SDLP stock performance vs SDRL is highly variable depending on the time frame your looking at. Some time frames it under or over performs. If oil continues to rally over the coming months, SDRL will outperform on the way up as it has fallen more than SDLP over 6 month/1 year time frame.
FYI--SDLP and SDRL have the lowest available cash vs mkt cap and Enterprise value of the drillers. Both of their current ratio's are well bellow 1 and thus are in the worst liquidity position of most of the drillers. If you want a driller with a really secure dividend, look at RIGP. It has no debt and has the highest cash levels vs mkt cap and enterprise value.
I did an analysis of ORIG cash levels to mkt cap and enterprise values and here is what I found.
Comparing its $833 million in cash to its enterprise value(ie debt adjusted) of $4.7 billion yields 18% which is better than the low debt mainstream drillers like ESV, ATW, DO, NE. Since many drillers need some of that cash just to maintain a current ratio(current assets/current liabilities) of 1.0, the net adjusted amount shows that ORIG has a 21% cash/EV levels with an adjusted current ratio of 1.0. Compare this with ESV, ATW, NE at 14%, 7% and 2% respectively. Some investors compare ORIG and PACD as being in a similar situation and their stocks track each other very closely in greatly underperforming the other drillers. PACD by comparison only has a 4% adjusted cash/EV level. Thus ORIG is in better liquidity position than many other drillers. The top drillers as far as adjusted cash/EV levels were AWLCF and debt free RIGP.
Time to buy?
I did a cash/mkt cap and cash/enterprise value comparison between this company and all the other off shore drillers and here is what I found.
Awilco has the highest cash levels to enterprise value(ie debt adjusted) at 33% of any driller. The next couple runner ups are debt free RIGP and its debt laden parent RIG at 24% and 25% respectively. However many companies need their cash just to maintain a current ratio of 1.0(current assets/current liabilities) so when you adjust that so the current ratio is an even 1.0, Awilco is the king at 36% and debt free RIGP at 32%. This means that Awilco has the highest level of cash relative to its long term and short term debt of any driller.
With todays big rally in oil, perhaps this is a time to buy?
RIGP is not being bought hand over fist because of negative sentiment towards the entire oil sector and thus its particular fundamental positive issues are being ignored. There is an enormous amount of fear in this sector right now.
As of the latest report, a short position of 76,000 shares on more than 8 million of float IS INSIGNIFICANT! This represents less than 1% of the float. Stocks with more than 10% of their float sold short is just starting to be considered significant. If you don't believe me call your broker and ask. They will tell you the same.
It appears that the 21,254,310 shares that are being registered for sale are the shares that parent company RIG owns of RIGP which they "may sell from time to time". Thus this registration is technically not new shares but RIG wanting the option of selling its shares and thus perhaps terminating their parent/child relationship?
Do you have a link to share that shows they are planning a secondary? I listened to the conference call and one of the questions was, "What do you plan to do with the excess cash? Share buybacks, increased dividend etc?" The CEO answered that they are exploring which actions to take.
RIGP is trading around $10 because of fund redemptions, general despair over the recovery prospects for oil, and relentless selling of all oil related stocks regardless of individual company specifics.
Based on the recent action of SDLP I would suspect it is income funds dumping to meet redemptions and thus is not directly related to the daily movements of the drilling sector.
Just like its parent RIG, RIGP delivered outstanding earnings and strengthened it iron clad balance sheet with yet more cash build, an Asset/Debt ratio of 16 versus 2 for its parent RIG and most other drillers, and a distributable cash/dividend ratio of 1.4/1 which makes this driller absolutely the BEST of any driller you buy. Future rollover day rates can decline 29% before they would have to begin cutting the dividend. RIGP has the staying power to survive this oil downturn while still paying healthy dividends.
Because RIGP has zero long term debt while SDLP has substantial debt although with their recent refinancing at 2+% they are good for quite a few more years.
Ran a quick calculation on what the effects of eliminating the dividend would have on being able to pay down debt. For LINE it will take them more than 20 years to pay back the debt based on saving $450 million a year by not having to pay dividends. For BBEP it was close to 18 years, ARP=9 years and the star is MEMP at only 4 years. Thus MEMP is the best positioned and represents the lowest risk of the stocks in this sector.
The lowest price for any of MEMP bonds is 83 and several are trading in the 90's. This is the highest price for the bonds of any of its fellow companies(LINE, BBEP, ARP etc). The bond market still has faith in this company.
Seriously did you bother to do any calculations? Short interest has doubled in the last month but still only represents about 0.5% of the float and is only 1 days trading volume. Completely insignificant!
I just checked it 4 days ago and its already up from then and has been raised many times in the last 3 months. 2015 PE and Cash flow/Enterprise value is the lowest of all the shipping stocks. Just to catch up to valuations of the other tanker stocks would result in AT LEAST a 50% upside pop from here.
Anyone know of any caveats to temper this bullish situation?
Sentiment: Strong Buy
We have a spread compared to SDRL because the parent is more volatile, both up and down. Volume is low so its likely being bid up for the dividend. Exactly same thing going on for RIG and its child RIGP.