heth247 Posted November 24, 2018 Share Posted November 24, 2018 Just found this thread at COBF, wonderful discussion here. Can anybody help me to understand one thing: Management had mentioned at the beginning of 2018 that TOO has growth project to add $200MM USD EBITDA in 2018. However, based on TOO's 3Q results, it is hard for me to see it. By my estimation, so far for the 9 months of 2018, TOO's EBITDA (CFVO) is $436 MUSD, while for last year same period in 2017, it was $375 MUSD. That's just an increase of ~$60 MUSD so far for 9 months. Where/when would the rest $140 MM come from? All in Q4? Thanks! Link to comment Share on other sites More sharing options...
heth247 Posted November 26, 2018 Share Posted November 26, 2018 Just found this thread at COBF, wonderful discussion here. Can anybody help me to understand one thing: Management had mentioned at the beginning of 2018 that TOO has growth project to add $200MM USD EBITDA in 2018. However, based on TOO's 3Q results, it is hard for me to see it. By my estimation, so far for the 9 months of 2018, TOO's EBITDA (CFVO) is $436 MUSD, while for last year same period in 2017, it was $375 MUSD. That's just an increase of ~$60 MUSD so far for 9 months. Where/when would the rest $140 MM come from? All in Q4? Thanks! I think I was wrong in thinking that the $200MM incremental EBITDA is on top of 2017's total, and it is coming online gradually so probably it will have run its full course in 2019. The biggest near term risk is the contract extension for Piranema + Ostras FPSOs. Anybody know how much CFVO they have generated in 2018? I found a VIC write up on TOO here - https://valueinvestorsclub.com/idea/Teekay_Offshore/6304552408#description in which they provided a table of "Rough bridge" from 2016 DCF to 2019 DCF. They modeled CFVO $100MM for Voyageur + Piranema, and $25MM for Ostras (Don't know how they came up with it). We now know that Voyageur has 2019 covered completely, so the risk is mainly on Piranema + Ostras. Maybe $50MM total of CFVO loss from these two, if assume no contract extension? Link to comment Share on other sites More sharing options...
heth247 Posted November 28, 2018 Share Posted November 28, 2018 Nobody interested in this one anymore? During their recent 3Q CC, they mentioned that they have a total of 800 (MM) capex in the near term on the shuttle tanker side. I assume this is for the 6 new shuttle tanker they have ordered. If we assume 40% of that is equity financing, then it works out to $320MM to be funded over the next two years. And I assume this will be funded by their cash flow, which is $640(CFVO)-$220(interest expense)=$420MM/year, correct? Link to comment Share on other sites More sharing options...
Gregmal Posted November 28, 2018 Share Posted November 28, 2018 I've got a flier on some longer dated calls here, but ATM I think TDW warrants are a significantly more compelling way to play the space. Link to comment Share on other sites More sharing options...
heth247 Posted November 28, 2018 Share Posted November 28, 2018 I've got a flier on some longer dated calls here, but ATM I think TDW warrants are a significantly more compelling way to play the space. Thanks, is there a thread or write up on TDW that I can get up to speed? Anyway, TOO's market cap is almost at 1.1X EBITDA now. Companies do not trade at 1.1X EBITDA unless they are distressed or highly leveraged, neither of which is TOO's case (Well, their 5X leverage is not low by the absolute standard, but still reasonable by industry standard, a little bit high on the comfort zone of 4~5X). Is market worrying that they will have difficulty refinance their debt due in the next couple of years? Link to comment Share on other sites More sharing options...
Steven B Posted November 28, 2018 Share Posted November 28, 2018 Hmmm think I might've scared Seth away. Anyway, still think it's interesting but thanks Greg, I'll look at Tidewater. Also Heth, while I don't profess to know the thought process of the market, you either need to look at EV/EBITDA or P/FCF, none of which are quite as low as 1.1 times. Link to comment Share on other sites More sharing options...
Gregmal Posted November 28, 2018 Share Posted November 28, 2018 I've got a flier on some longer dated calls here, but ATM I think TDW warrants are a significantly more compelling way to play the space. Thanks, is there a thread or write up on TDW that I can get up to speed? Anyway, TOO's market cap is almost at 1.1X EBITDA now. Companies do not trade at 1.1X EBITDA unless they are distressed or highly leveraged, neither of which is TOO's case (Well, their 5X leverage is not low by the absolute standard, but still reasonable by industry standard, a little bit high on the comfort zone of 4~5X). Is market worrying that they will have difficulty refinance their debt due in the next couple of years? I forget where so I'll have to look for it, but it's been covered a few places. I think Third Ave had written about it in one of their letters as well. Link to comment Share on other sites More sharing options...
heth247 Posted November 28, 2018 Share Posted November 28, 2018 Hmmm think I might've scared Seth away. Anyway, still think it's interesting but thanks Greg, I'll look at Tidewater. Also Heth, while I don't profess to know the thought process of the market, you either need to look at EV/EBITDA or P/FCF, none of which are quite as low as 1.1 times. It all your fault, Steven.... just kidding. Yeah, hope Seth can come back and comment again :-) Well, if we apply Seth's estimation of FCF of normalized ~$200MM a year, then this is at 3.5X FCF, which is cheap. I am trying to figure out why the share get to this low. What kind of distress the market is seeing? Do you see them having problem funding their 800MM*40%=320MM capex for the 6 new shuttle tanker over the next couple of years, while having 537MM debt mature in 2019, $349MM debt mature in 2020? They should have about $400MM a year cash flow to deal with these, if those FPSO contracts can be extended. Link to comment Share on other sites More sharing options...
longlake95 Posted November 28, 2018 Share Posted November 28, 2018 i thought that any funding issues were resolved by the Brookfield investment in TOO? Link to comment Share on other sites More sharing options...
heth247 Posted November 28, 2018 Share Posted November 28, 2018 i thought that any funding issues were resolved by the Brookfield investment in TOO? Those funding issues resolved were for the FPSO/FSO/Shuttle growth project 2015-2017, that were supposed to add $200MM incremental EBITDA. But since then, they just ordered 6 new shuttle tankers, and said on the 3Q CC that they have total of 800MM capex to fund. My understanding is that 60% of it will be debt financing and 40% of it will be equity financing, which should be coming from their cash flow. I consider these 6 new shuttle tankers as replacement not growth, since they have quite bit of old shuttles that will need to be retired in the next 5 years. Link to comment Share on other sites More sharing options...
heth247 Posted November 29, 2018 Share Posted November 29, 2018 I am trying to figure out if TOO can comfortably handle their debt due + CAPEX for the next two year. From their 20F, page 69, "Contractual Obligations and Contigencies" table, they have 853MM (590MM secured debt + 51MM op lease + 209MM CAPEX) in 2018. Then they have 1068MM (422 secured + 421 bonds + 225 CAPEX) in 2019, but we know the 421MM unsecured bonds is already refi'ed and pushed to 2023 by the new 700MM 8.5%, so the net is 647MM ($422 secured debt + 225 CAPEX), which is much less than what they did in 2018. Then they have 630MM (350MM secured debt + 280 CAPEX) in 2020, which is less than 2019. So all the debt due in the next two years are secured debt. Question to knowledgeable people, when banks decide to roll these secured debt, what is their consideration? Would they require large down pay? Should they be able to easily roll those secured debt in 2019 + 2020? After reviewing this, now I can understand why they had to issue preferred-E in 2Q to help to handle all the obligations in 2018, and did the 700MM @ 8.5% to push out those unsecured bonds due in 2019. It is a bit of pain, but makes the road ahead much easier. Comments? Link to comment Share on other sites More sharing options...
heth247 Posted December 13, 2018 Share Posted December 13, 2018 Is the Piranema field sold? When I google "DBO energy Pirenema Field", the following popped up: Double divestment deals for Petrobras | Upstream https://www.upstreamonline.com/hardcopy/.../double-divestment-deals-for-petrobras Nov 29, 2018 - According to Petrobras, the three fields have some identified ... the disposal of the mid-water Piranema field to newcomer DBO Energy, as well ... Double divestment deals for Petrobras Brazil's Petrobras has reached a pair of deals worth a combined $823 million for the sale of a series of shallow-water and onshore fields, as part of its divestment strategy to raise up to $21 billion by the end of the year, writes Fabio But I don't have access to the website. Anybody? Link to comment Share on other sites More sharing options...
heth247 Posted December 28, 2018 Share Posted December 28, 2018 I thought this one is not an oil bet but it came down even harder than oil. And it does not bounce back when oil bounce back! Really cannot figure out why, except guessing that some funds are dumping it due to redemption? Even assume that their 3 FPSO + UMS fail to get the contract extension, it still does not deserve current price level this low. Link to comment Share on other sites More sharing options...
chrispy Posted December 28, 2018 Share Posted December 28, 2018 Tax loss selling may be happening too. Seems over sold. BBU has roughly followed its price movement too despite it being one of many holdings Link to comment Share on other sites More sharing options...
heth247 Posted December 29, 2018 Share Posted December 29, 2018 Tax loss selling may be happening too. Seems over sold. BBU has roughly followed its price movement too despite it being one of many holdings I get the tax loss selling in December, but who would have waited until Dec 20 or later to do it ... Link to comment Share on other sites More sharing options...
Spekulatius Posted December 29, 2018 Share Posted December 29, 2018 Tax loss selling may be happening too. Seems over sold. BBU has roughly followed its price movement too despite it being one of many holdings I get the tax loss selling in December, but who would have waited until Dec 20 or later to do it ... Just my guess, but the stock market slump late this December messed up tax planning for many investors. Link to comment Share on other sites More sharing options...
Steven B Posted December 31, 2018 Share Posted December 31, 2018 Also generally follows the whole Teekay construct's trading pattern as of late... Link to comment Share on other sites More sharing options...
heth247 Posted December 31, 2018 Share Posted December 31, 2018 Also generally follows the whole Teekay construct's trading pattern as of late... The Teekay parent has a $600MM bond due in a year. Although they have $200MM cash on hand, they don't have good collateral's other than 3 very old FPSOs that are cash flow break even + the shares in TGP/TOO/TNK. Don't know if they will try to do funny things with TOO shares when rolling those bonds. In the hind sight, BBU did a pretty good job by pushing TOO's debt maturity to 2023 earlier this year, before the market going down. Link to comment Share on other sites More sharing options...
Steven B Posted December 31, 2018 Share Posted December 31, 2018 Also generally follows the whole Teekay construct's trading pattern as of late... The Teekay parent has a $600MM bond due in a year. Although they have $200MM cash on hand, they don't have good collateral's other than 3 very old FPSOs that are cash flow break even + the shares in TGP/TOO/TNK. Don't know if they will try to do funny things with TOO shares when rolling those bonds. In the hind sight, BBU did a pretty good job by pushing TOO's debt maturity to 2023 earlier this year, before the market going down. Don't see what they can do now that Brookfield is the GP... Link to comment Share on other sites More sharing options...
heth247 Posted December 31, 2018 Share Posted December 31, 2018 The Teekay parent has a $600MM bond due in a year. Although they have $200MM cash on hand, they don't have good collateral's other than 3 very old FPSOs that are cash flow break even + the shares in TGP/TOO/TNK. Don't know if they will try to do funny things with TOO shares when rolling those bonds. In the hind sight, BBU did a pretty good job by pushing TOO's debt maturity to 2023 earlier this year, before the market going down. Don't see what they can do now that Brookfield is the GP... Yeah, I don't worry that TK force to drop those old FPSOs down to TOO, but not sure about if they might fire sale their TOO shares when in distress... Link to comment Share on other sites More sharing options...
Deepdive Posted January 1, 2019 Share Posted January 1, 2019 The Teekay parent has a $600MM bond due in a year. Although they have $200MM cash on hand, they don't have good collateral's other than 3 very old FPSOs that are cash flow break even + the shares in TGP/TOO/TNK. Don't know if they will try to do funny things with TOO shares when rolling those bonds. In the hind sight, BBU did a pretty good job by pushing TOO's debt maturity to 2023 earlier this year, before the market going down. Don't see what they can do now that Brookfield is the GP... Yeah, I don't worry that TK force to drop those old FPSOs down to TOO, but not sure about if they might fire sale their TOO shares when in distress... I doubt Brookfield is the kind of investor who let people drop down crap assets Link to comment Share on other sites More sharing options...
heth247 Posted January 8, 2019 Share Posted January 8, 2019 Common unit distribution cut to zero. Although it makes sense from capital allocation point of view, I wonder if it means they are having difficulty to extend the FPSO contract? Link to comment Share on other sites More sharing options...
chrispy Posted January 9, 2019 Share Posted January 9, 2019 The story of the TOO in 2019 and forward was deleveraging and putting capital into the shuttle tanker business. Cutting the dividend may very well be the correct move here. Link to comment Share on other sites More sharing options...
heth247 Posted January 9, 2019 Share Posted January 9, 2019 The story of the TOO in 2019 and forward was deleveraging and putting capital into the shuttle tanker business. Cutting the dividend may very well be the correct move here. I agree. Actually they should have just eliminated the distribution in 2017 when BBU bought in. I just wonder what makes them to decide to cut now, is it because there are new investing opportunities or because of some sort of distress? Link to comment Share on other sites More sharing options...
chrispy Posted January 9, 2019 Share Posted January 9, 2019 That is a good question and I have no answer. The market didn't give a hoot about the stock with the dividend. I am guessing whatever they do with the money will be more beneficial. Link to comment Share on other sites More sharing options...
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