It's all the deepwater guys though, and Oil Service in general is a laggard. I had lightened up recently, but am buying back some here at 33. Boring trading these days. Good time for a vacation.
The GS commentary is a worst case commentary relative to idled rigs not getting contracts, and worsening conditions in general for the offshore drillers. This worst case scenario had a decent chance of playing out back a few months ago, but you can see by the rallies in NE, ESV, RIG, SDRL, etc. that investors are starting to feel that the worst case picture is probably not going to play out. This is due to oil prices staying high, idled rigs finding work (yes, at lower prices), and newbuilds getting very good prices (ESV just signed a newbuild at above peak dayrates). It's not that there aren't challenges, it's just that as is almost always the case in investing....."the sky is falling" scenario doesn't come true and ends up being a buying opportunity for those willing to take a chance that there will be better days. Disclosure, I had 2,500 (very small position for me) shares before this bad news hit, and just doubled that now at $4.15. Looking to hold this thinking I can get 5 for it at some point in the next year.
don't know, pg, i have sold about 1/2 and just going to keep the other half because it seems to have a head of steam and even acts well on bad days. HERO by the way, had a bad fleet status report but seems like specific to a certain situation with them in Angola. I added some down here, but probably going to be a longer term slog to make money...don't really have much dollar wise so not tying up too much money....4k shares total right now. good luck! glad to see NE rallying....sold all my ESV too soon over this week.
take care, pg ♥ (If you haven't sold any NE, I'd sell some just to book some profits, but that's me...I trade that way and usually sell too early)
I did end up talking with someone who works for APC. He said that APC takes a two-pronged approach, and that land drilling and deepwater drilling both have their place and always will....they both have a great ROI, and neither one is clearly better. Depends on the particular situation. He thought that the dayrates for the deepwater guys really depends on the supply demand equation over the near term. He really didn't give much credence to land drilling hurting the deepwater guys or pressuring dayrates very much.
Some of the negativity in the deepwater drillers is based on the assumption that some people are making that because of increased land drilling activity (shale oil, etc.), that customers of the deepwater guys will not pay the peak dayrates because they are allocating more money to drilling on land.
Do any posters have some in-depth knowledge about this?
This certainly does not seem to be true for the newbuilds which are getting top dollar and that's in brand new negotiations.
Volume was significantly heavier than usual with a rally of over 3%, that's some decent conviction....some big player/players were getting in today and were not shy about buying at higher prices as the volume was skewed higher toward the close.
Did you guys watch the trading today....reminds me of the Tom Petty and the Heartbreakers song "I won't back down". In a rough down market, the buyers just wouldn't back down....they stood their ground just like Tom Petty would've wanted them to. Thankfully the theme wasn't another Tom Petty song: "Free Fallin".
Glad it worked out for you bits....nice trade. I also continued to buy when it dropped below 47 yesterday....just felt like it was too overdone. I had planned to keep some for a run closed to 50, but just kept selling as it rose today until I had none left.
I still have NE and HERO. Looks like NE is heading up to test April Fool's Day highs close to 33 as I suggested it might....who knows it could form a cup there with a handle.....very bullish if it does that, esp. if the handle has low volume and low volatility and lasts for about a week. It seems like the deepwater guys are getting discovered today....doesn't surprise me given oil prices and strength in oil service sector which is setting new 52 week highs everyday....at some point they are going to go after the dogs of the sector.
NE is looking good technically. Not so much for a momentum rally, but more from the point of view of "the bottom is in". It's been doing solid base building for 4 months. Solid in that it has been in a tight range meaning that whenever it gets sold off, there are buyers at the low end of the range. Also solid in that the beginning of the selloff in late January had 3 weeks of high weekly volume, and since then volume has tapered off. That tells me that you had 3 weeks in which the big players and institutions dumped the stock....the big guys who wanted to get out, got out in a high volume persistent selling climax....probably no one left to sell unless fundamentals were really turning south, and that's just not the case at all at this time. Lastly, RSI on the weekly charts is confirming the lack of selling pressure and the likelihood that a bottom is in. I think the odds are good that shallower selloffs get bought and that the chart continues to make a pattern of higher lows with a test of highs in the range close to 33.
Don't usually participate in this one.....usually stick to NE and ESV although I do have a small amount of HERO. Buying DO down here is a read on what I think happened recently with the stock price. It had a major short squeeze in April that got it way out of line with its peers....now it has gotten crushed as the short squeeze finished playing out, and some bad news got the stock knocked back down. I think 47 here in DO will end up being close to a bottom, and it has been subject to short squeezes for many years. Looking to hold it for a test back up close to 50 over the next few weeks.
Seadrill just signed an ultradeepwater drillship @ 600k per day on a 5 year contract. That's right up there with the highest dayrates. This is just one of many many data points over the past month that show that the pessimism in the sector was way overdone. Meantime at the other end of the spectrum the older rigs are getting work at reduced rates, but the top rates for the newbuilds are balancing out the picture.
Re: "Hey look, Chute has a rooster!"
LOL! There's probably a good dirty joke in there somewhere, but I think I'll let it pass.
Just in case we're still in a trading range and this is above the midpoint of that range.
If we dip, over the next week I'll probably replace what I sold in NE with put sales.
With ESV, I want to buy stock to be in for the dividend.
As I mentioned in a prior post, you could see the shorts doing this....every time NE got a little head of steam, it would get pounded down with the 5 minute bars showing a strong volume spike, typical short action. I believe that some large hedge funds are behind this after reading the extremely negative analyst views from a few months ago. Every piece of evidence has disproved the "sky is falling" scenario. Yesterday, yet another fleet status report (RDC) showed that rig contracts are being signed and renewed. In the case of RDC, three of them. The negative analysts assumed that renewals would not happen....every single fleet status report over the last 2 months has disproved this negative assumption. The commentary from all the deepwater guys has acknowledged the slow patch (SDRL today), and if they are right, and it is just a slow patch, these shorts are going to get creamed eventually because the stock prices (below book value in many cases) already reflect the worst case scenario.
A 3 year Treasury currently yields under 1%, and if interest rates go up (very probable given Fed planned action), you'll be losing value in it as you get your low rate of return.
With NE stock price already destroyed,(in low range of past 5 years) and the supposed weakness in contract pricing expected to last anywhere from 6 months to 18 months, it seems to me that getting a 5% return while you wait for the stock to rebound at least 10% (let's be super conservative) at some point over the next 3 years, buying now seems like a no-brainer. Not only that, but you stand a decent chance of having your cake and eating it too: 5% dividend increases and stock rebounds to 40 at some point over that 3 year period....you could get a total return of 40%+ if things go even moderately right.
Almost got to the 31 number, but there seems to be an aggressive shorter in NE who pounds it down. It's lagging DO, ESV, RIG and SDRL by a good amount. I say a shorter just from watching the trading. I think it is being singled out for shorting because DO has squeezes, ESV is more peppy and responds to up markets, RIG's got some big marquis activists pushing for higher divi's etc, and SDRL people like because of the age of their fleet, so they pick on NE.
I have 2,500 shares of HERO and not considering selling any of it until it hits 6 which I know won't be until the sector turns around. I think this bounce is due mostly to a 5 year drilling contract they announced on a newbuild at a really solid rate, and also their fleet status report which is like the other ones we've been seeing....decent report without any big surprises and certainly nothing as alarming as the bearish analysts were predicting. to show you how crazy things have gotten in the sector, Hero operates around 38 rigs plus 24 liftboats. The newbuild contract they just signed is for 5 years and has a total value of 420 million. The entire company at this point has a market cap of 700 million. So with all those other 38 rigs plus 24 lifeboats, one single contract is worth 60% of the entire market cap. That's crazy! This should be a 6 dollar stock immediately and even then would be a big bargain.
Thanks, cben, sounds good and reinforces my sense in both the fundamentals and technicals that we've probably seen the worst for these guys (in terms of share price) and that we'll move up in a tentative way in the near term.
The time frame I'm looking at for my trading and my positioning right now is the last few months. The double bottom that jumps out at me on the daily chart is the lows set in mid April and the current lows from late last week. I like looking at RSI in relation to double bottoms because it can also give you clues about the strength of the double bottom. It is good to see a higher RSI reading on the 2nd bottom because that leans you toward an interpretation that selling pressure is diminishing and has worn itself out. This is the case in NE as the May bottom has a higher RSI reading than the April bottom. Also supportive of this interpretation is that the low set in March below 29 had the lowest RSI reading. This indicates to me the probability that the March low was the culmination of the selling and that at this point the majority of people who wanted to sell have done so and that the ship is slowly turning from the extreme negativity.
I think the lows have been tested and that as a first step we test selling pressure by rallying into the 31-32 range to measure resistance there.
I think we will rally in both next week. The recent fleet status reports were OK...things are getting renewed and yes with day rates reduced....but still nowhere near the doom and gloom scenario. We had analysts making assumptions that rigs would be idled as they came up for renewal...by and large that has not been the case, and there are still strong pockets where renewals are at existing rates and newbuilds are getting the expected great rates near peak.