AWLCF - Awilco Drilling

[permabear]

Issued today. Management had said that the work was ahead of schedule.

 

AWDR - Hess agreed to early release of WilHunter

Awilco Drilling PLC and Hess Limited have mutually agreed to release the WilHunter ahead of the 1st December 2015 contract date as a consequence of the successful early completion of the decommissioning program.  There will be no negative financial repercussions to either party as a result of this early release.

 

WilHunter is now moored at Invergordon and is being actively marketed against future opportunities.

 

WilHunter is one of Awilco Drilling's two Enhanced Pacesetter semi-submersibles and is equipped for operations in water depths up to 1,500ft.

 

Aberdeen, 31 July 2015

 

 

For further information please contact:

Jon Oliver Bryce, CEO

Phone: +44 1224 737900

 

Cathrine Haavind, IR Manager

Phone: +47 93 42 84 64

 

 

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

[phil_Buffett]

http://hugin.info/147077/R/1946319/706167.pdf

 

q2:

 

dividend $0,50

[permabear]

Any Canadian owners of Awilco on this board? Does this qualify as a TFSA/RRSP investment? Thanks

[gary17]

I had this previously in my RRSP and there was no tax withheld on the dividends.

 

 

I wonder how sustainable is the 0.50 $ dividend given the state of the O&G industry.

[Gamecock-YT]

I had this previously in my RRSP and there was no tax withheld on the dividends.

 

 

I wonder how sustainable is the 0.50 $ dividend given the state of the O&G industry.

 

Just depends if they are able to secure work for the WilHunter. Management thinks they are close, thus the warm-stack.

[permabear]

I had this previously in my RRSP and there was no tax withheld on the dividends.

 

So it is considered a qualified investment for TFSA/RRSP? I read that the security has to be on a designated exchange, one of which is the Oslo exchange, although I don't own the shares outright, I own an OTC ADR. According to what I read, OTC securities are ineligible for registered accounts. I suppose the argument is that the underlying security trades on a designated exchange?

 

Designated exchanges: http://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp

Qualified investments: http://www.taxtips.ca/rrsp/qualifiedinvestments.htm

[bizaro86]

I had this previously in my RRSP and there was no tax withheld on the dividends.

 

So it is considered a qualified investment for TFSA/RRSP? I read that the security has to be on a designated exchange, one of which is the Oslo exchange, although I don't own the shares outright, I own an OTC ADR. According to what I read, OTC securities are ineligible for registered accounts. I suppose the argument is that the underlying security trades on a designated exchange?

 

Designated exchanges: http://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp

Qualified investments: http://www.taxtips.ca/rrsp/qualifiedinvestments.htm

 

My understanding is that it has to be the same security. So if it has the same ISIN, you're fine. If it's actually an ADR, then generally speaking it isn't the same security.

[gary17]

http://business.financialpost.com/personal-finance/tfsa/are-you-sure-you-can-invest-that-in-your-tfsa?__lsa=baf3-fd7f

 

I think you should ask for professional tax or legal advice on this topic.

 

 

 

 

[phil_Buffett]

http://hugin.info/147077/R/1967958/719093.pdf

 

 

q3: dividend again at $0,50

[DTEJD1997]

Hey all:

 

WOW, a great quarter!

 

Of course, this won't be repeated in the near future, as part of that is a one time payment.

 

Nice to get a $.50/share dividend.

 

A few interesting things I noticed...Cash now exceeds market cap of the company ($151MM vs. $135MM).

 

 

How is the balance sheet?  $151MM cash vs. debt of $105MM.

 

Contracted future revenue WELL exceeds market cap of the company ($276MM vs. $125MM).  Looking at latest quarters numbers, about half of this should be cash flow...And that is being extremely conservative.  Future cash flow from signed contracts should EASILY pay off the debt.  You then have $151MM in cash, management & two rigs.

 

BUT IT ALL DEPENDS ON THE PRICE OF OIL!

 

I just don't get it...

[permabear]

Fear is that they don't contract their rigs in the short-term, are forced to stack them and delay upgrades (i.e. less marketable), and if/when the oil price returns to profitable levels for E&Ps, the rigs will be at the end of their useful life.

[roughlyright]

Good article posted on seeking Alpha

http://seekingalpha.com/article/3802336-2-years-after-tempering-the-awilco-enthusiasm-whats-next

[Tim Eriksen]

Good article posted on seeking Alpha

http://seekingalpha.com/article/3802336-2-years-after-tempering-the-awilco-enthusiasm-whats-next

 

The author's optimism on Awilco's ability to secure a contract for the second rig seems incredibly naive.  There are three other warm stacked rigs and six cold stacked rigs in the area with probably six more rigs ending contracts in the next few months.  Logic tells me that they all would rather be contracted at $175,000 per day versus just sitting.  The current market won't support it.  His Q4 estimate seems to ignore the rig going to the yard.  I expect them to lose money in the quarter.

 

The author does make a point on the value of the cash flow from the one rig should be over the next two years combined with Awilco's cash buffer.  Awilco has the cash to pay off their bond and pay for one rig's SPS and BOP.  The market has to improve because one rig at $215,000 per day is probably EPS break even.  I would expect the dividend to be cut below $0.25 per quarter.

[permabear]

http://www.osjonline.com/news/view,uk-to-lead-global-decommissioning-surge_41608.htm

 

DW anticipates that 146 platforms will be removed from the UK during 2019-2026 – that is 51 per cent of all UK platform removals over the forecast*. This is due to the high number of ageing platforms in the UK, which have an average age of over 20 years and are uneconomic at current commodity prices, as a result of high maintenance costs and the expensive production techniques required for mature fields. However, many of the largest platforms will remain in place until the 2030s, mainly due to tiebacks that have increased production late in life.

 

*Forecast period is 2016-2040

[roughlyright]

New article on SeekingAlpha

 

http://seekingalpha.com/article/3940066-6-reasons-awilco-drilling-edge-chasm

[DTEJD1997]

Hey all:

 

Anybody still watching this one?

 

They reported earnings today of $.50/share and a declared another dividend of $.20/share.

 

One rig is in cold storage...drilling activity is picking up a LITTLE BIT according to management...

 

If the 2nd rig can be put back into operation, AWLCF would certainly spike higher....

 

What are the odds?  1 in 10?  1 in 5?

 

I still think this is an interesting speculation on higher oil prices.

[Gamecock-YT]

Hey all:

 

Anybody still watching this one?

 

They reported earnings today of $.50/share and a declared another dividend of $.20/share.

 

One rig is in cold storage...drilling activity is picking up a LITTLE BIT according to management...

 

If the 2nd rig can be put back into operation, AWLCF would certainly spike higher....

 

What are the odds?  1 in 10?  1 in 5?

 

I still think this is an interesting speculation on higher oil prices.

 

UK market is still oversupplied. Slide 14 kind of spells it out. Ideally one of the big players should be scrapping rigs. But things will eventually even out. 7 rigs will be out of contract by the end of this year. Leaving just 5 with firm contracts at the beginning of 2018, which would put us at parity in today's market. So really, this thing will really start to turn around once you see scrapping take place. Plus side for the WilPhoenix is the contact expires late Feb 2018, which if the rest of the 2017 fleet gets cold stacked, puts it in prime position to pick up additional seasonal work in 2018 when we should see day rates rising.

 

Other plus side, which they mentioned in the call is lots of M&A E&P activity in the UK North Sea, which is certainly a good thing for drillers. I'm wondering if they will be active again in trying to pick up rigs on the cheap or if they'll be looking to sell out during the next upcycle. Seems like it could go either way...

[LongTerm]

For anyone still following this, looks like they have signed a 3 year follow-on contract for WilPhoenix beginning when current contract ends in April 2018. Day rate about $117k, up from the trough of earlier this year but still way off of highs 3 years ago.

 

http://cws.huginonline.com/A/147077/PR/201709/2135796.xml

[DTEJD1997]

I still have my Awilco shares.

 

This is indeed good news! 

 

Now if they can just get their other rig some work...

[fareastwarriors]

I still have my Awilco shares.

 

This is indeed good news! 

 

Now if they can just get their other rig some work...

 

Yay!

Only down 80% now  :D :'( :'( :'(

[valuedontlie]

Has anyone done the math on this new contract?

 

The day rate is $116.7k and opex has been ~$67k per day so $18m per year at 100% utilization. SG&A is ~$2m per quarter and cold-stacking of WilHunter is ~$1m per year so we're at $9m in EBITDA. Interest is around $7m per year and capex $3m so we're running a $1m free cash flow deficit. They have cash = debt right now and will generate some $20m per quarter from 3Q17 to 1Q18 so in theory they could pay the debt down 100% which would leave FCF around $6m annually or $0.20/share.

 

Guess my point is that unless rig opex per day is going down or they're able to contract the other rig, still not a screaming bargain. And the dividend is definitely unsustainable at this new day rate.

 

Anyone else have thoughts?

[DTEJD1997]

Has anyone done the math on this new contract?

 

The day rate is $116.7k and opex has been ~$67k per day so $18m per year at 100% utilization. SG&A is ~$2m per quarter and cold-stacking of WilHunter is ~$1m per year so we're at $9m in EBITDA. Interest is around $7m per year and capex $3m so we're running a $1m free cash flow deficit. They have cash = debt right now and will generate some $20m per quarter from 3Q17 to 1Q18 so in theory they could pay the debt down 100% which would leave FCF around $6m annually or $0.20/share.

 

Guess my point is that unless rig opex per day is going down or they're able to contract the other rig, still not a screaming bargain. And the dividend is definitely unsustainable at this new day rate.

 

Anyone else have thoughts?

 

I am going to guess that we will see the daily op-ex come down somewhat, along with all the other expenses. 

 

Obviously FCF is not going to be anything like what it was before, but there should be something.

 

If oil prices can rise a bit...that will increase the odds of the other rig being leased out.  If that happens, then that is truly a game changer.

 

With the existing lease, no more talk about the company being shut down or going out of business.  The business is viable for the next few years at least.

 

Management at AWLCF is excellent.  They managed to make it through the downturn, and still managed to pay a dividend (reduced).  Look at SDRL and their other competitors.  They went busto....AWLCF has made it through.

[writser]

Has anyone done the math on this new contract?

 

The day rate is $116.7k and opex has been ~$67k per day so $18m per year at 100% utilization. SG&A is ~$2m per quarter and cold-stacking of WilHunter is ~$1m per year so we're at $9m in EBITDA. Interest is around $7m per year and capex $3m so we're running a $1m free cash flow deficit. They have cash = debt right now and will generate some $20m per quarter from 3Q17 to 1Q18 so in theory they could pay the debt down 100% which would leave FCF around $6m annually or $0.20/share.

 

Guess my point is that unless rig opex per day is going down or they're able to contract the other rig, still not a screaming bargain. And the dividend is definitely unsustainable at this new day rate.

 

Anyone else have thoughts?

 

I agree. NPV of current contract cashflow is ~$2.20 per share, NPV of new contract is ~$0.50 per share. $0.20 / share excess current assets for a total of around $3. And that is assuming they cancel all debt quickly. Optional value of rig #2 is not that high given where day rates are. So, you are effectively paying a dollar per share for terminal value in 2021. Probably a bit cheapish but not a no-brainer.

 

If oil prices can rise a bit...that will increase the odds of the other rig being leased out.  If that happens, then that is truly a game changer.

Sure, but if your thesis boils down to "if oil prices can rise a bit" you might as well go long crude oil futures.

[valuedontlie]

My math was the following:

 

Assuming they pay down all debt immediately (i.e. no interest expense)...

 

Current backlog should net ~$20m per quarter through 1Q18 for $60m / $2/share. New contract nets maybe $0.20/share in FCF per year assuming non-100% utilization, ~$67k rig opex per day, and continued cold-stacking of rig #2.

 

Under this scenario you're essentially pay 10x FCF on EV. Yes, they bought 3 years of time to market the other rig but that remains option value at this point. Seems like a pretty fair price >$4/share. Dividend likely goes to less than $0.20/share as well.

[Gamecock-YT]

Keeps the company a going concern. Had to be done. Like others have said allows management to be more judicious in bringing the other rig out of cold-stack. Also continues to reduce the available supply in the UK. With as much M&A going on in the North Sea (most of which is PE) they're going to want to see some ROI eventually.

 

I'm still hoping they can pick off another cheap rig or two during this down cycle. But my gut says they'll probably try selling out this time around.