Short covering did probably drive this but volume notwithstanding, one cannot say "tons of shorts" covered. It could actually be a relatively small percentage of the unhedged short position. HERO for example has lower SI and is up over 150% in recent weeks from its lows on very little news. PGN meanwhile is up about 50% from its lows.
If shorts continued covering their position in PGN as they have in HERO then we could see PGN hit 2.5-3ish share price in short order. I don't think that will happen but very possible, considering PGN has at least as good a fleet and better overall fundamentals than HERO.
Shows continued activity in old jackup contracts. Noble has three older jackups available later this year(Tinsley, Hay and Copeland rigs). Tonight's FSR shows two of those three received 2 year extensions in ME. Dayrates on those two fell from 97KPD to 85KPD.
Not bad news for PGN at all. Rate is only $75K but is indexed to oil prices and project related capex paid by Eni. Notably this rig(260) is lower spec than any of PGN's rigs-eg hook load 780K pounds.
While not directly affecting PGN, this should serve to absorb more of Pemex' hi spec jackups and increase their need for more standard PGN jackups to pick up the slack:
MEXICO CITY, March 25 (Reuters) - As Mexico opens up its oil sector to private producers for the first time in decades, the initial set of contracts up for grabs later this year will feature extended exploration periods, the country's oil sector regulator said on Wednesday.
The change to the draft production-sharing contracts for 14 shallow water exploration projects will allow companies another year to satisfy requirements that they drill a field's first test wells, said Juan Carlos Zepeda, head of Mexico's national hydrocarbons commission.
How long is the $64K question all the crystal ballers are all over. What is surprising and encouraging is the drop in US land oil rigs of 50% since this began, even more of a drop in Canada i think and I don't think they're finished laying down rigs. This is the most dramatic drop in oil rigs in history and far more than the 20-25% falloff the land drillers were predicting just a few months ago. And the whole 'oil storage is so full were all going to be swimming in it' ruse makes me laugh. NOCs/Paragon customers probably could not care less about Cushing or WTI or US oil that can't get exported.
I know it will be some time before the falloff in new wells and more specifically well completions hits output. But I can't help but believe there will be a substantial drop in US oil production in the next 6-12 months, given the inherent output decline rates of frakking/onshore wells and the dearth of well completions.
I was watching Robocop the other day with my kids where it's said repeatedly: "I'll BUY THAT FOR A DOLLAR!". Made me think of PGN-lol-haven't quite got any for a dollar but pretty darn close. Way oversold but from the short perspective their thesis still in place: rapidly falling drilling capex followed by glut of newbuilds. Just a little patience...
No, the 90 million was since start of year. Approximately, $25 million backlog this month added plus ongoing Pemex backlog with these rolling "well extension programs". All in all though a good report considering many others are not signing any. And they probably beat the 2014 comparable period if you include the Pemex extensions, not to mention this was a shorter reporting period by a few days.
They also seem bullish on middle east where they have two idle rigs and maybe potential to move a Pemex rig or two for term contracts???
The prospector re-fi will get done I think. What should be a temporary parking of the debt in the revolver had been discussed previously and I do believe this will be just temporary.
C'mon get ur facts straight if ur going to bash:
"Their vessel values are plummeting, risking loan-to-value"
Its all about backlog and revenue.
"Those vessels are not finding, and will no secure, contracts."
PGN has been doing a good jobs of finding work for their idle rigs. They could do better but they are finding work.
"exposure to PBR"
That's a legitimate concern and you can add Pemex to that too.
"Arctic drilling is among the most expensive"
Prospector rigs are not drilling in the Arctic,
"the company has few options"
You admit they have options then? You should keep shorting it..IMO
Most of that $700 million NSea backlog came with the Prospector purchase and is old news. Also, much of that Prospector backlog goes well into 2016 and 2017.
Dean, I disagree. On the CC PGN was pretty clear they had a number of viable options wrt the Prospector term loan. Last resort is the revolver at libor + 2%, not bad. But first they said they had interest in several banks to replace those in the group which aren't interested in holding the term loan. Second option they said was a number of banks are also interested in issuing the debt secured by the Prospector rigs and their formidable backlog. I am guessing they will not use the revolver, but even if they do, I believe that will only take the revolver up to $400 million.
Yes, Essentially shut-in wells are becoming the storage of choice for onshore US and it saves the E&Ps expensive completion costs. Completions are decelerating rapidly. Consequently the USA will have a ready supply of oil for the forseeable future. As oil goes up, more well completions, oil down, then completions down. This is why many see stable $60-80 oil(Brent)for years to come. Maybe lower for WTI and is part of the reason Hercules will have an even tougher go of it than PGN.
HERO has about 35 rigs. Half are cold stacked, unlikely to ever return to work. Of their eighteen marketable rigs only eight are drilling, ten are ready stacked. And of those eighteen, ten are in the US GOM. Five of HERO's ten marketable US GOM rigs are stacked and unlikely to return to work for some time, perhaps 2016 if ever and have to compete with US onshore(WTI) which should run lower than Brent. Brent is what PGN drills for(rest of world)and at $60-80 Brent, PGN's customers should do well and continue drilling. So this is not a bash on HERO as much as it is thoughts on why PGN is in a much better postition. That and PGN does have better rigs i.e. no mat-supported jackups.
A major consequence of the new oil paradigm beneficial to PGN should be that these oil prices and cost-cutting amongst the E&Ps will strongly discourage the expensive sources of oil: tar sands, UDW, arctic etc. Why? When oil increases enough to justify these, the frackers will just turn on the spigot by increasing well completions resulting in oil prices steady and healthy enough to justify lots of shelf drilling around the world but still low enough to stifle the expensive, now risky sources. And Saudis are unlikely to cut. No way they're going to cave on market share.
On their call PGN was optimistic about the refinance which makes sense. The Prospector rig backlog is a pretty firm near-$400 million with which to secure a loan. Total is not a Petrobras or Pemex. This would be a safe way for a bank(s) to make a good return. And if that fell thru they can pay it off with the revolver.
Portending, ibc and xgr present good snapshots and scenarios respectively. You're correct it is not a true worst case scenario. However since u mention competitors look how incredibly, none of them signed jackup contracts these last two months while PGN, just in the last month found extensions/contracts for 5 of their jackups. Three of those were extensions at same dayrate(2 PEmex,1 NSea) while the other two North Sea rigs only took a 19% hit in dayrate.
What is also often lost in the talk of a flood of newbuilds coming is that most of these are asian speculator newbuild jackups with no practical means to market them. As such they will not find work at least until they get bought by an established driller which won't happen until the market recuperates. Most drillers now won't even take delivery of their own newbuilds. A few things that get lost when bears compare PGN to HERO: PGN generally has better rigs-HERO has a lot of mat-supported jackups which are least competitve; HERO has half its fleet in the US GOM which is by far the worst jackup market in the world; and HERO lacks the global breadth of PGN.
I think in that scenario EBITDA may put the debt covenants at risk(Debt:EBITDA of 4). They do however have a few rigs with high backlog they could sell. In spite of this market, rigs with hefty backlogs can sell for a premium.
Mexico- similarly optimistic. Mexico on Friday approved auction terms for five shallow water areas so they probably will in fact need PGN's jackups long term. But even if Pemex doesn't need them or tries to lo-ball PGN excessively, there is good chance those rigs will ne needed elsewhere based both on comments cited above as well as all the newbuilds being pushed out.
And speaking of newbuilds. Little wonder everyone is pushing out deliveries. Exemplified best I think by the NSea. ESV and HERO both have newbuilds in the NSea that are currently without any contract yet in the last 'horrible' month or so, PGN has found additional work for three of their #$%$, aged, assisted living" rigs in the NSea. I don't know about y'all, but watching PGN's rigs makes me feel a whole lot better about getting old!!
Interesting contrast between PGN's CC and ESV and Seadrill's CCs-two of the preeminent offshore drillers. Both ESV and SDRL were largely silent when it came both to actual backlog additions as well as specific opportunities. Meanwhile, PGN discussed a number of specific opportunities as well as recent backlog additions. While some of PGN's opportunities were couched in an optimistic, maybe even "talking their book" manner, it was still quite a contrast and it centered around their efficient, low-cost model. Keeping in mind PGN has a lot of rigs with NOCs which puts them at higher risk of cancellation, here is the gist of their market comments:
Very confident about their rig coverage in the NSea and Brazil.
India-expects ONGC to put out additional multiple-rig tenders for standard jackups. I don't think there's a stronger competitor in the standard jackup space than PGN.
Middle East- expects one of their 2 idle rigs in ME to go to work soon and optimistic both about their other idle rig their as well as rigs there rolling off later this year.
West Africa- optimistic about their single ready stacked rig there.
SE Asia- the most interesting comments made here. Only one rig that will roll off in a few months but they discussed displacing hi-spec jackups with Petronas who is not one of their customers. Petronas employs about a dozen hi-spec jackups and is cutting capex. We have all speculated how, in this environment, PGN's rigs would be logical alternatives to hi-spec rigs to carry out production and workover drilling. This is the first time I've heard actual specifics. Since Petronas is not a current customer, I don't think they would have mentioned them if they weren't having at least serious discussions. This would be an utter grand slam for PGN if it actually happened, I think.
Rambling on about a few nuances of my compraison. Again I use conservatively that each PGN floater is equal to about 2 jackups where in reality their cash flow is better than that; maybe closer to 3 jackups. For HERO's 12 rigs, based on liftboat revs/earnings I think I am being fair giving it a value of about 2 jackups. HERO has currently just 8 jackups drilling but they do have a few ready stacked old jackups as well including 2 newbuilds currently idle. Perhaps I should have used then 13-14 jackup equivalents for HERO which is still less than one third of PGN's 44+ jackup equivalents. Then again half of HERO's jackups are the oldest of the old mat-supported jackup technology which is generally inferior to PGN's ILC(independent leg cantilever)rigs.
Finally,while Petrobras can cancel PGN's floater contracts as they did recently to one of Diamond's rigs(Ocean Baroness) or as Aramco did to HERO, I am guessing Petrobras keeps PGN's floaters. I think this because Petrobras still needs to drill in the Campos basin which is where PGN's rigs are, they're cheap rigs and because apparently PGN is held in high regard by Petrobras having been cited as their #1 foreign contractor. All in all I think there is excellent risk/reward here.
Basic stuff for most here perhaps but not all I think. Firstly, one cannot simply compare share prices or market caps. Share price/market cap for both PGN and HERO are so small as to be near meaningless. At the minimum one should start by comparing EV(enterprise value) which includes debt as well as asset values and maybe a few other metrics such as forward EBITDA, revenue etc.
For example HERO's EV was about $1.125 billion, now it's about $1.1 billion and if HERO share price went to zero their EV would still be about $1 billion. By contrast PGN's EV is about $2.2 billion or about twice that of HERO's.
Now if you compare marketable assets, forward EBITDA's and Revenues, PGN consistently in all these metrics is a good 3 times more valuable than HERO-this includes both HERO's liftboats as well as removing the $50 million annual backlog of the Hercules 261 contract just cancelled by Aramco. So if HERO then has an EV of $1.1 billion, then one could say PGN should have an EV of $3.3 billion+ and which would equate to a PGN share price of over $15 after deducting debt.
Note: for asset value comparison I used 12 rigs for HERO including a few competitive but stacked rigs and approximated their liftboat business at about 2 jackups vs PGN's 44 rigs that counted their floaters as equivalent to 2 jackups; forward revenue and EBITDA comparisons are more straightforward.
PGN and HERO are now both, I think, being priced for bankruptcy, i.e. near negligible market caps ve EV. While PGN is, unlike HERO, still firing on most cylinders and printing ample cash, PGN's outlook could move dramatically south if they were to receive cancellations from NOCs like HERO just did. Particularly for example if NOC Petrobras calls up and cancels all their PGN floater contracts. This is unlikely I think and should it occur, PGN would still not be as bad off as HERO but it would nonetheless be an ugly chapter to this story.