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
(Est. Days) at 0 revenue Q4
Will be terminated on 8/16
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
Rate at 0 revenue
Early 6/16 - Early 11/16
|10||M1162||328/30||1/1/16 - Mid 1/19||85|| |
|Mid 9/16|| |
(Fee $71k/d to $42k/d)
Sold to SinoEnergy
|Mid 11/17|| |
(Fee $71k/d to $42k/d)
Sold to SinoEnergy
4. Prospector Offshore HE-HS Jackup newbuild.
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|
|Cape Town||9/15||Ready 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|
|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|
|C20052||1980||North Sea||2/16||Ready Stacked|
|M826||1983/1990||Tz||2/16||Stacked in UAE|
|1977/2004||GoM||4/16||Transit to Puerto Rico for stacking.|
|C463||-||North Sea||4/16||Ready Stacked per Rigzone|
|1984/2003||West Africa?||4/16||Ready Stacked per Rigzone|
|B391||1981/2001||UK||5/16||Ready stacked per Rigzone|
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.
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.
- C 20051, late June 2016.
- HZ1 early September 2016
- L784 early November 2016
- 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.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.