Paragon Offshore (OTCQX:PGNPQ)
Image: Paragon Offshore Jackup L785
This article is an update to my preceding article about Paragon on July 19, 2016.
Fleet status report August 8, 2016, click here.
2. Class: Semisubmersibles
(Est. Days) at 0 revenue Q4
|4/25||Late 8/16-Late 10/16||110|| |
3 - Class: Jackups
Rate at 0 revenue
|1||Dhabi II |
Noble Ed Holt
|300/25||mid 3/18||53|| |
|10||M1162||328/30||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|
|1||DPDS1||1979||US GoM||11/14||Cold stacked|
|Cape Town||9/15||Ready stacked|
|3||DPDS3||1977/2005 2013||Brazil||8/16||Waiting on Location|
|2||MSS2||1977/2004||GoM||4/16||Puerto Rico for stacking.|
|1||C462||1982||North Sea||Late October||Ready stacked|
|2||L1111||1982/2004||US GoM||11/13||Cold stacked|
|3||L1113||1975/1993||US GoM||5/15||Cold stacked|
|4||L1114||1982||US GoM||10/14||Cold stacked|
|5||L1115||1976/2001||Relocated to UAE||Late October||Ready stacked|
|6||L1116||1977-1996||US GoM||11/13||Cold stacked|
|9||M531||1972-1998||US GoM||12/14||Cold stacked|
|10||M821||1976-2003||US GoM||2/15||Cold stacked|
|11||M823||1979-1999||US GoM||11/14||Cold stacked|
|12||L781||1982-1998||US GoM||5/15||Cold stacked|
|13||B301||1976-1993||US GoM||6/15||Cold stacked|
|14||M841||1975/1997||US GoM||9/15||Cold stacked|
|15||M824||1982||US GoM||9/15||Cold stacked|
|17||C20052||1980||North Sea||2/16||Ready Stacked per Rigzone|
|18||M826||1983/1990||Tz||2/16||Stacked in UAE|
|20||C463||-||North Sea||4/16||Ready Stacked per Rigzone|
|1984/2003||West Africa||4/16||Ready Stacked per Rigzone|
|22||B391||1981/2001||UK||5/16||Ready stacked per Rigzone|
|23||C20051||1982/2005||UK||8/16||Ready stacked per Rigzone|
Note: The JUs B391 (5/16 UK), C463 (4/16 North Sea), M825 (West Africa 4/16) and C20051 (NS 8/16) have not been classified as "Stacked" in the FSR since April and May, despite being effectively out of work.
Also the drillship DPDS3 is now "waiting on Loc." I am sure Lee Ahlström who does a good job by the way, has a logical explanation for this, but it would be clearer for shareholders, if the idle rigs were indicated as idle in the FSR in a special category.
The company indicated a backlog of $472 million as of June 30, 2019.
Paragon's total contract backlog at June 30, 2016 was approximately $472 million compared to $806 million at March 31, 2016. Although Paragon continues to contest the approximately $143 million of backlog associated with what we believe to be an early release of the Paragon DPDS3 by Paragon's customer Petrobras, we have removed that amount from our June 30, 2016 backlog total. The March 31, 2016 backlog total included this disputed amount.
The recent fleet status has no contract or contract extension. However, here is what happened since the last FSR that need to be indicated.
1 - The Drillship DPDS3 is not classified as "waiting on Loc" and is about to be leaving Brazil for its stacked location. The company continues to claim $142 million in loss backlog. The backlog is finally including this fact and was $471 million as of June 30, 2016.
2 - The JU C20053 is now classified as "ready stacked" by Rigzone.
4 - No news about the Prospector 1 which is scheduled to roll off contract mid-next month.
2Q'16 Financial Snapshot (7 consecutive quarters)
|Q2 2016||Q1 2016||Q4 2015||Q3 2015||Q2 2015||Q1 2015||Q4 2014|
|Earnings per share - basic||(0.29)||(0.06)||(0.27)||(12.46)||0.51||0.69||0.03|
Average daily revenues
Cash and cash equivalent
|Outstanding long-term debt $ million||197.976||217.72||2,559.5||2,569.4||1,984.4||1,990.9||1,888.4|
|Current maturities of long-term debt||666.272||667.14||40.63||-||-||-||-|
Paragon Offshore released its second-quarter results on August 8, 2016.
Revenues were $184.935 million, down 30.2% quarter-over-quarter. The net loss was $25.109 million or 0.29 per share.
The worrying point is that revenues are about to dip further, starting next quarter.
I have prepared an estimated revenues based on the actual backlog for Q3'16 to Q1'16 and we can see the seriousness of the situation.
Per my estimate, Paragon Offshore will have between $120 million and $130 million in total revenues in 3Q'16 and then this number dips to under $60 million in Q4'16 and Q1'17. This is totally dismal and begs the query. Do we have to look at the back mirror and congratulate the company or look seriously at what is occurring?
Paragon offshore is still in the middle of a legal battle to get the bankruptcy plan approved by Judge Sontchi, which is scheduled to rule in mid-October. Paragon recently amended, for the second time, the "plan" to address some issues regarding the business outlook and renegotiated with the bondholders and revolving credit facility banks. Please, read my preceding article.
On August 5, 2016, Paragon published the new amendment plan, and a new shares outstanding repartition less favorable for PGNPQ shareholders, but still quite impressive (47%/53%).
Personally, I do not value this new deal as "feasible" in the long run. Paragon Offshore is not going to survive after this first bankruptcy, and a more honest plan should be presented, including the whole debt, to the Judge Sontchi.
The stock jumped to over 0.70 after the deal was unveiled with the Bondholders and Revolving Credit Facility Banks. I indicated that the stock was an opportunity below 0.40, and I happy to sell out at over 0.70.
Nonetheless, the stock is trading with too much volatility, as we speak, and I expect the same basic pattern until October.
It is quite an opportunity for traders only, and if you can catch the right timing(s) you can profit handsomely.
It is not an investment and the ones who want to invest in the offshore drilling sector should avoid this penny stock.
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 may buy again under 0.45
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