Yeah, the oldsters here might recall that NE tried an inconsistent special dividend approach a few years back. They issued one or two (can't recall which) , attracted some yield-seekers, and then quit the program. That did not end well, the investors they'd attracted bolted. We gave up more PPS than we'd gained. A painful example of mgmt not getting who their investors were and what they wanted.
I agree w Turbo (in several ways) re debt. While personally allergic to debt, I think it's prudent for corporations to have some in their capital structure, especially when the Feds are holding rates at these levels. I don't have a big problem with NE's level of debt. But I will acknowledge that it's unfortunate that so many drillers had the same idea (borrow and build) at the same time. In time I think it works out, but we're having some pain till that comes clear.
drwiggin, IMHO, I feel that special dividends are the worst deployment of capital, well behind stock buybacks...and Williams addressed this as well maybe a year ago...My own opinion is the stock never really keeps the floor you think it should with uncertainty on the payout...the debt really is not all that bad, geez, if you can't handle some leverage then I don't know what to suggest...and I am old school about balance sheet integrity and NE's is still within my comfort zone...Bernanke was giving out free candy, so take it...I have like prudently leveraged closed end municipal bond funds too (opportunisticaly)...Use the free money these morons are handing out.
Thanks for the personal attack. It shows your ability to have a discussion, but I will try anyway to address your points.
As for modernizing the fleet, I am not opposed to newer rigs with different capabilities. But I would have done it slower, used cash from continuing operations to fund it and kept the debt lower. I would have suspended the dividend to to it. Dividends are continuing obligations. Bonus payments or special dividends are better. Just because the money is available for borrowing, doesn't mean you have to borrow it.
As for the changing nature of the market, maybe it isn't changing all that much. As we have recently heard, shallow rigs aren't getting cold-stacked, they continue to operate.
As for me being upset regarding the stock, well, the directors you love so much have kept the stock price flat the time the DJI has gone from 11,000 to 16500. Not too impressive. Do I really want to sell now? I think not.
As for the windfall, the directors are going to get shares of 2 companies. That is how these things work. Wink-wink and they get their shares. Some call it the cost of doing business. Those shares will be sold the first chance they get. Do you believe otherwise?
Chute/Petro, anybody...What is the best comparison to what is expected to be the fleet of Paragon? ( I am not familiar with HERO)...TIA
I have a general comment about refurbished rigs...nobody seems to care, the analysts would rather have you rotate the stock like people trade-in cars, but Williams has said a few times in the past the revenue brought in through working the rig cost/benefit exceeds taking a fire sale price.
BTW, NE can go ahead and skyrocket now since I have probably finished my buying a couple of days ago..LOL
Thanks for making my misspelling of "insight" into a pun...haha.
They certainly aren't giving HERO the benefit of the doubt though taking it down 3% right now.
I guess I shouldn't be surprised given that they drubbed NE after a good report as well.
I just bought some HERO as they've knocked it down to this years lows where it seems to be forming a base.
Well, they've been pretty successful at inciting some downward pressure. Having said that, it seems like we are bouncing (yet again) away from sub-30 levels. I sold some 29.50 puts this Monday, based on that thought.
I will scuttle back to my cab hole with that 18 cents and keep waiting. I think this weakness is overdone and will let up, but it may take a while.
Hero reported a good report....beating expectations. They also put a stacked rig back to work (Hercules 209) and signed another rig at the same dayrate. They characterized GOM pricing as stable. Where's the apocalypse analysts predicted? I guess they have more incite sitting in an office in New York then the companies do ;)
You are crazy. They are not anywhere close "to the edge" financially. Since you know all the answers, how would you have gone about modernizing their fleet (esp in light of the changing nature of the market)? Borrowing rates are at 50 year lows and still you opine that it's not wise to borrow to reinvest in the business. In your world it must be magic that keeps a drilling operation at the forefront with no need to reinvest in the most modern/efficient equipment. And how exactly do you connect the spinoff with the directors receiving a windfall? My guess is you are invested and down a boatload of money. If that's the case you should sell your shares since it's clear you have no idea how a business like this runs. Cheers!
In 1945, Arps, then a 33-year-old petroleum engineer for British-American Oil Producing Co., published a formula to predict how much crude a well will produce and when it will run dry. The Arps method has become one of the most widely used measures in the industry. Companies rely on it to predict the profitability of drilling, secure loans and report reserves to regulators. When Representative Ed Royce, a California Republican, said at a March 26 hearing in Washington that the U.S. should start exporting its oil to undermine Russian influence, his forecast of “increasing U.S. energy production” can be traced back to Arps.
The problem is the Arps equation has been twisted to apply to shale technology, which didn’t exist when Arps died in 1976. John Lee, a University of Houston engineering professor and an authority on estimating reserves, said billions of barrels of untapped shale oil in the U.S. are counted by companies relying on limited drilling history and tweaks to Arps’s formula that exaggerate future production. That casts doubt on how close the U.S. will get to energy independence, a goal that’s nearer than at any time since 1985, according to data from the U.S. Energy Information Administration.
drwiggin, I would also note that looking at the intraday short term bars (I'm looking at 2 minute bars) the green bars are persistant and have more volume than the red bars. This suggests to me that someone is quietly accumulating. I think this means that we may be testing out the higher price zone (30.40 and above) from the selloff day post earnings. You never know for sure, as sellers can come out of the woodwork when price goes up.....that's just the nature of stocks that are strongly out of favor. We'll see, but my guess is that the constant selling in NE for months now may be wearing itself out and that we'll see either stabilization of a weak rally (which would mean say up to 32) Just some thoughts.
Pis---So depressing to feel totally helplesswhen it comes to the fixed game. a PE of 9 and stock is treatede as if the pee was 500. Like I said depressing.
One more transocean update:
Sedneth 701 - The rig sustained damage from a galley fire. The company has decided to divest the rig and has classified it as held for sale.
Transocean CEO Steven L. Newman was overheard yelling during the subsequent crew meeting, "Dagnabbit Cookie, that $311,000 dayrate is coming out of your paycheck"!!!
Wood, IMHO, it seems as if some feel the value of the rigs less accumulated depreciation is overstated on the balance sheet and thus tangible book value is overstated and by extension the future revenues derived from the legacy rigs will be lower as a result.
NE is 40% down from the 52 week high, earnings beat by 41%, the analyst were clobbered, top and bottom.
What do you get when a bully on the playground get beat by a smaller kid in a game? He becomes a bully and beats up on the smaller kid.
So...The "analyst" were beat by a smaller kid, big time, and now they are seeking revenge. The 'analyst' cannot support a company when the company does not play the game of "insider" info so they can look "smart".
Most of the "analyst" have moved down EPS and one below $3.00 for 2017.
NE is totally out of the hands of investors and in the fiber optic cable controlled by traders.
It might be best to close up shop for a few months and see just what happens come July.
I meant to give the message a thumbs up. I hit the wrong button in my haste. Can I correct that??
Jefferson Research and eva Dimensions give the stock a buy. Excellent dividend!! I bought shares yesterday. Stock is quite close to its 52 week low and just had an outstanding quarter!!
Can anyone explain to me why all the expert analyical minds out there continue to predict doom and gloom for the drilling industry? I do not see any diminished demand for gas and oil. So there are more rigs drilling for oil---is it sitting idle in tanks somewhere or is it being used?
NE has never been a darling stock of wall street in the sense that it isn't very volatile (like DO). I'm not sure WIlliams is the issue. Why would you vote to get rid of a CEO that has been running the company pretty damn good recently? Only time will tell of course, but I think NE has taken probably the best balanced approach they could have considering the changing nature of the market. His comments re upcoming free cash flow and the spin off are really the only things this guy can do to try and bring value back to the stock holders. I picked up some more NE after the CC when it traded below 30 and will sit tight. Yes, there are a lot of risks in this stock/industry, but IMO these guys seem to me to be managing it well. GLTA