AWLCF - Awilco Drilling

[DTEJD1997]

Hey all:

 

Anybody still own/watch this thing?

 

Brent is just under $70/barrel today.

 

If that rate sticks around, OR even goes higher, then i would think rig day rates would go up along with demand for them.

 

If that is the case, AWLCF might do reasonably well.

 

Their balance sheet is in good shape...they've got good management...they've got a rig in cold storage.

 

With firmer crude pricing, good things could happen here?

[valuedontlie]

I still own a small amount... still stand by my previous comments around run-rate EBITDA (~$8m) / FCF (~$0.20/share) under the new rig contract...

 

They will collect higher cash flows as the current contract winds down into 1Q18 and then new run-rate FCF of ~$0.20/share. Beyond that, it's mostly an option on landing a contract for the cold-stacked rig which, as you mentioned, seems to be increasing in value.

[Gamecock-YT]

You are correct, but can't imagine we get a material move in share price until the second rig gets firm work. Will be interesting when the working rig switched to the new contract what they do to the dividend. All the yield hounds might abandon the stock if they drop the dividend.

 

Long term I still think they'll either get more rigs or sell out this cycle. Probably would lean more towards more rigs.

[tytthus]

How much does it cost to bring one of these rigs out of cold storage?  Who bears the cost?  How many warm stacked rigs are available?  I'd hope awilco would only sign a new contract for the cold stacked rig if they can get adequate return after the costs to bring it up to operating level.

[Hielko]

How much does it cost to bring one of these rigs out of cold storage?  Who bears the cost?  How many warm stacked rigs are available?  I'd hope awilco would only sign a new contract for the cold stacked rig if they can get adequate return after the costs to bring it up to operating level.

I think once one of these very old rigs are moved to cold storage it's quite unlikely they will ever get back to work again. Quite expensive as far as I know, and since there is still a big supply of other rigs available...

[Tim Eriksen]

Since the rig was refurbished in 2011 I don't think it is considered very old.  In my notes I had noted a cost of less than $10 million to get it ready.  I would think that was from a conference call but did not note which one, so I cannot confirm.  I would further presume the longer it is cold stacked the higher the cost to get it ready.  I would ask the company.

[Gamecock-YT]

It's been mentioned a few times in the conference calls when they were weighing going warm vs. cold stacked. Off the top of my head, I recall 1,2, maybe 3 million?  But still has to undergo the SPS and I think they need to pay a bit more for the BOP upgrade?

[DTEJD1997]

Since the rig was refurbished in 2011 I don't think it is considered very old.  In my notes I had noted a cost of less than $10 million to get it ready.  I would think that was from a conference call but did not note which one, so I cannot confirm.  I would further presume the longer it is cold stacked the higher the cost to get it ready.  I would ask the company.

Did this rig have the upgraded blowout preventer?

 

I don't the cost would negligible, but it should not be that high as it has been in storage a relatively short time.

 

Even thought the rig was older, it had been refitted relatively recently, so I think they will have a slight edge over other competitors.

 

I see the probability of the rig being put into service as on a sliding scale.  At current oil rates?  50/50 maybe.  At $100 barrel, almost certainly it will go into service.

 

We will see.

[Tim Eriksen]

Since the rig was refurbished in 2011 I don't think it is considered very old.  In my notes I had noted a cost of less than $10 million to get it ready.  I would think that was from a conference call but did not note which one, so I cannot confirm.  I would further presume the longer it is cold stacked the higher the cost to get it ready.  I would ask the company.

Did this rig have the upgraded blowout preventer?

 

I don't the cost would negligible, but it should not be that high as it has been in storage a relatively short time.

 

Even thought the rig was older, it had been refitted relatively recently, so I think they will have a slight edge over other competitors.

 

I see the probability of the rig being put into service as on a sliding scale.  At current oil rates?  50/50 maybe.  At $100 barrel, almost certainly it will go into service.

 

We will see.

Did this rig (WilHunter) have the upgraded blowout preventer? No based on reviewing the Q3 and Q4 2015 presentations.

You are right that mgmt mentioned around 2-3 million.  I was being conservative; however, I forgot that they did not do the SPS which could add 15-20 million.  The BOP would be another 20 million.  Assuming WilHunter's needs are the same as WilPhoenix.   

[Gamecock-YT]

Since the rig was refurbished in 2011 I don't think it is considered very old.  In my notes I had noted a cost of less than $10 million to get it ready.  I would think that was from a conference call but did not note which one, so I cannot confirm.  I would further presume the longer it is cold stacked the higher the cost to get it ready.  I would ask the company.

Did this rig have the upgraded blowout preventer?

 

I don't the cost would negligible, but it should not be that high as it has been in storage a relatively short time.

 

Even thought the rig was older, it had been refitted relatively recently, so I think they will have a slight edge over other competitors.

 

I see the probability of the rig being put into service as on a sliding scale.  At current oil rates?  50/50 maybe.  At $100 barrel, almost certainly it will go into service.

 

We will see.

Did this rig (WilHunter) have the upgraded blowout preventer? No based on reviewing the Q3 and Q4 2015 presentations.

You are right that mgmt mentioned around 2-3 million.  I was being conservative; however, I forgot that they did not do the SPS which could add 15-20 million.  The BOP would be another 20 million.  Assuming WilHunter's needs are the same as WilPhoenix. 

 

They went ahead and purchased the BOP for the idle rig. So while I'm sure there's sizable costs associated with the installation, the replacement process as a whole is hopefully mostly paid. This from the 1Q16 transcripts:

 

Jon Oliver Bryce

 

Let me just elaborate there. When I talked about that – I talked to one of the previous callers about protecting the company in terms of expenditure and CapEx and the WilHunter has completely come to a stall and we are not going to do the SPS until we have the site of new work and demand the crew to save on OpEx et cetera. We’ve always done all these things to help protect the company. But as Ian just said there are some cost with the WilHunter BOP even though we are not going to install it and we took a view last year should we cancel WilHunter BOP and we decided not to because the new BOP is vital from acting the rig going forward and also the way that the cancellation cost work, it wasn’t worth doing, so we are still taking delivery of the new BOP. The WilHunter will be store and preserved and that will be used at some point in the future. So that’s only exception to not spending CapEx. That was a sensible decision to continue that the new BOP and store it already for the [indiscernible] WilHunter.

[jhcap]

Awilco finds work for WilPhoenix.

 

http://splash247.com/awilco-drilling-finds-work-semi-submersible/

[Gamecock-YT]

Just seasonal work that they would've been hot stacked waiting for the new contract to start. $120k day rate. The interesting bit that hopefully they clarify on the next earnings call is I think these 115 days will go into when they were supposed to start the new contract, so not sure if it's getting pushed back or what? Their last deck showed the Apache deal running off in late April and the new contract starts the beginning of May. 

[writser]

https://finance.yahoo.com/news/awilco-drilling-plc-contemplated-private-154901675.html

 

Awilco Drilling PLC (the "Company") is contemplating a private placement of new shares with gross proceeds in the amount of USD 65 million directed towards Norwegian and international investors (the "Private Placement"), subject to applicable exemptions from relevant registration, filing and prospectus requirements. ABG Sundal Collier ASA, Arctic Securities AS, and Fearnley Securities AS have been retained as managers (the "Managers") for the Private Placement. An investor presentation prepared for the Private Placement is attached hereto.

 

The subscription price will be fixed at NOK 29 per share. The net proceeds from the Private Placement will be used to part finance the equity requirement for the building of a new semisubmersible drilling rig for harsh environment use, to be built by the premium yard KeppelFELS in Singapore at a price of approximately USD 425 million, and with planned delivery in 2021. In connection with entering into a Letter of Intent for such newbuilding, the Company has negotiated options to build up to three additional rigs of similar design, such options to be independent of each other.

[Gamecock-YT]

Seems like they got a good deal. Only paying 20% of cost before delivery. Possibility of a rights offering to shareholders as well. Also plan looks like to place the rigs in Norway instead of UK.

[DTEJD1997]

hey all:

 

AWLCF has been pretty strong lately.

 

Rig rates seem to be moving up along with the price of oil.

 

I think they made a good move contracting construction of the new rigs.  Those are still a LONG way away though.

 

I've got to wonder about the price of oil.  Brent crude is about $74/barrel....what will demand for rigs be if/when it is $80?  $85?  $90?

 

If AWLCF's cold stacked rig gets put back into service, that will be a game changer. 

 

If Brent is $85/barrel this time next year, those contracts for the new rigs are going to be worth a whole lot more than what AWLCF contracted them at.

 

With any continued strength in the price of oil, I think AWLCF could do VERY well.

 

Any thoughts?

[DooDiligence]

https://images.rigzone.com/data/dayrates/

(not sure how accurate these day rates are, as there's no citation.)

 

https://www.rigzone.com/oil/data/offshore-rig-search/

https://www.infield.com/rigs/all-rigs

https://www.infield.com/rigs/report-rig-utilisations

(again, not sure how accurate this data is either but MarineTraffic gives AIS info on SOME locations.)

 

http://www.drillingcontractor.org/shell-invests-vito-development-gulf-mexico-46831

(4000 feet of water, it's a start.)

 

https://www.rigzone.com/news/wire/brazils_upcoming_presalt_oil_round_attracts_record_interest-24-apr-2018-154378-article/

(Anyone need their car washed?)

 

http://www.drillingcontractor.org/permian-still-dominates-as-onshore-market-tightens-rig-rates-rise-46635

(When will this paradigm get blown up, and for what reason?))

[DTEJD1997]

Hey all:

 

AWLCF signed a contract with Shell oil the other day for the WilPhoenix to do work on 18 wells. Management thinks the contract will last about 330 days and will be about $39MM.

 

Obviously this is at a much lower rate than previous contracts...but it is good to be bringing in some revenue.

 

Now if they can just get the other rig out & producing income, they will be on their way.

 

With oil at $80+ per barrel, I would think they have a chance.

[Gamecock-YT]

I think it is more likely it gets scrapped or sold. I think they said it basically cost $1MM per year to be cold stacked so not exactly a big opportunity cost to just let it sit.

[DTEJD1997]

Hey all:

 

Brent crude is over $80/barrel now.

 

I would think day rates have improved somewhat.

 

I would also think that the odds the 2nd rig get reactivated are better than they were 12 or 6 months ago.

 

Does anybody know if any work on the new rig has actually commenced?

 

Finally, AWLCF seems to be up a little in the last few months.  I think AWLCF is well managed, but it is still obviously highly speculative...but interesting none the less.

 

Any thoughts?

[Gamecock-YT]

Talk about a mind bender of a press release: CEO is stepping down and they’re exercising the option on the second rig with a private placement.

[Voodooking]

Hey all, thought I'd resurrect this post as Awilco Drilling seems to have become pretty cheap again and might be worth another look.

 

On first glance it looks incredibly cheap, if you take everything on the balance sheet at face value.

Stock price: 2.95 NOK

Current Ratio: 14.93

Debt to Equity: 0 (no debt whatsoever)

NCAV: 12.37 NOK (currently trading at 24% of NCAV)

Net Cash P/s: 1.66 NOK

 

However, it's not as easy as that, and this is a pretty gnarly company in a pretty gnarly industry. They own two semi-submersible drill rigs, one has had regular work for a number of years, and one has not, and has been cold-stacked off the coast of Scotland for 5 years. These are old rigs, decades old which have been refurbished over time to attempt to keep them current. They also have / had two under construction in Singapore by Keppel (the world's largest drill rig manufacturer).

 

Where it gets messy is that they have attempted to cancel one of the orders (due 2021) and keep the order in progress for the one due 2022. They are in arbitration / litigation with Keppel regarding the cancelled one, and have asked for a refund of the *roughly* $54 million USD that they have paid so far toward the purchase price.

 

The reason that the financial metrics above look so good is that they have included this $54m "refund" in the current assets under 'Receivables'. I can now tell what you are thinking: "But, what if it doesn't go their way? That figure will surely vanish from the balance sheet?"

 

Well, even if you repeat the above calculations without the Receivable, it still looks reasonably cheap.

Stock price: 2.95 NOK

Debt to Equity: 0 (no debt whatsoever)

NCAV: 3.63 NOK (effectively trading at 81% of NCAV)

Net Cash P/s: 1.66 NOK

 

If you suppose that they have a 50% chance of winning the arbitration / litigation, or that they only recover 50% of their pre-payment costs toward the cancelled rig, then even with that possibility, it still sounds like a bit of a bargain.

Stock price: 2.95 NOK

Debt to Equity: 0 (no debt whatsoever)

NCAV: 7.99 NOK (effectively trading at 37% of NCAV)

Net Cash P/s: 1.66 NOK

 

If you'd like to dig into this a bit more, there is a lot of good information in the press release and IR section of the Awilco Drilling website, and the annual and latest quarterly reports explain things in more detail.

 

In short, the oil industry and in particular drilling contractors seem like an ugly, horrible place to go at the moment. However, there is still work out there at the moment, and still contracts to be won although these will be at a lower rate than a few years ago. As the North Sea (between UK and Norway) matures, there is still a lot of plug and abandonment and associated decommissioning work which will exist for many years to come. If they can successfully cancel / delay their delivery of new-build rigs, they are a reasonably attractive, debt free, low cost provider in a field which will pick up at some point once COVID fades and travel / fuel usage increases.

 

Look forward to hearing any thoughts any others may have.

[SharperDingaan]

Look at PDS - and what happens when shares are consolidated.

They will not be trading at > USD 1.00/share by Sep-24, and shareholders have pre-approved a 5:1 reverse split

 

https://www.precisiondrilling.com/investor-relations/press-releases/press-release-details/2020/PRECISION-DRILLING-ANNOUNCES-RECEIPT-OF-CONTINUED-LISTING-STANDARD-NOTICE-FROM-NYSE/default.aspx

 

SD