debt repurchase in Q4 was $175M, not $251M ($76M was in Q3). You have to add the the substantial cash flow from operations they made in Q4 - my guess is $220M. Although some of that cash earned in Q4 will arrive in the bank account in the following quarter.
Orig is trading at 5% of book. By buying back stock, the company can buy a modern floater for 30-35 M$. Solution: cancel the 2019 ship order (construction probably not started yet) - Save more than $700M in total and use half the saved prepayments in 2016 and 2017 of $82M for share buybacks. Even better: also cancel or postpone the 2018 ship - more than $100M in prepayments in 2017 and 2018 saved.
justice: do you mean 2015Q4?
2015-Q4 - all numbers in $M
Earnings in Q4 will be higher than 80 - it's the company's best quarter in 2015, all floaters working! - earnings probably around 120-130. That's the equity increase. What counts is cash flow. My calculated guess: 220. Debt repurchase in Q4 has cost 175. Nominal debt reduction 300. Thus extraordinary gain:125. Regarding my initial cash calculation: there might have been a small scheduled debt repayment 5-12 M - could reduce calculated cash somewhat. The company might also have repurchased more debt in the meantime.
All numbers in $M, if not specified
Cash end of year 2015
= 895 (end Q3) -175 (debt repurchase Q4) + 220 (cash flow Q4) = 950 - due to inflow-outflow timing issues, actual number might be somewhat different.
Cash flow from operations 2016, after the Olympia cancellation, based on existing contracts: 590 to 620
New ship prepayments 2016: 329 (if no further delivery delay)
Debt repayments: 71
Upgrades (incl 5 year inspections): 75
- Cash year end 2016 around 1100
EPS from operations $1.5 to $1.8
All based on ship opex (direct and onshore) of $145k/d for active ships (was lower in recent quarters) and 40k/d for ready stacked ships (would be lower if cold stacked)
I assume that more debt will be repurchased at significant discounts, reducing year end cash, but producing extraordinary earnings and a very good cash situation at the end of 2017, even if no new contracts until then.
2017 is likely to see the start of a new up cycle for offshore services, with oil prices recovering. With $190B of offshore projects postponed, pent up demand is significant.
The method Pope Investment used has been quite successful. It has been applied by Attorney David Graff several times now.
- demand the company to show the books (the company typically ignores that) or apply other levers, then
- ask the judge to accord put options to the plaintiffs to sell the shares back to the company.
- ask the judge to appoint a receiver to execute the judgement.
Several Delaware judges are now agreeing with that script.
Because there are some upfront costs, the number of shares that the plaintiffs represent shouldn't be too small so that the shared upfront costs are not more than a few cents per share. I'd say 1 million shares is a good number.
Seems that ORIG gets punished for buying back debt at a discount despite a meaningful improvement of its debt profile and annual interest savings of $ 30 M.
What does Moody's know about the oil market after 2016 and the size of the floater market after all that expected cold stacking/scrappings of old stuff? - Which is likely to devastate the earnings power of companies like RIG or DO. The Debt/Equity ratio is misleading r if equity has no earnings power.