Paragon Offshore - Complete Fleet Status As Of June 13, 2016, And Commentary

| About: Paragon Offshore (PGNPQ)

Summary

Paragon Offshore released its fleet status on June 13, 2016. No new contract or contract extension and another rig stacked.

Actually, only 12 JUs are working and the drillship DPDS3 will roll off contract early August 2016. 4 JUs will roll off contract before the end of 2016.

Long term, I do not see how Paragon Offshore can survive this down cycle, and I believe it will be back in bankruptcy court next year, barring a miracle.

Paragon Offshore (OTCQX:PGNPQ)

This article is an update to my preceding article about Paragon on May 10, 2016.

Fleet status report June 13, 2016, click here.

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

Will be terminated on 8/16

347

[Petrobras] Brazil

Click to enlarge

Note from the company:

- Petrobras (NYSE:PBR) has advised us that they will release the rig DPDS3 in early August 2016, as they are disputing approximately 380 days of the drilling contract, which was scheduled to end late August 2017. We will pursue all legal remedies available to us under the contract.

- Petrobras early-released the rig DPDS2 in September 2015, as they are disputing approximately 520 days of the drilling contract, which was scheduled to end early March 2017. We will pursue all legal remedies available to us under the contract

2 - PGN has no more SemiSubmersible working. However, it is possible but not confirmed, that the semi-submersible MSS1 has been contracted later this year. I commented on this issue on May 12, 2016.

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

(29d)2Q'16

2

C20051

1982/2005

360/25

Late 6/16

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

HZ1

1981

213/35

Early 9/16

142

[Wintershall]

UK

7

L784

1981/2002

300/20

Early 6/16 - Early 11/16

95

Early termination

[NDC/ZADCO]

UAE

8

L786

1983/1998

300/25 3/18 53

[Dynamic Drilling/ONGC]

Bareboat chartered

India

(7d) 2Q'16

9

C461

1982

205/25

mid 11/17

113

[ONE]

NL

10 M1162 328/30 1/1/16 - Mid 1/19 85

[NDC]

In/UAE

11

Prospector 1

2013

JU 2000E

HS-HE

Mid 9/16

185

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

[Total]

UK NS

Sold to SinoEnergy

12

Prospector 5

6/2014

JU 2000E

HS-HE

Mid 11/17

218

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

[Total]

UK NS

Sold to SinoEnergy

Click to enlarge

4. Prospector Offshore HE-HS Jackup newbuild.

#

Name

Year built

Spec.

Feet/K feet

Contract

End

Information

1

Prospector 6

Delayed

JU 2000E

HS-HE

Available Option
2

Prospector 7

delayed

JU 2000E

HS-HE

Available Option
3

Prospector 8

delayed

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 Ready Stacked
M826 1983/1990 Tz 2/16 Stacked in UAE
MSS1 1979/2000 North Sea 3/16

Ready stacked?

MSS2

1977/2004 GoM 4/16 Transit to Puerto Rico for stacking.

M842

1975/1995 GoM 3/16 Stacked
C463 - North Sea 4/16 Ready Stacked per Rigzone

M825

1984/2003 West Africa? 4/16 Ready Stacked per Rigzone
B391 1981/2001 UK 5/16 Ready stacked per Rigzone
Click to enlarge

Fleet status:

Total Drillship Semi-submersible Jackup
Working 13 1 0 12
Stacked 27 2 3 22
Total 40 3 3 34
Click to enlarge

Important Note: Backlog estimate only.

Paragon is including $142 million contested by Petrobras that will not be paid. If this amount is not paid in 2016, the backlog as of 6/14/2016 will be $325 million.

Furthermore, the Prospector 1 and Prospector 5 have been sold and Paragon must pay the owner of the rigs a long-term lease.

A total of $307 million is owed ($38 m/2016, $41m/2017, $33m/2018, $31m/2019 and $164m/2020). This amount will be paid whether the rigs are contracted or not.

Assuming this amount is deducted from the backlog, Paragon has only $241 million left, which is alarming.

From the 10-Q (Petrobras dispute):

...Remedies available to us under these contracts. The Paragon DPDS3 is currently expected to work until August 2016, according to Petrobras' interpretation of the contract. As of March 31, 2016, the Paragon DPDS3 drilling contract constitutes $191 million of our contract drilling services backlog, including $142 million being contested by Petrobras. Any material changes in these contract terms will have a material impact on our financial position.

Conclusion:

The Fleet Status Report is showing again a full collapse of the revenue starting Q3'16, and the situation will not change until well after mid-2017.

The B 391 is now ready stacked according to Rigzone.

Actually, only 12 JUs are working and the drillship DPDS3 will roll off contract early August 2016. 4 JUs will roll off contract before the end of 2016.

  1. C 20051, late June 2016.
  2. HZ1 early September 2016
  3. L784 early November 2016
  4. Prospector 1, mid November 2016. The rig is leased until 2020 whether it is contracted or not.

The company situation is quite dramatic, right now, and any recovery is not expected before H2 2017.

On March 25, 2016, the company filed an 8-K SEC filing to announce the following:

As previously reported, on February 14, 2016, Paragon Offshore plc (the "Company") and certain of its subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief (the "Bankruptcy Cases") under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").

In connection with the Bankruptcy Cases, on March 24, 2016, the Debtors filed an amended plan of reorganization (the "Amended Plan") and disclosure statement (the "Amended Disclosure Statement") with the Bankruptcy Court.

The "plan" is subject to vote and approval by the end of June.

I have commented about the situation already, and indicated that the "projections" for 2017, 2018 and 2019 were totally overestimated.

The company "projects" a total revenue of $2.745 Billion between 2017 and 2019.

Here is a graph comparison between actual projection based on backlog and "virtual projection" submitted to the judge. I do not even mention the $142 million disputed by Petrobras.

I will not enter the details here, but I believe the "bankruptcy plan" will be most likely approved, despite this illogical situation, and some justified objections from the term loan lenders. It is unfortunate, and this action will eventually hurt many shareholders down the road who will not be able to separate reality and fiction.

I still do not recommend any investing or any trading on PGNPQ unless you like gambling. The price per share is moving widely on no news and cannot be justified by the fundamental.

Long term, I do not see how Paragon Offshore can survive this down cycle, and I believe PGNPQ will be back in bankruptcy court next year, in my opinion. However, let see what will be decided at the end of this month, first.

Important note: Do not forget to be one of my followers for the Offshore drilling sector and get updated frequently. Thank you

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.

Additional disclosure: I only day trade PGNPQ (mostly on the short side)on special occasions. I have no position right now.

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