Look at the low of each driller for the last 5 year period and 10 year period. Take the two numbers and average them, get a feel for the low on the average down cycle by the drillers. That is all I did.
Then I looked at the debt. SDRL debt is likely to increase 25-30% over current levels.
ESV has the strongest financial position. Then Noble. 50% of the RIG fleet is old, that is a big negative.
Guessing the price of oil is dangerous. All we know is that always falls more than people expect and to everyone's surprise, Saudi Arabia and Russia can do nothing about it. I have no clue if oil is going to $80 or $70 or $60 and it is expensive to turn a well off and shut it down and start it up again.
SDRL and the rest of the sector is going to have a rough 2-3 years and if any company cuts the dividend many investors will dump the stock and prices will fall.
I'm tempted to buy 1/2 a position in ESV and SDRL when they fall another 10%, then wait a quarter and see how oil prices and rig fleet utilization rates look, if week, hold off, come back and try an buy in the next quarter the rest of the position.
More interesting than the drillers are the refiners CVRR and CLMT, let them fall another 10% and they look more interesting than SDRL and ESV. Would I buy some of all for with another 10-15% correction, sure.
head of the CDC said on national news last night the Ebola epidemic could rival the AIDS epidemic. By the way 40 million people died of AIDS.
Forget what happens to the aviation sector if discretionary travel is cut back drastically? Doesn't aviation, military and commercial use up for fuel that any other transportation mode?
Even if you think Ebola is not important and will not curtail people from using planes and other similar environments, the issue is climbing debt getting bigger each year for SDRL and the other drillers, fleet utilization at lower rates are also a concern.
Boone is wrong as much as he is right in recent years. Hope you did not invest in his company 3-4-5 years ago as CLNE has fallen 75%.
Linn is fully hedged on prices and the planes, cars, buses in the U.S. are not shrinking in numbers. For that matter the number of homes in the U.S. is expanding and in case you forgot, they use energy: electricity and natural gas. So, if all the numbers in the U.S. are going up and do not see the scare on the economies in Europe and China lasting for more than a few quarters.
Our distribution is not going to be cut.
Debt is currently $13 billion and with deliveries of the rigs over the next 18 months,
they will owe another $4 billion or more.
Even with contracts, sector is going lower as world falls into recession over Ebola
spreading and demand for commodities continues to fall.
all fuel sales at retail level are low margins. I sold gas and diesel as a Shell operator and it is tough. There is a reason this company has never told shareholders when it will be profitable and if that day comes the margins are still going to be small.
A year ago I said the shares would go lower and they have.
As the company is unprofitable each quarter in 2015 it should go lower still.
The press release says the $100 million Montreal highrise is not performing but they do not say what the occupancy is. I imagine it is close to empty. What young people can afford an expensive building?
So tell me, how will they handle the debt service on the building paying for the utilities in winter on a mostly empty building?
You said this is a good company. Remember, 5 years ago the price was $21, today it is $21. Look at companies like EOG, XOM, CVX, COP, Hess, Google, Intel, Yahoo, Facebook, etc. Most "good companies" are up 100% or more over the last 5 years.
I am holder of CHK and rather than doing a good job it has underperformed the market over the last 5 years.
Do not kill the messenger especially when he has called it correctly.
CHK shares could be bought 5 years ago for $21 and that is true now 5
years later. Also, most of the stocks he mentioned have appreciated 100% plus
over the last 4-5 years. As a long time shareholder of CHK he is correct as the shares
have not accomplished anything for holders over that period.
Ask yourself why Barron's is ignoring the fact that Line/Lnco is 90% hedged for the next several years. Lower oil or gas prices will not substantially change revenue/cash flow and forecasts. With lower prices in 2015 they can defer $100-200 million of capex until 2016 and drill when prices are going up again.
SDRL is in a sector that is in free fall. Today an analyst said the chart on RIG is the worst he has ever seen. As all drillers will continue to fall 20%, SDRL will go along with them.
As oil prices decline and gasoline prices decline and more rigs are delivered to the weaker hands, the sector will keep going lower. Wait for the weakest drillers to bottom and sit at the bottom for awhile, then buy.
Unfortunately, that could be a year in the waiting, but it is not worth the dividend to ride this.
Actually no. They are down $4B in price because the FED has inflated the market for the last 5 years with a zero interest rate. The entire market has been inflated by cheap money.
The cheap money (financing) has resulted in to many platforms as the world is flush in oil.
The same cheap money has kept oil prices inflated and as those prices go through a decline
which is only a normal cycle and the sector of drillers faces declining utilization and declining revenues, the sector will take all drillers down.
The price decline is not over especially if commodities continue lower, demand for oil declines and the weak sisters in the sector keep falling (think RIG, etc.).
The $3B of assets called Goodwill is nothing. The productivity of
that excess paid for assets is really worthless and if they were
honest with investors they would write it off.
Goodwill can not be sold, earns nothing, has no liquidity.
Basically it is a phony number that is meaningless.
If management was honest they would write the goodwill off
and take a loss.
Investors need to discount the market value by that phony item
on the balance sheet, then you get to the real numbers.
But management is not going to admit the games they are
playing with the balance sheet. They want investors to think
the assets are worth more than they are.
SDRL has a nice backlog but that has not protected the equity price.
Russia and Brazil are major users of the really deep rigs and both
have major economic issues without more Western finance (lending).
The addition of more rigs (all varieties) is causing a sector sell off
along with the decline in energy pricing. Oil has fallen 10% in just
the last three months, predictions are for gasoline next year to fall
to $3.00+ per gallon.
Brazil and Russia issues along with lower oil is going to play
havoc with all drillers and that includes SDRL. Look at SDRL's
price even with a great quarter. What does a good quarter do
for SDRL with its big backlog? It's falling like it weaker sisters.
You are correct, it is going to drop significantly that is going
to happen to the entire sector and this is going along with
Next stop as market continues down on commodities
and over production and lower commodity prices.
New investors might get a chance to invest around
$3.50. Might be a great entry price.
139 new platforms came on line during the previous 5 years.
50 more are coming on line in 2014-2016.
Demand is slowing in Brazil, Russia (by sanctions), rest of the
world as more oil is produced in Canada and the U.S., this is
all depressing prices as everyone knows.
The price could stay at $90 or lower for a year or two. Sure it
is not permanent but it will have an impact just as the market
will be impacted by the FED changing the course of interest
This company is not immune to world demand for oil nor the is
it immune from the other 4-5 major drillers that are going to
see utilization drop and revenue per platform drop.
Just take a look at the SDRL price decline with no change in
its utilization and rates. What will happen as other drillers
feel the hurt of 50 new platforms in the next 36 months.
Time to get out of drillers and sit on the sidelines for 12-24
months and buy them after the sector corrects another 20%.
Buying the drillers at bottoms of cycles always gives better
return than riding them up and down. Buy LOW, sell HIGH.
Current debt is around $12 Billion.
Deep water rig count from 2008 to 2013 grew from 103 to 239 platforms.
From 2014-2016 this rig count is going to grow another 25%.
SDRL is going to take on almost $6 billion more in debt as it
pays for its platform deliveries in 2014, 2015, 2016.
There is going to be tremendous price pressure and utilization that
will effect all drilling companies with these platforms and the sector
moves up or down together.
Also, the FED is going to start raising interest rates over the next
three years and a change in the FED course always impacts the
entire stock market.
The stock market has been on a 5 year bull market run, these runs
always correct. When it does everything falls 10-20%, look at the
market history on corrections.
remember, the lowest interest rates in our lifetime have been during the last 5 years. The FED is going to change that in 12 months. Also, the largest number of new rigs manufactured in the last 15 years is going to hit the market in 2015. Both of these factors are going to impact the market, especially the interest rate reversal. Could the market take a hit of 10% or more when the FED changes course. Easy in my opinion.
Could SDRL hit the same low of 2010, sure, that was $19.
market has been inflated by 0-1/4% interest rates on 1 year money.
This has been the case for the last 5 years. Interest rates are going
to go up in 12 months and probably continue to go up. Once that
happens the market will really correct, so I would not be surprised if
everything drops 10%-20% once the FED changes course. Add the
largest number of rigs coming into the market over the last decade
during the next two years and then throw in a course adjustment by
the FED and you have a recipe for another hit to SDRL. One of of us
is going to be correct.
SDRL hit $19.00 per share during the summer of 2010.
If rigs coming into the market in 2015 and 2016 are going
to create price pressure and utilization issues why would
the price of the equity not test previous lows during this 5 year