My barber has a brother who knows someone who knows John F. He says the dividend will restart at 65 cents but not until Q1 of 2016 and only if Brent is up to 87.50.
I will join in the laughter but not until SeaDrill hits my 19.40 break-even point. Hopefully that will happen later this year but I can deal with early 2016 if that's the way the cookie crumbles.
Let's see. SeaDrill is turning a profit, not late on any payments, its bank in Norway states it will cut SeaDrill some slack if needed, and Fredricksen has access to several billion dollars he holds outside of SeaDrill if needed. A classic bankruptcy, thank you for bringing it to my attention.
I personally do not think SeaDrill is going to go bankrupt. However, for the sake of the discussion, let's assume there is a 50 percent chance of bankruptcy in 2015 or 2016 and a 50 percent chance that SeaDrill survives until drillers move back into an up cycle.
50 percent chance stock goes to zero and 50 percent chance it goes back to the 30's or 40's in two or three years equals a good bet at the current price of 10 dollars.
If, like me, you think bankruptcy is unlikely SeaDrill becomes a very good bet at 10 dollars.
Since John Fredricksen owns about 30 percent of SDRL's stock he controls the company. I have serious doubts about the prospects of him destroying the current shareholders which include himself so that the debt holders can become the owners of a debt free company. Looney Tunes thinking.
To me the biggest potential problem for SeaDrill during the current crisis is in the area of debt and liquidity. During Q4 cash went up 193 million to 831 million. During Q4 debt went down 980 million from 12,735 million to 11,755 million. Progress was made in the area of debt and liquidity. Analysis of the rest of the report I leave to sharper minds than mine although I expect headlines about an earnings miss.
I must admit that I only have 800 shares. I must also admit that I did not buy for 11.50 but rather paid just a wee bit more than that. I am not particularly proud that I own the shares, they are just a stock. Nowadays you do not even get a pretty certificate to look at. Though lacking in pride for my stock-picking prowess, I do have patience and will hold on until a dividend is restored and maybe a wee bit longer.
If this is indeed the bottom for oil, which I really do hope but who knows, then deep water and SeaDrill will be OK. Adjusting for somewhat lower dayrates, 48 where Brent is right now is just about the break even point according to the chart SeaDrill put out a couple of months ago which showed 52 for deep water. Since deep water wells are expected to produce for 10 to 30 years the oil companies will assume that oil will not stay flat at 48 for 20 years and will keep on drilling with SeaDrill's ships.
I bought as a multi-decade hold to pass on. I liked the dividend but I can take a dividend-less year or two if it improves the company's chances of surviving and prospering going forward. I think this move does so. Fredricksen seems to have learned a lesson from his FRO problem.
Looks like a gap down to 15 to 17 area. At least uncertainty about dividend is over. Yuck. Seems to be quite a few contract extensions.
Is the strategy to drive the price down and buy back ten percent of the shares super cheap before the stock price moves back up? John does think out of the box.
At the least SeDrill is making moves to eliminate bankruptcy fears and accumulate some cash for bargain hunting while the industry is on its posterior.
At first glance it looks good to me. Almost half a billion dollars of Seadrill's debt is wiped out, Seadrill gets a couple hundred million in cash, and for five years until the contract runs out Seadrill gets 84,000 dollars a day.
Of course after 2020 the ship will be gone from Seadrill (technically) instead of making money for Seadrill. Times are getting tough right now for drilling companies and this looks like a good idea to shore up the balance sheet.
Not real sharp in this type of finance so if I understand things wrong someone please correct me.
"They" will likely tell us exactly what to deliver once the rights have expired. Never been in this type situation before so just guessing. Maybe if the rights expire selling for 40 cents "they" will make folks like me who are short the calls deliver 40 dollars per call immediately. But if so who would I deliver it to? Would it complicate my income tax return for a piddling sum? Reckon we just wait and see. As you say a minor thing really but interesting.
I am short a few January calls. Etrade changed the symbol from SHLD to SHLD2. The contract was changed to me delivering 100 shares of SHLD and 100 rights if the calls get exercised. The rights will expire in a couple of weeks or so. I imagine they will use the final trading price of the rights and make me deliver that in cash along with 100 shares of SHLD. Maybe some formula to determine the amount of cash. Maybe a little cash for the rights even if the contract expires worthless as far as the stock itself is concerned.
Ackman is a clown maybe but I got a six-bagger following him into GGP when it was in bankruptcy. He has had, and will have in the future, his moments.