AWLCF - Awilco Drilling

[Gamecock-YT]

My first attempt at speaking to scottrade about the dividend resulted in getting completely blown off. But reading about it in other areas, it looks like Schwab has been receptive and shows today as the ex-dividend date.

[BG2008]

It certainly trades like today's the Ex-Date

[siddharth18]

Well according to the company, today IS the ex-dividend date.

 

The shares in Awilco Drilling PLC will be traded ex dividend USD 1.00 as from today, 21 August 2013.

[NoCalledStrikes]

I'm thinking its a safe guess that we all belong to the 17% :)

 

 

Awilco Drilling PLC's 20 largest shareholders as of 1 August 2013:

 

Name                                                  Shares                                            Percentage                                          

Awilco Drilling AS                                  14 633 100                                                    48,73                                         

Euroclear Bank SA                                  2 512 425                                                      8,37                                         

Deutsche Bank AG                                 1 165 668                                                      3,88                                         

Goldman Sachs & Co                                957 990                                                      3,19                                         

QVT fund V LP                                           851 898                                                      2,84                                         

Bank of New York                                     813 940                                                      2,71                                         

Odin Offshore                                           584 884                                                      1,95                                         

Stenshagen Invest AS                              407 905                                                      1,36                                         

VPF Nordea Kapital                                   371 944                                                      1,24                                         

Arctic Funds PLC                                       318 760                                                      1,06                                         

Storebrand Verdi                                       310 310                                                      1,03                                         

JP Morgan Chase Bank                             280 458                                                      0,93                                         

MP Pensjon                                            236 000                                                      0,79                                         

VPF Nordea Norge                                    232 749                                                      0,78                                         

Goldman Sachs Intern                               227 940                                                      0,76                                         

Alcides Holding AS                                  209 000                                                      0,70                                         

VPF Nordea Avkastning                            189 174                                                      0,63                                         

Citibank                                                 185 607                                                      0,62                                         

KLP Aksje Norge VPF                                172 132                                                      0,57                                         

Skandinaviska Enskilda Banken              168 808                                                      0,56                                         

Other                                                    5 200 808                                                    17,32                                         

Total                                            30 031 500                                                  100,00         

 

http://www.awilcodrilling.com/6667-Shareholders               

[Hielko]

Not a safe guess: it could easily be that your stock is owned through euroclear bank, deutsche bank or one of the other financial institutions in that list.

[Olmsted]

Actually, behind my avatar, I am actually Skandinaviska Enskilda Thor Kickass Banken.

[Gamecock-YT]

http://online.wsj.com/article/SB10001424127887323407104579034763362659316.html

 

Crash Grounds Oil Helicopters in North Sea

 

 

 

Looks like those maintenance projects might be delayed further...

[tytthus]

http://www.rigzone.com/news/oil_gas/a/128662/North_Sea_Crash_CHC_Resumes_Super_Puma_Flights

 

not all helicopters are grounded....

[Gamecock-YT]

Here we go again...

 

 

http://www.upstreamonline.com/hardcopy/news/article1334573.ece

 

http://www.tradewindsnews.com/offshore/322729/awilcoeyes-newbuilds (have to login to access)

 

 

Oslo-listed Awilco Drilling is in talks with three Asian rig builders for the construction of up to three North Sea-class semi-submersible drilling units valued at more than $1.8 billion in total.

[BG2008]

This is concerning. Has anyone here spoken to management about these rumors?  An interesting tidbit here.  China Oilfield Services (COSL) bought Awilco Offshore back in 2008 for $2.5 billion.  I wonder if COSL is still operating under Awilco Offshore.  I wonder how much of this is Upstream confusing Awilco Offshore, a subsidiary of COSL, versus Awilco Drilling.  Nonetheless, we need to roll up our sleeves get to the bottom of this.   

[siddharth18]

Here are the articles:

 

 

Three in race for Awilco newbuild semisub rigs

 

By TAN HWEE HWEE and XU YIHE Singapore  16 August 2013 00:00 GMT

Oslo-listed Awilco Drilling is in talks with three Asian rig builders for the construction of up to three North Sea-class semi-submersible drilling units valued at more than $1.8 billion in total.

The drilling contractor is understood to have sounded out the market for a Moss Maritime CS50 design semi-submersible drilling unit capable of operating in the North Sea.

 

Awilco is looking for up to three DP3 semisubs capable of drilling wells to 30,000 feet and operating in 5000 feet of water. They will also be equipped with variable deck load of 5000 tonnes and accommodation for 130 people.

 

Delivery of the three semisubs is targeted from the end of 2016.

 

Awilco currently operates two 1980s-built Pacesetter design semi­subs, which are on charters off the UK.

 

The newbuild order, if confirmed, will signal an extension of its presence off Norway.

 

Awilco chief executive Jon Oliver Bryce downplayed any newbuild possibilities, but said the contractor is concentrating on its two existing semisubs and “evaluating growth opportunities”.

 

However, the company is understood to have shortlisted China’s Cosco Shipyard, South Korea’s Daewoo Shipbuilding & Marine Engineering and possibly Singapore-based Jurong Shipyard for further price talks following an enquiry earlier this year.

 

The trio may have pulled ahead of other competing yards because of their track records in semi­sub construction.

 

Cosco emerged as the strongest Chinese contender, drawing on the delivery of the Island Innovator, whereas its compatriot CIMC Raffles was said to have dropped out due to the multiple delays in delivering three semisubs originally placed by Awilco Offshore.

 

Awilco Offshore subsequently sold out the three CIMC semisubs to China Oilfield Service Ltd, but several members of its management team are now sitting on the Awilco Drilling board.

 

The shortlisted contenders were challenged to matching an asking price of under $600 million apiece for a potential newbuild order on one firm semisub plus options for up to two further rigs.

 

It is unclear if the set budget excludes any owner furnished equipment, but some industry estimates for the high specification CS50 design unit have come in at about $700 million.

 

The newbuild contract is also expected to be premised on 20:80 payment terms or better.

Awilco eyes newbuilds

 

Awilco Drilling is reportedly looking to order up to three North Sea capable semi-submersible drilling rigs.

 

Awilco Drilling's WilPhoenix

 

The Oslo-listed company is said to be in discussions with three Asian shipbuilders, reports TradeWinds’ sister publication Upstream.

The drilling contractor is understood to said to have sounded out the market for a Moss Maritime CS50 design unit.

Cosco Shipyard, Daewoo Shipbuilding & Marine Engineering and possibly Singapore’s Jurong Shipyard are said to be in the running for the $1.8bn deal.

Upstream says the trio have pulled ahead of their competing yards because of their track records in semi-sub construction.

The deal, if it proceeds, is said to be for one firm order plus two options with deliveries set for the end of 2016.

Awilco chief executive Jon Oliver Bryce downplays any talk of newbuildings, but is quoted as saying that the company was “evaluating growth opportunites”.

Awilco currently operates two 1980s-built Pacesetter design semisubs, which are fixed on charters for work off the UK.

[NoCalledStrikes]

Though AWILCO's July rebuttal was a strong no, I agree that the continued raising of the new rig construction issue is unsettling.

 

In the process of looking for more info I stumbled across the following article about a successful Norwegian investment manager courtesy of Google Translate.

 

http://www.hegnar.no/analyser/aksjetips/article740373.ece

Ex-analyst Aasulv Tveitereid and Jørgen Stenshagen the last three years earned 300 million for Sten Egil Hagen investment company. Tveitereid argue that much of the success has been to stay away from oil, with the exception of Awilco Drilling, Finance writes newspaper.

 

article contines at:

http://www.dn.no/forsiden/borsMarked/article2539845.ece

 

 

 

 

[DTEJD1997]

Though AWILCO's July rebuttal was a strong no, I agree that the continued raising of the new rig construction issue is unsettling.

 

In the process of looking for more info I stumbled across the following article about a successful Norwegian investment manager courtesy of Google Translate.

 

 

Good catch, very interesting!  I've personally done well with Awilco and it has grown to be my second largest holding.

 

I am somewhat skeptical of the reports of them negotiating to get THREE new rigs.  Well, technically I guess it is ONE rig and options for two more builds.

 

My preference would be for Awilco simply to manage the two existing rigs and maximize the cash flow....

 

HOWEVER, let us think about this possible scenario:

 

Management probably knows many things that we don't know as investors...Perhaps it is almost certain that the option will be extended for WilPhoenix?  If so, cash flow is going to be EXTREMELY strong.

 

Further, cash flow is going to be going up for sure about $150k a day in late 2014.  That will translate into about an extra $50MM per year in additional cash flow.  That would go nicely towards paying down debt on an additional rig.  The additional incremental cash flow might support purchase of a new rig.

 

Presumably a new rig is going to be cash flow positive on it's own.

 

Could it be that Awilco is likely to have it already placed?

 

What if Awilco can get EXTREMELY advantageous financing?  What if a Chinese yard will build for only 10% down (or even 5%) and carry most of the rest? 

 

There have been rumors the Chinese government is running shipyards at a LOSS in order to maintain employment...Could that be the case here?

 

So far management has been very adept at purchasing the rigs, refurbishing them, placing them, and distributing cash flow.  I just can't see management losing their minds and blowing it all on a foolish building program.

 

If Awilco can get a good price on a new rig, get it financed right, and get it placed, AND MAINTAIN THE CURRENT DISTRIBUTION, why not?

 

Management has a good track record...I just can't see them blowing it all.

 

We will see.

[Olmsted]

Good points DTEJD.  From my own perspective, I can see what the business case may be to lead them to pick up another rig.  My own personal preference is just for thesis simplicity: wait for the yield to compress, then move on.

 

I know this is completely qualitative, but the tone and language they used on the conference call, when they described how they would approach growth opportunities from a shareholder value point of view, give me some confidence that they will be good stewards of shareholder capital.  They expressed the thoughts in a way that those who "get" capital allocation usually do.

[BG2008]

Just got off the phone with CFO

 

1. He stated that there is no truth of the Upstream rumor that they are close to acquiring rigs.  He says that Awilcos look at acquisitions, but they are nowhere near signing a contract with the Chinese yards.  He expressed concerns of the Chinese yard's equipment from a liability perspective.  They prefer South Korean and Singapore rigs.  I pressed him and asked him what would get them to pull the trigger, is it a certain IRR, having a contract in place, cheap financing, etc.  He said that there is a matrix of factors, but the best way to describe everything would be "opportunistic".  From the tone of voice, does not seem like they are interested in buying new builds. 

2. Dividend continuity - He views dividend continuity as very important.  In case they do make an acquisition, they will still want to continue paying a dividend.  Although, he can't guarantee they can maintain 100% of the current amount.

3. Hand off of WilPheonix from Premier to Apache/Tataq - There will be no gap from May to Nov 2014.  If Premier does not exercise its option, they will hand off the rig to Apache/Tataq creating no gap in between.  Premier is subletting the rig and Awilco gets to participate in the delta of the dayrates during the sublease. 

4. Insurance - Each rig is insured for $260mm for catastrophic loss.  There is also insurance in place against (I guess) mechanical downtime with 45 day deductible and up to 120 days reimbursement. 

5. Barriers to Entry - It could cost 120-150mm per rig for existing rigs outside of the UK market to be modified and moved to the UK market.  There will also be a cost of mobilizing the rigs.  Companies need a huge contract in place in order to pay for this upgrade and the mobilization cost. 

6. 2015 Inspection and Cap Ex - Each rig needs about 60 days off time and $20mm (TBD when in yard) of inspection/cap ex cost

7. Competitiveness Vs other equipment in UK market - Believes that their rigs are more competitive than others given their recent upgrades and the contract wins. 

8. Arrival of new equipment/higher specs - At least 3 years out, definitely by the next 10 years.  Will add dayrate pressure on Awilco's existing equipment.

9. What keeps him up at night - Not market outlook but personnel and employee turnovers. 

10. Ability of customers to break contract - He stated that these contracts are firm and the customer cannot back out of them in case of a softer market. 

 

Overall summary - Seems like the Upstream rumors are false (especially given the liability comments regarding Chinese rigs).  Dividends should be safe for the next 2 years unless they make an acquisition.  Also, catastrophe is not as bad as we thought it will be.       

[Hielko]

Thanks for the update :)

[matts]

Thanks BG2008. I really appreciate you taking the initiative and sharing this kind of information and I'm sure others keeping up with the company/thread do as well.

 

 

[DTEJD1997]

BG2008:

 

Excellent work!  This is EXACTLY what makes this board so good.  I thank you and wish I could give you a "thumbs up".

 

What you found out confirms most of what I have heard/concluded.

 

These guys are sharp operators and are not going to do anything foolish.

 

 

[BG2008]

Just want to add color to Point 5 regarding Barrier To Entry - In short, barrier to entry relates to entry of existing rigs outside of the UK market.  There is no barrier of entry to new rigs as New builds will build them to UK specs.   

[Olmsted]

MVP--> BG2008

[siddharth18]

Wow! Excellent post BG2008!

 

So much of the uncertainty regarding the future (within Awilco's control) has been dissipated.

 

FYI for those who didn't read the thesis from an analyst who covers this industry - http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/92071 (comments too).

[DTEJD1997]

I would be VERY surprised if there was any substantial short volume in Awilco.

 

It could be that there is some type of arbitrage going on between Oslo and the shares traded in USA.

 

Perhaps somebody is shorting it as part of a tax strategy.

 

You would have to have a death wish to short a stock with a 20%+ yield that is earning $4/share and has cash flow of $5+ share that is trading for under $20.  A substantial short interest just does not make any sense.  You want to short fraud companies with weak financials.

 

Or maybe they are speculating that is has run up quite a bit and a pullback is immanent, or maybe the yield is not sustainable.  If I were going to short, Awilco would be one of the last ones on my list!

[Hielko]

My guess would be that the short volume is created when people buy Awilco in the US from a market maker. He will buy shares, or already own shares, in Oslo to create the ADR's.

[matts]

Yeah, it's almost certainly "listing" arbitrage. The big players do it all day long (via HFT algos). That is why something like Blackberry is the same value in both the US and Canada.

 

 

[bz1516]

I’m new to this site and this is my first post.  I follow AWILCO and have read all the posts.

 

Most of what was stated from a management contact in a recent post was also stated to me in my recent conversation with management.  The comment about their dividend policy was identical.  However there are some differences and additional color which may interest some that like to get deep in the weeds.

 

I was told their 5 year survey costs would be $25mm as opposed to a previous post where it was reported as $20mm/rig.  Have no idea which is correct, but in the absence of clarification it seems safer to go with the higher number. 

 

I also got some additional color on how they might use a $600mm new build rig, if something like this were ever to materialize.  Normally I would think of a $600mm rig as used in deep water.  However they have no plans at all to go beyond mid depth as deep water exceeds their expertise.  There are however harsher mid depth conditions west of the Shetland islands that would need the capabilities of a rig that would cost ~$600mm.  Such a rig would have a day rate of $425-450,000.  Doing some rough calculation the addition of one such rig would bring DCFPU to around $5.00/share.

 

If they were to buy such a rig they believe, with the backing their company has, they would be able to accomplish the necessary financing that would consist of favorable terms from the yard including back loaded payment terms, as well as both equity and debt financing.  They would reduce, but still maintain the dividend.  It was clearly emphasized there are no plans in place for this and that entering the new harsher environment represented additional risk for the company and they are very risk averse by nature.

 

My take is they evaluated such a situation, but there are no plans at this time to proceed with such a plan.

 

Based on what I see, AWILCO offers an opportunity to earn 17-18% yield over the long term with the current two rigs, as well as some appreciation potential, and a free option for additional growth in rigs that would bring a higher normalized long term yield.