Hey all:

 

Northern Offshore apparently just reported blowout earnings of $.06/share compared to $.01/share in the year ago period.

 

Cash flow was just over $20MM.

 

Dividend declared of $.05/share.

 

With all rigs under contract, earnings are set to rise in the 2nd half of this year.

 

The company is also evaluating spinning off the Northern Producer.

 

Hopefully we will see further increases in earnings and dividends in the upcoming quarters.

[Palantir]

Damn.....should have paid more attention. On to Paragon Offshore then!

[DTEJD1997]

Hey all:

 

Oil prices have declined somewhat and so has this stock....

 

It has declined so low, I'm almost taking a loss on it.  I'm considering purchasing more.

 

There was a problem with the Energy Searcher, but it has been rectified and is producing income now.

 

Their net income should be very high the next couple of quarters....I imagine they might be under pressure late next year if the market continues to be under pressure...

 

On the other hand, stock is selling under book value, good balance sheet, 15% dividend, P/E under 8, and possibility of spin off.

 

Any thoughts from anyone?