Amazing how management can watch this happen and not say a word.... also the fact that insiders are not buying at these levels speaks volumes... CHK saddled company without a lot more debt than management thought going into deal....
11 rigs 3 months with auto renewals
5 rigs 1 year
10 rigs 2 year
25 rigs 3 year
all take or pay so total 51 rigs with CHK, the 11 3 months ones are at immediate risk
insider buying was small.... I am disappointed they have NOT bought any shares after a 50% drop in 1 week ???? you would think they would be loading up at 6 ??
The debt level is too high and they plan on putting free cash flow towards reducing debt in 2016 as they have no plans for any new rigs in 2016 this will reduce capex significantly and help them get some cash on the books... the CHK contracts are safeguard to pay debt interest payments in case of huge slowdown in industry ... bad news is they have had 100% utilization of rigs and that is key to success. Rates are going to come down but key is how many rigs are idled, that is where things get scary for them.
spoke to IR on peakerigs, I asked why they would not put hold on new rigs in down time to conserve capital........ was told they are being built specifically at request of customer, 6 for American Energy which will all be delivered by year end, and 10 for CHK. I also asked if they were building them from cash flow and I got the impression all this year were built without using revolver which is good news. Sounds like the peakerigs are least of worries as their is high demand for them even in slow times.
earliest debt due in 2019 with zero debt covenants .... but like any highly leveraged play if revenues dwindle and free cash flow stops they will be in trouble. Market has taken a shoot (sell) first ask questions later approach, I think relationship with CHK will actually help in near term as they have 40 plus rigs on take or pay contracts which in slowing environment will give them steady revenues...
Long term if oil does rebound American Energy Partners (Aubrey mclendon) wants to use Nomac & PT having ordered six new peakerigs that will all be delivered this year. 10 new peakerigs are being built for CHK all new peakerigs are on take or pay deals...
SSE is not building these new rigs and hoping to find a home they have 3 year contracts on them as they are most desirable rig in field. Tier 3 rig players are in trouble, SSE will have zero tier 3 rigs in 2015 giving them one of youngest fleets in industry, also there frac equipment is newer as well. This all being said I have seen momentum and downdrafts that last a lot longer than people think so this no doubt could be dead money and trade lower from here. They have debt issues and caution by management on spending should be made accordingly, of course if oil keeps tanking with natural gas every company in O&G will be feeling the pain.
Majority of their investment is in new rigs that have been contracted by CHK and American Energy partners... $132 million was spent in 2Q to buy 33 remaining leased rigs (tier 2), lease expense is now gone, they can easily put a hold on the new peakerig builds next year and use free cash flow to build cash or pay down debt. The fact that their best customer is CHK is ironically helpful as opposed to having smaller more vulnerable shale players. Did you notice they paid for latest 3 peakerigs from free cash flow as 275 mil revolver only had 17 million drawn as of october 30th... At $20 a share this was overvalued, however at 6.50 the risk reward is compelling. Your talk of bankruptcy is absurd.
so where were you with this great advice on SSE before the 70% drop..... this drop is not stock specific as whole service industry has been crushed.... if you believe that CHK will stop drilling then yes they are in trouble.... so what is your reason for posting ? to educate or frighten
you created your ID yesterday with the sole purpose of convincing anyone who will read that SSE is going bankrupt... it appears you have an agenda. Curious you appear to be an expert on SSE yet you had no bearish posts on at 25, 20, 17, 15, 13, 10, 8, ..... nope you decided to post AFTER stock dropped 70%.
They have plenty of free cash flow to weather this storm, obviously they will need to put a hold on growing tier 1 rigs at 24 million each. Also their 3 years of guaranteed work from Chesapeake is not a negative but in slowing times a positive. Chesapeake is not going anywhere. Earliest debt is due in 2019 and 275 million ABL loan is available if needed. Good luck with your short position, as like most of your kind you will be long gone and onto your next short with a new ID as SSE stock moves higher.
Seriously this is being priced as though there will be zero drilling capex in 2015, momentum is a killer. Holiday BS trading had stops and margin calls accelerating move down.... 2 Billion in revenues and 400+ million in EBIDTA with a market cap of 395 million ?
BRO ....you have no clue, ummm GUY Halcon has many issues, dude its going lower. You are lucky you sold GDP bro that is bigger dog than HK.
they were barely profitable at $90 oil.... you are in denial, much of the shale shale oil is no longer economical at current prices, sustained low oil prices will put many small shale players into bankruptcy especially those with high debt levels, find me one with higher debt ratios than HK