The best thing going for PRGN is that the shipping business is so miserable, that the banks would rather not be in that business. Its not like they want to seize the ships. That's the last thing they want.
Disc: no position.
Agree that they should do a reverse split. They should also try some type of swap offer to try and get preferred holders to accept common stock (not sure I would unless it was a good offer).
Considering they just raised 150 million in the last couple of months, liquidity is not a near term concern. At least not for 2015 and 2016. 150 mil credit line is undrawn. The liquidity concerns are further out in 2017.
Given their hedging, the revenues for 2015 are not going to be all that much lower than 2014. They have some cash and are deferring the preferred dividend to conserve cash. What they need to do is work with their lender. Most likely they will pay some fees and be required to use cash flow to pay down the credit line until they are back in compliance with the lowered borrowing base. Preferred holders would not accept 3 - 4 per share. The bank would not accept 80 cents on the dollar. Natural gas may yet rebound over the next couple of years.
The new preferred stock is essentially common stock with some added protection. It doesn't pay a dividend and converts to common.
As I predicted an article yesterday shows power prices starting to spike in the Northeast due to the cold weather.
Deep cold sends energy prices rising in U.S. Northeast
By Wayne Barber
Chief Analyst, GenerationHub
A blast of bitterly cold temperatures has driven up spot power and natural gas prices in the Northeast, according to data posted Jan. 7 by the Energy Information Administration (EIA)
New York City showed a spot power price of $120.67/MWh and New England had a spot power price of $101.87/MWh. The Mid-Atlantic wasn’t far behind at $81.83/MWh, according to GenerationHub.
The Mid-Atlantic recorded the highest increase in spot power prices from the prior business day at almost 107 percent.
Actually oil and nat gas are not always correlated. This morning nat gas was up big despite oil being down. (although it gave up the gains later). What actually happens is that when there is less oil drilling, less natural gas gets produced as a by product. Less oil drilling can cause nat gas prices to rise over time. Most oil is used for transportation and most nat gas is used for electric generation. They don't really compete with each other much.
2020 bonds at 70 cents on the dollar indicates risk, but is certainly no guarantee of bankruptcy. We are sort of in the "financial crisis" type environment for oil. Many bond issues traded a lot lower that 70 cents on the dollar and the company didn't go bankrupt. I still own Sears bonds I bought at 20 cents on the dollar in 2009. You could have bought debt for Ford, BAC, GS, AIG and numerous others at far lower prices than 70 cents on the dollar.
Here'a a Nov article from the Institute for Energy Research:
Electric utilities in New England are requesting rate increases for this winter. Over the past decade, coal-and oil-fired power plants in New England have closed and now the region is dependent on natural gas for generation and has limited infrastructure to get the gas to markets. In Massachusetts, the two largest electric utilities have requested rate increases from state officials. National Grid received approval for a 37 percent rate increase over last winter’s rates, effective November 1, 2014, and NStar has requested a 29 percent increase, effective January 1, 2015. The rate increases affect more than 2.3 million consumers in Massachusetts. These high winter electricity prices are likely to continue in New England until new pipelines are built, which could be three to four more years, as heating markets compete with electric generators for limited natural gas supplies. Unfortunately for consumers, cold weather has already arrived in many parts of the United States, including New England.
Sample Rate Increases
According to NStar, the monthly bill for the average household it serves will increase about $28 a month with supply costs increasing 60 percent from 9.379 per kilowatt hour to 14.972 cents per kilowatt-hour . Supply costs are the costs that the electric utility pays for the generation that it purchases, which reflects only about half of consumers’ bills. The other half is the cost of delivering the power to their homes and that part of the bill is not changing. This is the highest level that NStar’s one million customers in metropolitan Boston and Cape Cod have paid for supply costs since 1998, when Massachusetts overhauled its electricity market.
Do the research on the situation in New England. I posted some of articles. The same pipeline brings in natural gas for heating and also electrical generation. All the coal & nuke plants have been shut down so they are heavily reliant on nat gas. Gas for heating gets priority. This is why elec rates in New England are spiking 30% - 50% this winter. It's hard to believe it, but New England already has serious problems and they will get far worse if we get a good cold spell which increases nat gas demand for heating.
In many parts of the country elect rates are down. The solar vendors will sell alot of systems in New England though when people get their electric bills and go into shock.
Weather reports say article blast coming in. Look for brownouts and soaring electric rates in new England to be in the news.
Anyone dealing personally with these electric rate spikes this winter in MA and other New England region states? SCTY, Sungevity and all solar vendors should do very well there.
Another thing you folks should be aware of is that oil and natural gas don't always move in the same direction. A lot of natural gas is produced as a "free" by product when wells are drilled targeting primarily oil. There is going to be less oil drilling, which over time could make natural gas prices rise. Natural gas has been down the last month due to warm weather, but the weather has been brutally cold lately (at least where I am in Delaware) and prices are starting to rise again.
Natural gas is only part of the picture though. You have to look at all the taxes that get loaded on electric bills, natural gas pipeline bottleneck in New England, state incentives for solar and federal incentives for solar. People consider other factors as well. Besides putting no money down and saving about 25 - 30 initially (lease payments of $82 / month offset about $110 / month in electric costs), it's nice to get your electric rate locked in for 20 years. I also like the system since I will have some power (at least during the day) if the grid goes down. If anyone is thinking of putting a system on their roof and has questions, email me (yahoo mail is mrpanick).
First of all, solar competes primarily with natural gas - not oil. Very little oil is used to generate electricity. Natural gas was down on account of the warm winter weather, but has been starting to bounce as cold weather is hitting. So you are watching the wrong commodity.
If you do research, you'll see that electrical rates vary widely by state. Check out my posts on New England which is seeing 30% - 50% increases in electrical rates due to a bottleneck in the natural gas pipelines into the region. They need nat gas to heat homes and generate electricity and can't get enough into the region for both. New England electric rates are over 20 cents / kWh this winter. Solar can compete easily with that. In other states with cheap nat gas and limited "free money" state incentives for solar, it can't compete.
Very little oil is used to generate electricity. Natural gas competes with solar for generating electricity. It's more complicated that that though. If everything else was equal, it would be cheaper to generate electricity with natural gas than with solar, although the gap is closing fast. Things are not equal. The federal & state governments provide all sorts of incentives (free money was about 4K from Delaware plus federal incentives for my house) for solar while they heavily tax natural gas and your electrical bill. In New England (see my posts on electric rates there) electric rates are up an unbelievable 30% - 50% this winter despite lower natural gas prices. They don't have enough pipeline capacity for all the nat gas needed to heat homes and generate electricity. Cheap electricity from the nuke plants is gone there as those were shut down. Coal (also cheap) has been shut down. You can't even build new electrical lines into the region from Canada. The "greens" are blocking that too.
You can do the comparison for your house of solar very easily. I went with Sungevity (use Referral Code: 1147466 at their web site to get their $500 cash back deal). They will quote it and show you the savings as compared to your electric utility without even having to come onsite (they use google earth to look at your roof). In my case I put no money down and am initially saving about $25 - $30 / month. That amount increases over time as electric rates increase further. Even if you don't think solar will work for you (you might be surpassed!), anyone investing in solar stocks should get a couple of quotes for their house. You will have a much better understanding of the economics and incentives for solar by getting a quote for your house.
So natural gas is cheap and yet electric rates are going up 30% - 50% in New England. You know that "environmentalists" are going to be suing to block new nat gas pipelines into the region and will probably block those for years. You just can't make this stuff up.
If you live in New England and don't put in a solar system, let's just say that you will be wishing you had very shortly. Email me (yahoo mail mrpanick) for any questions on my SUngevity system or just go to their web site and use Referral Code: 1147466 to get a quote with 500 cash back. Sungevity is a great deal, but other vendors like SCTY are probably fine too. What's not fine is being at the mercy of this nonsense while electric rates skyrocket despite the natural gas glut. Do your research. Google New Enegland electric rate increases and you will see I'm right.
This is the SCTY board so let me just say that SCTY is going to sell a whole lot of solar systems in New England as people get their electric bills over there and go into shock.
When Don Sage of Concord, N.H., learned his electric bill could rise by as much as $40 a month he got flustered. He and his wife make do on a bit less than $30,000 a year in Social Security payments, and they pay close attention to their electric bills.
"When the invoice comes in the mail to get paid, I have a target amount that we can fluctuate up or down, based on our fixed budget," Sage says. "They don't need my permission to hike up their rates, but the fact is we're the ones that are paying these increases."
Utilities in New England have announced electricity rates hikes on the order of 30 percent to 50 percent, making prices some of the highest in the history of the continental United States.
For Sage and other consumers, these changes seem to have come out of nowhere, but in reality, they have been a long time coming. Between the years of 2000 and 2013, New England went from getting 15 percent of its energy from natural gas to 46 percent. That's dozens of power plants getting built.
But the pipelines to supply those power plants? Not so much.
Pumpjacks at the Inglewood oil fields in California in March. Some of the most controversial methods of oil extraction, like fracking, oil sands production and Arctic drilling, are also expensive. That's made them less profitable as the price of oil continues to fall.
Falling Oil Prices Make Fracking Less Lucrative
At the same time, with the fracking boom just a few hundred miles west driving down gas prices, more and more homeowners were switching to natural gas for heating.
So now when it gets cold and everyone turns on their heat, the pipelines connecting New England to the Marcellus Shale are maxed out.