Update: Awilco Earnings

Aug.14.14 | About: Awilco Driling (AWLCF)


Awilco has reported decent earnings and announced a quarterly dividend of $1.15/share.

This is not unexpected as the long-term contracts of the two rigs provide earnings visibility.

The investment thesis remains standing. Because the company only has two rigs, the company should be considered a high risk/high reward investment.

Awilco (OTCPK:AWLCF), one of the most followed OTC companies on this website has reported its earnings for the second quarter of this year. As the company owns just two rigs, its revenues were relatively limited (compared to other listed ocean rig owners) at $66.3M, and as this still is a very high-margin business, the EBITDA ratio was 64% which resulted in an EBITDA of $42.4M. This is obviously great news as the company pledges to distribute the majority of its free cash flow to its shareholders.

The management team is keeping its promise and has announced a dividend of $1.15 per share which will be payable in the second half of September (the ex-div and record date will be next week). This results in a dividend yield of approximately 18%. This is obviously very nice, but keep in mind that Awilco is a high risk/high reward investment. The yield is nice, but the company only owns two rigs and they are already quite old. On the positive side, both rigs are contracted for the majority of 2015 before the rigs need a "time out" at the yard.

For the time being, Awilco continues to offer an interesting dividend yield, and it looks like this will continue for the next five quarters as both rigs will continue to contribute cash flow. The dividend might be maintained for Q4 2015 but I do expect a (one-time) dividend decrease for Q2 2016 as one of the two rigs will undergo maintenance for two months during that quarter and the other rig will need to secure either a contract extension or a new contract. The dividends will be safe for the next 5 quarters and the company has a lot of time to secure new contracts meanwhile.

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