Paragon Offshore - Fleet Status As Of February 17, 2016 And Commentary

| About: Paragon Offshore (PGNPQ)

Summary

Paragon Offshore released its February fleet status on Feb. 16, 2016. It was no new contract and only a few changes.

Contract backlog remaining as of February 16 is now approximately $800 million with only $38 million remaining in 2018. The company is reporting its earnings results next month.

PGNPF has delayed a little bit what seems unavoidable and this first bankruptcy is only one step down to oblivion, unless the company can add new contracts soon.

Picture: MDS 1

This article is an update to my preceding article on Paragon Offshore (NYSE:PGN) on Dec. 15, 2015.

Here is a look at the fleet status, as of Feb. 16, 2016.

1. Class: Drillships

# Name

Spec.

K feet

Contract

End

Current

Day rate

Information

(Est. Days) at 0 revenue Q4

Location
1

DPDS3

1977/2005 2013

7.2/25.75 Late 8/17 347

Petrobras has indicated to us
that it may contest approximately 380 days of the drilling contract backlog.
We continue to discuss the matter with Petrobras.

[Petrobras] Brazil

Click to enlarge

2. Class: Semisubmersibles

# Name

Spec.

K feet

Contract

End

Current

Day rate

$ K

Information

Location

(Est. Days) at 0 revenue Q4

1

MSS1

1979/2000

1.5/25

Late 2/16

150

Finishing well, best estimate. [Nexen] U.K. North Sea
2

MSS2

1977/2004

4/25 Early 4/16 270

Eligible for a maximum 10% performance bonus.

[Petrobras] Brazil

Right to terminate contract in case of excessive downtime

Click to enlarge

3. Class: Jackups

# Name

Year

Built

Spec.

Feet/K feet

Contract

End

Current

Day rate

Location

Rate at 0 revenue

1

Dhabi II

1982/2006

120/20

mid 7/17

76

[NDC]

UAE

0-rate (15d)2Q'16

2

C20051

1982/2005

360/25

Late 5/16

135

[Total]

NL

3

M1161

1980

300/20

Early 4/18

62

[Dynamic Drilling/ONGC]

Bareboat chartered

India

4

B152

1982/2004

150/20

Late 11/17

81

[NDC]

UAE

5

(L1112)

Noble Ed Holt

1981/2003

300/20

Late 10/18

38

[Dynamic Drilling/ONGC]

Bareboat chartered

India

6

M825

1984/2003

250/20

Late 3/16

149

[Perenco]

CM

7

M842

1975/1995

350/25 Early 3/16 70

[Pemex] Mexico

0-rate

(10d) 1Q'16

8

HZ1

1981

213/35

Early 7/16

142

[Wintershall] UK

0-rate

(41d)1Q'16

9

L784

1981/2002

300/20

Early 6/16

Early 6/16 - Early 6/18

88

95

[NDC/ZADCO]

UAE

10

B391

1981/2001

290/20 Early 4/16 154 [Centrica] UK NS
11

L786

1983/1998

300/25 3/18 53

[Dynamic Drilling/ONGC]

Bareboat chartered

India

12

C461

1982

205/25

mid 11/17

113

[ONE]

NL

13 C463 205/25

Early 3/16

130

[ENGIE]

NL

14 M1162 328/30 Mid 1/17 135

[NDC]

In/UAE

(Others)
1

M71

Labor contract -

Hibernia Platform

Canada

Rigzone reports the unit as drilling

2 M72 Labor contract Waiting on location -

Hibernia Platform

Canada

Click to enlarge

4. Prospector Offshore HE-HS Jackups

# Name

Year

Built

upgraded

Spec.

Feet/K feet

Contract

End

Current day-rate

$ K

Information

(Est. Days)

at 0 revenue Q4

Location
1

Prospector 1

Sold to SinoEnergy

2013

JU 2000E

HS-HE

Mid 9/16

185

(Fee $71k/d to $42k/d)

Option till 2018

(1Y and 4 6m)

Five-year bareboat rental charter

[Total] UK NS
2

Prospector 5

Sold to SinoEnergy

6/2014

JU 2000E

HS-HE

Mid 11/17

218

(Fee $71k/d to $42k/d)

Option till 2018 (2x 1Y)

Five-year bareboat rental charter.

[Total] UK NS
3 Prospector 6

4/2015

Delayed

JU 2000E

HS-HE

Available Option
4 Prospector 7 9/2015

JU 2000E

HS-HE

Available Option
5 Prospector 8 3/2016

JU 2000E

HS-HE

Available Option
Click to enlarge

Note: Prospector has the option to delay the delivery of Prospector 6. The three rigs (P6, P7 and P8) are being constructed on a non-recourse basis with no parent company guarantees. They do not figure into the fleet status anymore.

Cold Stacked and Ready Stacked Rigs

Note: Ready stacked includes warm stacked, hot stacked and available.

Name Year built Location Last contract date status
DPDS1 1979 US GoM 11/14 Cold stacked
DPDS2

1981/2002

2011

Cape Town 9/15 Ready stacked
MDS1 1975 UAE 10/15 Stacked
C462 1982 North Sea Late October Ready stacked
L1111 1982/2004 US GoM 11/13 Cold stacked
L1113 1975/1993 US GoM 5/15 Cold stacked
L1114 1982 US GoM 10/14 Cold stacked
L1115 1976/2001 Relocated to UAE Late October Ready stacked
L1116 1977-1996 US GoM 11/13 Cold stacked
L783 1982-2003 Cameroon 7/15 Cold stacked
L785 1981-1995 Malaysia 4/15 Cold stacked
M531 1972-1998 US GoM 12/14 Cold stacked
M821 1976-2003 US GoM 2/15 Cold stacked
M823 1979-1999 US GoM 11/14 Cold stacked
L781 1982-1998 US GoM 5/15 Cold stacked
B301 1976-1993 US GoM 6/15 Cold stacked
M841 1975/1997 US GoM 9/15 Cold stacked
M824 1982 US GoM 9/15 Cold stacked
L782 1981/1995 Cameroon 10/15 Ready stacked
C20052 1980 North Sea 2/16 Stacked(now?)
M826 1983/1990 Tz 2/16 Stacked(now?)
Click to enlarge

Note: C20052 and M826 were finishing their respective well and may have rolled off contract very recently or will in a few days.

Fleet Status

Total Drillship Semi-submersible Jackup
Working 21 1 2 16
Stacked 19 2 1 18
Total 40 3 3 34
Click to enlarge

Commentary:

Paragon Offshore released its February fleet status on Feb. 16, 2016. It was no new contract and only a few changes. I calculated a remaining backlog of $797 million that extends to 2017 only, which is extremely worrisome. Here is the repartition of the backlog from 2016 to 2018.

I believe this simple graph above, is explaining the fundamental problem of the company and to some extent to the entire offshore drilling industry. Furthermore, it is important to notice that a good part of this backlog is disputed by Petrobras, and the company is still negotiating. The dispute is approximately 380-day of the contract drilling backlog or about $130 million.

Recently, PGNPF declared bankruptcy and saved common shareholders from an immediate disaster. In short, the bondholders will exchange $984 million of debt for 35% of the share outstanding, and $345 million in cash payment. But, of course, looking at the backlog and the overall situation, it is solely a temporary relief.

However, ~$1.4 billion secured debt is still remaining, and the cash position is now $224 million. The new covenants are a tiny less draconian with a consolidated EBITDA 2017 equal or above $248 million. I sincerely wonder how PGNPF will be able to deliver such EBITDA in 2017?

I do not want to be over-pessimistic, but PGNPF needs a miracle at this stage of the game. The miracle is a sudden and strong increase in the oil prices due to a new geopolitical situation and instability in the Middle East with a rapid drop in oil production. This situation may push some oil operators to contract some of the jackups Paragon Offshore is operating, thereby increasing the probability of new contracts. But, of course, it is highly improbable in such a limited time.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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