plato1976 Posted November 27, 2014 Share Posted November 27, 2014 You never know, if oil stays at 60-70 for a long time it will be very distressed Nice idea Yes, fleet price with some discount and then minus debt may be the best way to have a conservative estimation on the entry to this distressed asset Wow, Seadrill, NADL news is decimating this entire group today. Anyone around in the mid 80's (or not) know of any rules of thumb for bottom of cycle p/b ratios in this industry? I think you're looking at it the wrong way. Figure out the market value of their ships. Then figure out if the stock is trading at a discount to the sum of the parts. George Economou does this arbitrage all the time. Awilco is a distressed asset? I think that is a bit extreme. Contract drilling is a cyclical business, and they are entering a trough in the cycle. Link to comment Share on other sites More sharing options...
JAllen Posted November 27, 2014 Share Posted November 27, 2014 Fredriksen's MO is to dividend out all of the earnings of his companies, then when turmoil hits, he recaps them at advantageous terms and/or injects capital into whichever sub-sector of the shipping industry is collapsing. He is, of course, quite a few steps ahead of every one else in the business. But I would expect that SDRL is looking to take advantage of attractive opportunities here actually. He knows that if he cuts entirely the dividend, the stock will sink so he can buy more. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted November 27, 2014 Share Posted November 27, 2014 It seems that the macro situation got a little ugly recently due to: 1- Drop in oil prices. Though oil prices may recover in the future. It may depend on whether or not you think that shale oil production will keep prices down. 2- US sanctions on Russia. Certain projects look like they will be put on hold, e.g. all of Exxon's projects in Russia. I don't know how much this impacts world supply/demand for rigs. Fredriksen's MO is to dividend out all of the earnings of his companies, then when turmoil hits, he recaps them at advantageous terms and/or injects capital into whichever sub-sector of the shipping industry is collapsing. He is, of course, quite a few steps ahead of every one else in the business. Him, George Economou, and many of the shipping CEOs strike me as shady. I dislike this industry. Link to comment Share on other sites More sharing options...
constala Posted November 27, 2014 Share Posted November 27, 2014 Those div cuts/suspension by over leveraged rivals Seadrill and NADL offer a decent entry point in Awilco, which has a stronger balance sheet, a skillful owner, however certainly more operational risks with just 2 rigs- but this concentration also means added focus and motivation to secure decent contract renewals. Also UK North Sea with harsher environment and stringent UK regulation offers some form of barrier to entry. At NOK 86 it looks a fairly decent risk/reward proposition. Link to comment Share on other sites More sharing options...
roughlyright Posted December 5, 2014 Share Posted December 5, 2014 I know that Seadrill is a different company with lot of more debt load. I am not sure whether the comparison to Seadrill is relevant.But does anyone here think that Awilco will cut its dividend? Link to comment Share on other sites More sharing options...
siddharth18 Posted December 5, 2014 Share Posted December 5, 2014 I know that Seadrill is a different company with lot of more debt load. I am not sure whether the comparison to Seadrill is relevant.But does anyone here think that Awilco will cut its dividend? By "cut" do you mean - being able to, but choosing not to pay - the dividend and hence hoard cash? Or by "cut" do you mean will it go down in the coming quarters? About the first I don't know, about the second...it can be modeled pretty easily. It definitely won't stay at $1.15/share for the next few years. Link to comment Share on other sites More sharing options...
GregS Posted December 5, 2014 Share Posted December 5, 2014 I know that Seadrill is a different company with lot of more debt load. I am not sure whether the comparison to Seadrill is relevant.But does anyone here think that Awilco will cut its dividend? By "cut" do you mean - being able to, but choosing not to pay - the dividend and hence hoard cash? Or by "cut" do you mean will it go down in the coming quarters? About the first I don't know, about the second...it can be modeled pretty easily. It definitely won't stay at $1.15/share for the next few years. siddharth18 is right. It's best to think of Awilco's dividend policy as a variable dividend policy. They committed to paying out substantially all of their FCF after a cash buffer and Capex. So this isn't a situation where they are paying 50% FCF and the question is whether they can maintain that. Anything but a nominal drop in FCF should be expected to affect the dividend. Read through this thread and there's been plenty of discussion of how to model Awilco's FCF and dividend going forward. The upcoming yard stay for their rigs alone will result in at least a temporary cut. Operational risks could certainly impact future cash flow. Future day rates for new contracts will be the biggest factor once current contracts run off. Whether Awilco changes their policy and decides to hoard more cash is hard to say. While I suppose it is possible, they've said nothing to indicate that. They've also left open the possibility of seeking growth opportunities. Given where the rig market is at the moment, I would expect they are looking at possible acquisitions but I can't handicap the odds. Link to comment Share on other sites More sharing options...
saltybit Posted December 8, 2014 Share Posted December 8, 2014 New post from OTCAdventures http://otcadventures.com/?p=1512 Link to comment Share on other sites More sharing options...
DTEJD1997 Posted December 9, 2014 Author Share Posted December 9, 2014 I have to agree with Dave over at OTC adventures. I think Awilco is WAY oversold. That is, if you think we are going to be using oil in the near future... One thing the market is not taking into consideration is possible disruptions in oil supply from Iran, Russia, ISIS or who knows? Trouble from Russia or the Middle East could spike oil prices very quickly. Back in 08 oil went from $140 to $40 to $100 in the space of a few months. One mistake I made was focusing too closely on Awilco. It has solid, quality contracts and a GREAT balance sheet. This is all well & good! HOWEVER, the mistake was not calculating that no matter how good/solid an individual company is, they are going to get hammered if the whole sector goes down. Awilco is my largest position. I will be adding further before the end of the year... Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted December 9, 2014 Share Posted December 9, 2014 One thing the market is not taking into consideration is possible disruptions in oil supply from Iran, Russia, ISIS or who knows? Trouble from Russia or the Middle East could spike oil prices very quickly. American companies with oil projects in Russia have to halt their projects. So this reduces the worldwide demand for rigs somewhat. Link to comment Share on other sites More sharing options...
Palantir Posted December 16, 2014 Share Posted December 16, 2014 Which brave souls are still holding? Link to comment Share on other sites More sharing options...
jschembs Posted December 16, 2014 Share Posted December 16, 2014 i just purchased a starter position, against my better senses... Link to comment Share on other sites More sharing options...
Libs Posted December 16, 2014 Share Posted December 16, 2014 Still holding, bought at $14. At least there's this: <The Board approved a dividend distribution payable in Q4 2014 of USD 1.15 per share. The share will trade ex-dividend on 18 November 2014, the record date is 19 November 2014 and the payment date is on or around 19 December 2014.> Link to comment Share on other sites More sharing options...
shhughes1116 Posted December 16, 2014 Share Posted December 16, 2014 I'm still holding...painful to say the least! Link to comment Share on other sites More sharing options...
siddharth18 Posted December 16, 2014 Share Posted December 16, 2014 I sold out two weeks ago (around $11.75), booking about a 10% loss, which is all the more painful considering I was up about 50% at one point. I feel silly looking back at the blue sky (not too long ago, when PPS was $25+) when I thought the majority shareholder will get sell the company at the top of the cycle. They did sell...but only their stake - and that should've been my first clue, if not writing on the wall that the smart money is looking to sell around $20/share, not buy or even hold. For me to hold at this price, I must have confidence that these rigs won't be cold-stacked or that the cycle will turn before the current contracts are up and I simply don't. The Hess decommissioning work offers some safety, but not as much as I seek. I simply don't understand if/when/why the cycle will turn. If there's $6 worth of contractually guaranteed EPS for this company, is paying $10 (don't forget $3 worth of debt) worth it when you don't know how north-sea is going to look like after the next few years? More rigs coming online, shale apparently imposing a price ceiling and no price floor apparently in sight. While north-sea won't have a glut of rigs due to the regulatory and physical constraints (moving a rig costs tens of millions), if UDW rig rates are going to get pinched, then wouldn't north-sea midwater semi-subs follow suit ? Maybe someone can correct me if I'm being too gloomy but it's not like we have a wildly asymmetric payoff if things work out here anyway. If you are of the view that oil price recovers quickly, why not buy LEAPs on some of the more levered drillers like SDRL? My 2¢ Link to comment Share on other sites More sharing options...
SwedishValue Posted December 16, 2014 Share Posted December 16, 2014 Well one thing that bodes well for Awilco is their OPEX-structure. Compare Awilco to any other listed drill operator, and it looks like their breakeven rate would be around 30-40k USD less than that of other operators (meaning the be rate for Awilco would be around 140-150k USD/day). Link to comment Share on other sites More sharing options...
NoCalledStrikes Posted December 16, 2014 Share Posted December 16, 2014 I'm out. Right now, it is too binary for me. If no rig gets stacked, I think you'll do ok now even at a significantly reduced day rate, but if one does get stacked you lose. Probabilistically, you would probably do with a hundred positions like this, but I don't carry that long a list, so I generally don't do binary plays. I got too greedy and didn't lighten up enough when the stock was doing well. I also took too long to appreciate the significance of the insider selling. My once large gain went to no capital gain, but I did collect a rather nice dividend for the year... On the plus side, watching AWILCO crumble encouraged me to sell my other energy holdings in November before they declined much. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted December 16, 2014 Share Posted December 16, 2014 Well one thing that bodes well for Awilco is their OPEX-structure. Compare Awilco to any other listed drill operator, and it looks like their breakeven rate would be around 30-40k USD less than that of other operators (meaning the be rate for Awilco would be around 140-150k USD/day). I commented on this on OTCAdventures but I don't think you can call them the lowest-cost operator since rigs are highly differentiated and their rigs likely have some of the lowest demand for their services. This industry was producing excellent ROIC due to a similar cycle that occurred 15 years ago. With the glut of rigs there's not much reason to believe that ROIC will be anything near double-digits in my opinion. Link to comment Share on other sites More sharing options...
Hielko Posted December 16, 2014 Share Posted December 16, 2014 i just purchased a starter position, against my better senses... Given the negativity here I think you might have picked a good time. FWIW: I'am long, recently added to my position, but it isone of my smallest positions Link to comment Share on other sites More sharing options...
SwedishValue Posted December 16, 2014 Share Posted December 16, 2014 I have a position. It is my smallest position, but I have only five positions fwiw. I think it's satisfying to note that whereas I lost around 40% in my local currency on stock the depreciating, I have recouped half of that in dividends, holding the stock throughout the worst 8 month turmoil in the oil rig business in a very long time. Link to comment Share on other sites More sharing options...
SpecOps Posted December 17, 2014 Share Posted December 17, 2014 I'm still long here, really annoyed I put in a sell order a few cents above the share price at the peak when I wanted to sell it, and it never got hit and is down 45% since then. That'll teach me a valuable lesson in being greedy for a few cents. At these prices though I think risk/reward is attractive, but only a small position for me. Link to comment Share on other sites More sharing options...
siddharth18 Posted January 13, 2015 Share Posted January 13, 2015 http://oilpro.com/post/9507/now-ultra-deepwater-rig-contract-cancelled-early-drilling-dominoe http://www.offshoreenergytoday.com/camac-considers-legal-options-against-northern-offshore/ Link to comment Share on other sites More sharing options...
Gamecock-YT Posted February 10, 2015 Share Posted February 10, 2015 Nice article in the financial times today about decommissioning in the UK North Sea. Among the highlights: Oil & Gas UK, the industry’s lobby group, believes that between 2014 and 2023 oil companies will spend £14bn plugging North Sea wells and removing infrastructure. Wood Mackenzie says that spending on decommissioning will exceed that of developing oilfields in the North Sea from 2022. Most decommissioning costs can be deducted for tax purposes. Link to comment Share on other sites More sharing options...
zippy1 Posted February 12, 2015 Share Posted February 12, 2015 Quarter out. The presentation is kind of interesting. http://hugin.info/147077/R/1894041/671335.pdf Link to comment Share on other sites More sharing options...
GregS Posted February 12, 2015 Share Posted February 12, 2015 This was interesting Timing of Return to Higher Activity Levels is Uncertain •Significant market change during the quarter due to sharply falling oil price •Prompt reaction from Operators with reductions in current and planned expenditure •Continued low level of rig contract activity in the UK •Hints on potential stimulus /tax treatment from UK government but nothing confirmed •Increased number of available rigs expected to last through 2015 and 2016 •The UK market still has barriers to entry •Globally, some increase in mid-water Semi Submersible rig attrition programmes •Accelerated market downturn leads to increased uncertainty with respect to the market recovery They also noted up to 6 rigs available for new contracts during 2015. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now