Yeah, wasn't really trying to play "nail you", apologies if it came out that way. I like that you put out options at least for your bearish position. I suppose there could be three options, and you group share dilution and selling assets under the other groups, as they are partial liquidation and partial sale/buyouts....
I have been lurking for some time now on oil, having owned DVN in the 2001-2005 timeframe by them buying up one of my holdings. Complete luck. I had looked at off shore drillers right after the Y2K bust, and that led me to what I bought, as the drillers are too risky to me.
Fast forward 10 plus years, and I started in late 2014 with the off shore drillers again. Glad I passed, to put it mildly. I should have my head examined.
I then migrated back towards DVN, MRO, etc, thinking consolidation is coming. That is why I am now looking at HES. It is instructive. There are all sorts of levers (debt to equity conversions like HERO did), print more shares and sell, etc etc. Common shareholders are last in line.
Consolidation surely is coming, but at what price level? I figured maybe March April would be washout time, but if the Saudis hold the hammed down for balance of the year, boy howdy, it's gonna get ugly.
Besta luck to everyone, regardless of position. It makes a market.
Well, apparently there was a 4th option. They did an offering and diluted. So, it's just not that simple. The oil folks are wily as can be about surviving, which I generally mean as a complement.
Why folks would buy the offering, dunno. Loot at ORIG doing an offering at 7 bucks a share about a year ago... who in their right mind bought that one....but they did. ORIG is under a buck now.
If the the Saudis keep pumping along with rest, the net effect is that returns will be poor to negative, which seems to be your general point. The only thing that really makes E&P's well is higher oil prices. That's up to the Saudis. They sure are bringing the pain, and don't seem likely to blink.
Even if HES got bought out, I'd imagine it will be a stock for stock deal, at low prices for each. I doubt it happens. I also doubt BK. Somewhere in the dull, grinding middle.
Wow. Try mutual funds, more your speed.
Any newbie that quotes book value as a metric is usually amusing for a few posts.
The book value and bonds are related very simply: the bonds are now being discounted because the debt owed cannot be completely recovered / collected by re-possessing the rigs.
They are not general purpose tools like computers, trucks, etc, that can be re-sold upon repossession for some other use. They are application specific, near custom built tools. There is no demand for the rigs right now, with an oversupply.
So book is meaningless, and bond values mean quite a bit.
You should be using crayons, not a keyboard.
Thanks for input, it helps me frame what to buy. Now, can you tell me when? Exactly, please. Ha! Besta luck, still stooging around looking at them...
I am looking at it. Their growth has slowed to basically zero, revenue wise, which is why the PE is so low. But 6-7? Come on....
I think I buy a couple hundred shares at some point soon. I think they pop a little, but then maybe fade a bit, as most biotech investors are growth oriented, not value. But, this management team has proven itself over and over.
Point is, I don't think there is a ton of downside, and some considerable upside over next few years. Oil, there is considerable upside, but still some downside to come...
Look at ATW, down after a reasonably good report. That's because the off shores are trading on future contracts, and that looks pretty grisly...
That likely means you don't know what you are looking at. Read the fleet status report, that's what this stock, and the whole sector is trading on.
Sure. They cut it out of ORIG and other drillers. You seem to use a bunch of different, but familiar names to post the same drivel over and over.
In 2014, he said oil would not go below $100. He's hardly an unbiased observer -- he misses to the high side very consistently -- go figure. So , he's certainly not accurate. Then again, neither is anyone else.
Oil may well go back up a good chunk later in the year. But, even oil at $60 is not going to bring a lot of profits back to the off shore drillers. The profits in this sector are likely minimal for the next several years.
Even if a black swan event drives oil back near $100, the off shore projects take time to re-plan, re-bid, and re-start. Meantime, frackers start poking holes again.
I view the dividend cuts as positive, as it is prudent in this environment. Also, it fits my bias as I am not investing for the income, but for capital appreciation if things turn around.
Besta luck, still circling myself. I figure RDC, NE, then ESV....if any.
I figure if oil bottoms out into March/April, I'll buy some MRO and DVN for sure, still hedging on off shore drillers. I've even looked at a few off shore plays that are not strictly drillers, as there still are platforms to be maintained and serviced out there. I am looking at OII and, believe it or not, BRS.
8K filed on Jan 29th, just saw it.
Snipping from 8K:
Item 8.01 Other Events
The Company also announced that its Board of Directors has eliminated the quarterly cash dividend of $0.10 per Class A Ordinary Share, effective immediately. Additionally, during the fourth quarter of 2015, the Company retired approximately $98 million of outstanding senior notes. The press release is attached as Exhibit 99.1.
And from Citigroup via Barron's.
Article is titled Offshore Drillers: Racing Toward the Cliff -- nice to write articles titled like this when most of them are already 3 feet from hitting the bottom of the canyon...:
and then Transocean (Sell). We lower Transocean’s target price to $6 but note that if their 5th generation assets are completely displaced this cycle, then the enterprise value of the company is swallowed by the debt load.
Howdy my cheesy friend! I hope you make a pile (percentage wise). No skin off my nose!
I still look at off shore some (more focused on RDC, NE, then ESV....ATW is a fine company, but their backlog spooks me, so they are in 4th place -- RDCs backlog looks pretty good, comparatively). If I had to guess, and I am, companies that get bought (if any) might get bought for their contracted backlog, not the rigs. There was a Barrons piece that had Morgan Stanley revising off shore targets downward, and ATW was still something like 12 for a target....I picked it off the SDRL news on Yahoo. They also took RIG down from $12 to $2.70 a share target....this is a stock that was at 170 a few years back. So, the sector sure looks spooky if you take that target seriously.
I also have held off on DVN and MRO, but wish I had nibbled. Oh well. Still trying to time it on oil, but MRO as a spec seems reasonable, as long as you did not bet the ranch and have time to wait it out.
I'm putting the hairy eyeball on GILD too, as it looks stupid cheap, even with renewed competition. You can see my MO -- I always seem to be an ambulance chaser looking at stocks that are down quickly.
At a 120 B market cap, GILD won't triple on you in a year, but it might in 5 yrs. MRO might triple in a year... it all comes down to oil price recovery. On the other hand, Biotech really and truly continues to be a growth industry -- but I think most of us without the expertise should probably just put some in a sector fund.
CRUS was a bit of surprise, bucking the trend on consumer oriented chips. I might look closer, but I'm a techie, and have enough of that type investing bias/position as it is. I was a genius in 1999. Not so much in 2001....ha!
Sunny, gonna hit 80 F or so here in Austin on Sunday. I know, that was not very nice of me...but summers coming, and you will have your revenge.
I'd think this might bring him back. From a Barrons blurb on Morgan Stanley analysts take on off shore (dig the new target for Transocean):
Slorer and Ng cut their price target on Seadrill to $2.50 from $12, on Transocean to $2.70 from $12, and on Diamond Offshore Drilling to $12 from $14.
I wonder if that $2.70 target is really correct. It would put it down there near the esteemed SDRL that you keep trying to tag him on....of course the same article essentially says SDRL will restructure, so maybe it is at zero by then....
We may finally be getting to the point of maximum pessimism in the next few months.
Thanks bag and affirmed, that's about my mindset too. I agree that consolidation will happen, but when and how leaves a pretty big window. I could see some re-orgs driving it. PACD, ORIG, SDRL, all really leveraged. What if a bunch of those rigs are on the market from the banks in BK (worst case)?
I keep holding off, but I figure in the Mar/Apr time frame (total guess, probably miss the turn....) I will nibble on ESV, RDC, NE, or ATW, or some of each....speculations, basically. They each have some nice rigs, and are not as leveraged.
Affirmed is looking at ENTERPRISE VALUE -- roughly what it would take to buy the company at current rates. You assume the debt and the equity obligations, so he (I presume) is adding them.
You seem to be looking at STOCKHOLDERS EQUITY as a proxy for asset values. Not very accurate in this situation, as those rigs are very badly discounted right now.
I can' t see anything being bought out completely and having to assume the debt. Maybe a stock for stock, as affirmed suggested, but I think the game of chicken goes on for a while.
Atwood is not that leveraged compared to some others, but their backlog situation falls off pretty rapidly next year. Atwood might try to acquire (unlikely they could do it) RDC or some such for backlog. Someone acquiring Atwood for the rigs is unlikely. I think folks might buy backlog (for whatever it is worth...), but not rigs. Just guessing....
Good luck to you, still hanging around to bottom fish, eventually. Maybe...probably will miss it. Trading probably makes more sense.
I have been looking at SLB too, but their stock sure retains a premium. I just can't really warm to anything in the sector, which is fortunate for me, thus far.
I think it is because ORIG, PACD, SDRL, and even RIG are already down more than 90% from peak. They fell first and hardest, and, frankly, not that much left to fall as a percentage of peak market cap.
So, on some levels ESV, NE, and others are playing catch up.
I'm not sure it is the dividend completely going away, as that must be assumed, I'd think.
I can see a few fairly obvious things driving them down:
1. Oil whether it is 25 or 30 or 35, it's all too low for there to be any new off shore demand.
2. There is still new capacity coming on line.
3. If someone reorganizes through BK or debt for equity swaps, and can lower their pricing, the vicious cycle of downward day rates continues.
4. ESV still has fairly significant exposure to PBR. And they are breaking contracts.
5. I think NE has exposure to Freeport McMoran, and those are a real concern.
So, I think there might be a couple of company specific issues, one each, but the overall industry is just tanking, and they are playing catch up on it. Fair, or not. We'll see.
For what it is worth, I also have RDC and ATW on my watch list, but ATW's back log is not great. They held up for a while, and then took a real bad hammering too. I think because lower for longer is real, or at least the market believes it to be. Perception is reality. RDC, I wonder what the negative on them is, specifically. Have not found one yet, so more interested in them now....