They appear confronted with a $1M/day loss in revenue between the West Alpha now working (or so I surmise from the Exxon statement today), and the possibility of no work for the Navigator beginning 1 Jan.
I don't see them marketing the Navigator or the West Alpha, given their agreement with Rosneft.
A very difficult position for NADL.
There is certainty that thay can't still continue on that contract, since it involves no immediate commitment except for the Navigator in Jan 2015.
Should the sanctions relax, all conditions return to "normal".
The risk premium is just now being calculated, however, and the 30% share price decline reflects some of that.
Depending on who's calculating, we have more to fall, or we have overshot.
The justification for the premium over many other drillers (e.g., RDC, also in HE North Sea trades at 0.6 Book)
was their strong competitive position, the opening of the Russian Arctic, and their generous dividend.
All those attributes are washing away, it would seem.
To the extend they vanish, then one could make a reasonable case for shares trending toward book value....$4
One wonders what the so-called "analysts" knew about this matter?
In any case, I believe is was Credit Suisse that indicated in late August that they took a more positive view of the shares, and believed that VLCCF would increase its div at least 50% by 2016.
With their full fleet in place by then, and assuming charter rates in the $15, 000 to $20,000 range, then
VLCCF would easily pay $1.20/sh in divs.
But 8% yield today is small satisfaction when share have fall 8% today.
A 12% yield in 2016 is even smaller satisfaction when shares fell 12% in 2 days!
Like in the Greek tragedy, NADL was given wings to fly via a lucrative Rosneft deal.
It soared, but too close to the burning Sun.
It was warned about its complacency and hubris, but NADL was young and immature and took flight (with Rosneft)
As with Icarus, it met a tragic end.
Of course, that's just a tale....or is it?
Presumably, those too are priced to the JF interests at $10/sh.
There surely is plenty of space for the share price to be driven by other forces, but does that issuance in March portend ill for a substantial price move in the interim?
Stellar reaction on the Street to the div announcement by PGN today.
The PGN yield of only 7% is insufficient to attract any attention.
This sector is toxic, no matter who you are.
SDRL and NADL....yielding 14%....down another 5% on share price.
PACD, board indicated a 7% payout in 2015.....down 3%
ESV yielding almost 7%....shares dropping hard.
NE yielding over 6%....down
RIG yielding almost 9%....shares down today
The share drop, now about 17% this week alone, far exceeds that of peers...in fact neither SALT nor DSX have declined in this week. SBLK down single digits. SBLK and SALT each have large exposure to Cape market.
This can only be understood as related to the 31 M share issuance, related to the purchase of the FRNT Cape fleet of 25 vessels. Another 31 M shares to be issued in March 2015 to complete that transaction.
their ramping cash flow alone would fund a new build.
they have $1B untapped revolver credit line.
their leverage is among lowest in industry.
their new build will be contract driven, not speculative
their expansion prospects and financial strength will drive share price higher
RDC sites pretty compared to may others.
That's what this is about.
Not some absurd irrational sell off.
A fleeing from a legacy driller that doesn't have premium vintage equipment, won't be competitive in a weak demand and oversupplied market, leading to idle and cold stacked and idle assets.
That's what the view is, and the reason for the share collapse, IMO.
They are profitable at the current Cape rates....and charter rates have been fixing quite a bit higher than the spot....so its not like the company is bleeding cash.
The shares are very volatile, but this might improve eventually when the capitalization is at over 100M shares
very helpful. Most concerned about Navigator...being an older vessel, and of course the near term, and the high current rate they have for existing charter.
The utilization of rigs in the Arctic is near 100% (according to recent RDC presentation), that I would lean toward your scenario of "not too difficult".
Personally, not being hip-tied to Rosneft would make NADL a more attractive investment..
The coverage comes from their newly added veteran analyst in shipping,formerly Dahlman Rose & Co. analyst Omar Nokta.
So, I take some (not sure how much...) comfort in his positive assessment of VLCCF