I have a good sized position in NAO. I suggest you check out the Nov 11th thread on this forum entitled "OT: North Sea oil market news, NAO" for more information. Here's my basic NAO review:
Clean, debt-free balance sheet. 6 contracted ships running, 4 new-builds due in the first half of 2015. G&A costs likely to stay in-check even as the fleet size rises. The current div is not sustainable as-is (it is not covered by the revenues from the 6 ships). Instead it was set to take into account the future income that the new-builds will provide. I think if they contracted just 2 of the 4 new-builds, they could cover the div. Contracts for the remaining 2 would add notably extra coverage, possibly even allow a div raise. Prior dayrates were around 26k, so keep that in mind when contract announcements come in.
I think the stock is a good bet assuming we don't see North Sea active drilling-rig count dropping. Though these ships don't have to operate in that region, it would work out best if they did. If & when NAO starts announcing contracts for the 2 newbuilds in Jan and then the 2 newbuilds around June, the stock should hopefully climb as the great-yielding div first becomes sustainable, and then looks to be "over-covered". They could alternatively use the extra income to further expand the fleet, obviously that could increase risk though if there are any concerns that the number of active rigs in the deep sea drilling market declines and supply ships become too plentiful.
Hope that helped.
Insanity! Approaching 4mil shares traded and the stock price is still in the $3.20's. I think there's 241 million shares outstanding, so basically the market cap at today's prices is under $800 million. Less than the price of 1 new 6th gen drillship.
Where's JF in all this?...
Huff, when Mark mentioned $2, though I felt NADL had more downside I figured a price target that low might be a little bit of sour grapes.. But wow, it got to $2.95 at the low today.
My sympathies to everyone who is still in this one & SDRL :(. I sure hope they turn around after the upcoming ER.
Is it just me, or is yhoo screwed up & filtering every use of "the vowel which isn't i,e,o,u"? Yes I've written this msg not to use the pre-mentioned vowel even once ;)
Agreed that LGCYO seems interesting at least on the surface. So, does anyone here know much about Legacy LGCY, such as quality of management, ability to weather 2015+ if oil prices remain low or fall a little further (how's their hedging?), etc? Looks like LGCY has dropped just as hard or maybe even more so vs. LNCO shares, which isn't exactly encouraging.
Overall that's my philosophy on this one too. The question is how safely is the div covered, particularly given the North Sea drilling climate. Let me ask if you're reading the numbers the same as I am:
It appears the div was set in anticipation of the money coming in from 2015 newbuilds and is not sustainable based on the current working fleet? $.45 div/qtr and 23.4 million shares outstanding = $10.5 mil in divs to pay. Quarterly cashflow (not including the 1 time IPO expense) is $7.5 mil, a $2.5 mil shortfall.
I think dayrates are around $25k-26k? At $25k, each incoming newbuild should gross $2.25 million/qtr.
So after the 2 January newbuilds arrive and begin contracts, chances are the current div will be shored up. Then, when the next 2 newbuilds arriving in mid-2015 begin contracts, there's the potential for div expansion (or, should day rates all get nailed across the board on NAO's whole PSV fleet, at the least allow NAO to continue to maintain over 1.0 div coverage...)
Do I seem to be looking at this correctly?
There was a negative news item yesterday morning on CNBC concerning a North Sea oil company... I wasn't able to catch it but caught a glimpse of a slide showing some Nordic oil companies falling in sympathy.
NAO shares seemed to take a hit yesterday as part of that and are now taking an even larger hit today, but I haven't noticed any news. Does anyone know what's going on? The moves seem too large to simply be in relationship to oil prices, which have only trickled down a small amount in the past two days. Or maybe is this just a delayed reaction to the news on 11/6 about Statoil suspending a couple rig drilling contracts?
Who else here is in NAO? William? Keebon?
And after the close today, a stock many of us are familiar with.. PSEC. Given the contribution from that big one-time-gain event they announced maybe a month or so ago, I'm guessing their numbers today will allow them to get by for another quarter and a few more month-by-month div announcements (taking them towards middle of next year) before their backs could start to be up against a wall for a div reduction. But let's see what they say (cc is tomorrow at 11am EST). I just wish they were operating with more consistency and div coverage. I would love to be back in when they can show this, used to love the monthly high-yield divs.
Another BDC, HTGC, is after close today too. Ranks very well on most metrics for BDC's and I was considering an entry recently but I "made the mistake" of checking out the names of the companies they invest in. A lot of little software/tech companies that I'm familiar with from a past tech career... Companies that were typically struggling and on an eventual decline vs. the promise they had over a decade ago before their tech became less relevant. Maybe they've re-invented themselves, dunno, but it's hard to get past old dealings & prejudices.
Mark, all good general points. Regarding NYMT specifically though, have you taken a look at today's ER and do you have any concerns in practice?
Some of the income is indeed booking one-time gains on asset sales, though it seems like some of this is within the usual course of business for them. Though I'm hesitant to buy at these levels, I'm considering topping off the rest of my currently-partial position depending on what the price does in coming days. AI & NYMT are the only 2 mREIT's I'm in by the way (and no plans to add any others).
Looks like AI is indeed following the same pattern as last time so far... Actually got down almost 30c today on no volume. Again it's like no one even noticed the ER. Could be a good chance right now for those who want in or want to increase their shares... I topped off my position to max this morning.
The stock now seems to be coming back as I type, only down 4c. Remember last quarter, after a few days this one took off.
Good luck all.
Looking good. May top off my position in the coming days depending on the price action. Have a big enough allocation that I'm fine either way. AI continues to feel like an undiscovered gem.
Thought no guarantee of how the stock will act this time... The last ER was a pretty big positive blowout but I think the stock actually trickled down in the days that followed it, before starting a march higher. So there's some precedence that you might be able to first hear the ER results before making a purchase decision, without the stock running away from you.
Mark, with regards to: "The interesting issue is with the Saudis as they have now switched their position on supply, now cutting supply..."
Are you basing this on the number mentioned the other day showing the Saudis had a 300k barrel reduction? If so, FYI there was an oil analyst today who said the number was misinterpreted, it didn't go towards the Saudis reducing production. It actually went towards the Saudis simply putting the oil into storage rather than immediately selling it (or something along those lines).
Note that of the companies reporting earnings as of yesterday (35%), I think 69% have beaten guidance. It's not just a few standout companies reporting good earnings. And now lower oil will be a tailwind for most companies for the next quarter. Obviously not for the oil stocks themselves though which the vast majority of us own :(.
Huff: Ha, I started on a reply to Mark before your reply was posted.. Looks like we independently said a lot of the same things, including asking him to consider selling puts ;). GMTA
Ok, so having separated making a decision on how to treat the current position vs. buying a new call spread... Next up is trying to figure out where your convictions lie regarding where Yahoo will be in a month. Without some conviction, then it might be prudent to get out of the whole trade at or near break-even. Two of the 3 stock directions (down, and sideways) will hurt you so the odds are essentially against you all else equal. That said, it's not all equal as BABA is on a tear & next week more analysts come out with ratings, so one *would think* there will be a propensity for BABA to continue up and gently carry Yahoo with it. Dunno, I don't touch Yahoo (but I am in BABA, both stock & options).
Side note, you probably know the extrinsic decay isn't linear. As a big generalization, extrinsic will start a deeper decline somewhere around 3-4 weeks out from ex. Also, take a look at the premiums for the Oct31 $43's for today, Mon & Tues. That will give you a sense of the extrinsic as you approach/enter the week of Nov22 expiration. Looks like you'll essentially shed $1/sh in extrinsic in the next 3 weeks from today.
Options are like a big toolbox (some of which are dangerous power-tools ;)). Another tool you could consider if you think Yahoo's bias is at least sideways, if not up: sell some cash-covered naked puts. Ex: you could sell the Nov22 $43 Puts right now for $1.37. Now time works in your favor and you make $$ on "sideways" or even "trickle down". B/E of $41.63, any closing value above that on Nov 22 is profit, but you are capped at $1.37/sh profit if YHOO is $43+. However, if YHOO is below $43 you'd have to be prepared to own the shares (at $41.63). In reality though, you would more likely roll out when Nov22 approaches, so you never have to hold the shares, and now time works in your favor again as you'd get a fresh new infusion of time-premium that again will tick away towards your January catalyst.
I could ramble on & on ;).
My 02c for what it's worth... I think it's important to differentiate between the 2 concepts in your post. One question is how might it be best to wrap up the position you are currently in. You can either sell the calls when you think you're at/near a high (intrinsic+extrinsic), or depending on how the options prices look at that time you're ready to sell, maybe create a new spread by shorting calls that have a strike at or very near the money and are "full of extrinsic", if you think the stock price won't fall more than the value of the short call by the time expiration arrives. Re-spreading can require some added management when you actually get to expiration if the stock price is between or below the 2 strikes in your spread.
The other, *completely separate* concept is if you think buying a new Feb Yahoo spread is a good idea right now. It has nothing to do with your decision about the long Nov's you currently own. If you think Yahoo is going higher in coming weeks, then it might make sense to buy a new spread sooner rather than later, but then if you had that opinion, you wouldn't be looking to sell your current Nov $43's right now, correct? (Or do you have an early Nov expir, there are 4 Nov ex's?). If instead, you think Yahoo will tread water or even pull back in the near term then why get into a new spread now? You could buy it cheaper in the future when some of the time premium has bled off (not to mention the intrinsic if the stock drops).
Long story short.. Unless you feel there is big headline risk to the upside such that you need to have a continuous long/bullish position on Yahoo every day or you "might miss it"... There is no need to immediately buy a new, potentially more expensive call spread at the same time that you sell what's left of your old one (aka the "mental concept" of rolling). Now, if you had a short/bear position, that's different, because then time-decay works in your favor.
What form(s) of insurance would you be most likely to use? If long Puts, would you buy them against your individual holdings, or something broader?
Sorry, I hit "Post" too quick. Meant to thank Ed for LRE & his thoughts.
Huff, thanks as well. I listened to the SLB CC by the way but in the case of LNCO it didn't feel correlated enough (unless SLB had made more polarizing statements than they did). I didn't feel like they were ruling out $70's WTI and I just wonder how Linn's dist coverage would hold up for the long term given they are roughly 55% hedged, have a lot of debt, etc. I felt a little better about Brent long term though and I wonder what percentage of LNCO's production is now priced at Brent thanks to the latest deal for more CA assets.
If we could just get the darned U.S. export restrictions lifted... ;)
I'm thinking more along the lines of buying some temporary protection in case WTI decides to test into the $70's. If it does, I would think LNCO could go sub-$20 or at the very least get back to $20, considering it got down around there recently at an oil price a lot higher than $70's.
If anyone knows offhand, it would still be helpful to know some of the earliest U.S. E&P reports coming up.