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  • Seadrill At Imminent Risk Of Bankruptcy... Really?
     • Mon, Dec. 15 SDRL 98 Comments

    Summary

    • Some people have suggested that Seadrill may be in imminent risk of bankruptcy but the numbers say otherwise.
    • Seadrill has a much higher debt-to-equity ratio than its peers. That is the cause of these fears.
    • The company's strong contract status provides significant visibility into its forward revenues and cash flows.
    • Seadrill generates significant operating cash flow and should be able to pay off its debt as it comes due.
    • There are still risks, but the company does not appear to be at high risk for bankruptcy at this time.
  • Seadrill And North Atlantic Drilling Discuss The Conditions In The Offshore Drilling Industry
    Tue, Dec. 9 SDRL 54 Comments

    Summary

    • Seadrill and North Atlantic Drilling consistently provide excellent analysis of the offshore drilling industry in their quarterly reports.
    • Short-term, both the ultra-deepwater floater market and the jack-up market face significant pressures but the long-term fundamentals are quite strong.
    • Over the next few years, aging rigs are likely to be scrapped which will help to relieve the current oversupply of rigs.
    • Oil companies look likely to increase their demand for the rigs over the next years.
    • The next few years are likely to be quite challenging for the companies in the offshore drilling industry.
  • North Atlantic Drilling's Results Are Much Stronger Than The Market Reaction To Them Indicates
    Wed, Dec. 3 NADL 97 Comments

    Summary

    • North Atlantic Drilling's results showed strong quarter-over-quarter and year-over-year growth, including a record EBITDA.
    • The company is well positioned for growth going forward due to the enormous amount of oil that is located off the coast of Siberia.
    • Rosneft is committed to developing its Russian reserves and North Atlantic Drilling has the most modern and capable fleet to assist in this endeavor.
    • The development timetable for these Russian reserves is somewhat uncertain.
    • North Atlantic Drilling's dividend cut was not out of necessity but was done so the company could strengthen its finances and better weather near-term headwinds.
  • First Thoughts On Seadrill's Earnings Report And Reasons Not To Panic
    Wed, Nov. 26 SDRL 136 Comments

    Summary

    • Seadrill announced earnings that were quite solid despite the company's dividend suspension.
    • Seadrill is now largely booked until the end of 2015, with only 9% availability following the awarding of four contracts from Petrobras.
    • Seadrill's dividend suspension will allow it to reduce its debt significantly going forward and thus strengthen its balance sheet.
    • The company also plans to buy back up to 10% of its current shares outstanding.
    • Despite the pain that income investors are feeling now, the suspension of the dividend was actually a very prudent decision that positions the company well for the future.
  • Chinese And Russian Demand Provides Reasons To Be Bullish On Gold
    Mon, Nov. 24 GLD 21 Comments

    Summary

    • Gold has proven a difficult asset to hold in recent months as the dollar continues to strengthen and gold prices weaken due to the pressure this exerts.
    • The actual fundamental dynamics of the market prove much more promising, however.
    • The Russian Central Bank recently increased its purchases of gold several times over.
    • The Chinese citizenry are now purchasing nearly all of the world's annual gold production and the PBOC is also likely to be a significant buyer.
    • China has opened a physical gold exchange that could prove to be a game changer.
  • Could International Support For The U.S. Dollar Be Waning?
    Mon, Nov. 24 UUP, UDN, CRUD 7 Comments

    Summary

    • The primary reason why the U.S. dollar is the reserve currency is that it is the dominant currency in the oil trade.
    • This dominance provides a source of artificial strength in the dollar as it increases demand for U.S. dollars and U.S. Treasury securities.
    • International support for this standard continues to wane as three countries recently agreed to trade oil to China in yuan and not U.S. dollars.
    • The nation of France also appears to be moving away from using the dollar as the standard currency of international trade.
    • If support for the dollar continues to fade, the U.S. would likely see rising interest rates and inflation at home.
  • Decline In Oil Prices Unlikely To Affect Linn Energy's Distribution
    Thu, Nov. 20 LINE 60 Comments

    Summary

    • Linn Energy pays its distribution by pulling oil out of the ground and selling it.
    • The stock has declined along with oil prices, likely due to fears that the distribution will be cut.
    • Linn Energy maintains a hedging program that effectively locks in a sale price for the company's oil production.
    • The company also has a significant margin of safety in its cash flows that could help it maintain the distribution.
    • Linn Energy's distribution is likely in no danger in the short-term.
  • Could Forward GDP Growth Prove More Elusive Than In The Past?
    Thu, Nov. 13 DIA, SPY, QQQ 9 Comments

    Summary

    • Nominal GDP is equal to the velocity of money times the size of the money supply and velocity has been slowing rapidly since the 1980s.
    • This means that all economic growth comes from increasing debt loads because in our financial system all money is debt.
    • The effect that each additional dollar of debt is having on GDP is diminishing.
    • At some point, the continual expansion of debt could stop having any effect on GDP or even begin reducing it.
    • This is due to the U.S. economy becoming increasingly focused on non-value adding speculative transactions instead of actually producing things that people need.
  • Pacific Drilling's Latest Results Show Company's Growth Potential And An Improved Ability To Weather Industry Downturn
       • Thu, Nov. 13 PACD 8 Comments

    Summary

    • Pacific Drilling's third quarter results showed significant quarter-over-quarter and year-over-year growth in virtually all metrics.
    • Pacific Drilling is likely to show even further growth in the fourth quarter due to the start-up of a new rig.
    • Pacific Drilling is recommending the initiation of a share buyback program pending approval by the stockholders.
    • The company is in talks for two of its three rigs that need new contracts. This could result in further growth next year if it gets these contracts.
  • Seadrill's West Vela Deal Shows The Company's Financial Flexibility
    Editors' Pick • Tue, Nov. 11 SDRL 21 Comments

    Summary

    • Seadrill is selling the West Vela ultra-deepwater drilling rig to a subsidiary of Seadrill Partners.
    • This will reduce Seadrill's debt and increase its cash position.
    • The deal will increase Seadrill's ability to maintain its dividend.
    • Seadrill's cash flow will not be significantly impacted by the deal.
  • Ensco's Q3 2014 Earnings Report Shows Company's Ability To Weather Industry Storm
    Thu, Nov. 6 ESV 6 Comments

    Summary

    • Ensco's Q3 2014 report shows significant year-over-year growth despite weakness in the industry.
    • Ensco has a large revenue backlog representing nearly nine quarters of revenue at its current level.
    • Ensco has one of the newest floater fleets in the industry and has less availability than many peers.
    • Despite the company's fundamental strength, the share price has been hammered by oil price weakness and challenging industry conditions.
  • Despite Some Risks, Pacific Drilling Could Offer Interesting Opportunity
    Sat, Nov. 1 PACD 10 Comments

    Summary

    • Pacific Drilling's stock price has gotten beaten down with the rest of the companies in the offshore drilling industry.
    • Pacific Drilling has one of the newest fleets in the industry and demand for these rigs has held up much better than for the broader ultra-deepwater fleet.
    • The company still needs to secure contracts for two new rigs in the next six months.
    • Pacific Drilling has another rig coming off contract in February 2015 that needs a replacement contract.
    • Despite these risks, the company could present an interesting opportunity for investors willing to take on the risk.
  • Tracking Utilization And Day Rate Trends In The Offshore Drilling Industry - October 2014 Edition
    Thu, Oct. 30 PACD, SDRL 10 Comments

    Summary

    • The offshore drilling industry has been hit hard with concerns about falling dayrates and utilization.
    • A closer look at the actual figures though reveals that much of this fear is misplaced.
    • Some types of rigs continue to enjoy 100% utilization.
    • Even among ultra-deepwater rigs, modern drillships have shown remarkable strength in both utilization and dayrates.
    • Hardest hit have been those older ultra-deepwater semisubmersible units.
  • Markets Are Not Considering Weakness In Middle Class
    Tue, Oct. 28 WMT 9 Comments

    Summary

    • The middle class is frequently considered to be the driving force of the American economy.
    • The middle class has less discretionary income than in the past due to the rising costs of necessities at a rate that exceeds inflation.
    • Unless this is reversed, this group will not be able to consume like they have in the past.
    • Yet, markets continue to ignore this reality and are still near all-time highs.
  • A Few Reasons To Be Cautious On ExxonMobil
    Sat, Oct. 25 XOM 32 Comments

    Summary

    • ExxonMobil has several problems which need to be corrected in the next few years.
    • The company's production levels have been steadily declining since 2009.
    • ExxonMobil is not generating enough free cash flow to finance its enormous share buyback program and dividend commitments.
    • ExxonMobil has been taking on debt to finance its dividend and share buybacks.
    • Many of ExxonMobil's forward growth projects are in Russia, which the company is pulling out of.
  • Statoil's New Gas Discovery Strengthens Company's Position To Be A Major Supplier To Growing Asian Markets
    Editors' Pick • Wed, Oct. 22 STO 11 Comments

    Summary

    • Statoil recently made its seventh major discovery in the gas-rich block 2 region offshore Tanzania.
    • Tanzania is ideally positioned to ship natural gas to Southeast Asia.
    • Several countries in Southeast Asia are likely to greatly increase their imports of natural gas over the next two to three decades.
    • Statoil has sufficient gas reserves in the country to become a major supplier to these countries.
    • The company is currently constructing the needed infrastructure to take advantage of this trend.
  • The Market Seems To Be Overestimating Seadrill's Risk
    Thu, Oct. 16 SDRL 97 Comments

    Summary

    • The market has been severely punishing Seadrill's stock price in recent weeks due to fears of a dividend cut, debt maturation, and a weak drilling environment.
    • Seadrill's strong contract position should provide it with some stability to its cash flows.
    • Seadrill has reduced its debt by more than $3 billion YTD and this provides some confidence in its ability to handle its maturing debt.
    • Offshore drilling contractors are likely to scrap old floaters going forward at a rate in excess of the rate of construction, reducing supply.
    • E&P companies are likely to demand more rigs going forward as a greater percentage of their reserves is found in deep- and ultra-deepwater.
  • Could The 'Shale Oil Miracle' Be Just A Pipe Dream?
    Editors' Pick • Tue, Oct. 14 OXY, PXD, SDRL 191 Comments

    Summary

    • Technological developments such as directional drilling and hydraulic fracturing have allowed the United States to significantly increase its production of crude oil from various tight oil plays.
    • This production suffers from numerous problems including very high costs and steep decline rates.
    • Few companies operating in these formations have made any money and nearly all are depending on friendly capital markets to survive.
    • Costs and decline rates appear to be getting worse, making it more difficult for these firms.
    • EIA projections show that it is unlikely that the United States will ever be a net exporter of oil.
  • Examining Telenor's Huge Opportunity In Myanmar
    Fri, Oct. 10 TELNF 1 Comment

    Summary

    • Last month, Norwegian telecommunications firm Telenor ASA began to operate in the Southeast Asian nation of Myanmar.
    • Myanmar has a large population and virtually no telecommunications infrastructure, providing an enormous opportunity for Telenor.
    • Telenor has a proven successful strategy that it will be using in the country.
    • The company's operations in the country are unlikely to turn a profit for the next three years.
  • TeliaSonera's Declining Stock Price Partially Attributable To Currency Fluctuations
    Thu, Oct. 9 TLSNF, TLSNY Comment!

    Summary

    • Currency fluctuations can have a significant impact on foreign investments.
    • This is because the stock price is typically denominated in a foreign currency so the value of that currency relative to the dollar affects how Americans value it.
    • TeliaSonera's stock price has been driven down partly due to the USD rising dramatically against the Swedish krona.
    • This could represent an opportunity for investors due to the stock's high dividend.
  • North Atlantic Drilling: Sanctions And Offshore Drilling Weakness Are Not Likely To Be A Problem
    Editors' Pick • Wed, Oct. 8 NADL 275 Comments

    Summary

    • North Atlantic Drilling's share price has suffered severely over the past few weeks.
    • One reason for this has been the falling price of oil, but North Atlantic Drilling's revenues and cash flow do not depend on oil prices.
    • Another reason for the share price decline has been the weakness in the offshore drilling industry but the company's focus on harsh-environment drilling makes this unlikely to be a problem.
    • Finally, North Atlantic Drilling has been punished for its recent deal with Rosneft due to fear of sanctions preventing the deal from being executed.
    • For several reasons, I do not believe that these sanctions will be a concern for the company and it will continue to operate as normal.
  • September Jobs Report Was Weaker Than Headlines Claim
    Mon, Oct. 6 SPY, DIA, QQQ 2 Comments

    Summary

    • The September jobs report showed the unemployment rate dropping to 5.9% as 248,000 jobs were created.
    • The labor force participation rate also decreased as workers dropped out of the workforce. It is now at its lowest level in 36 years.
    • Average wages also decreased. This could make it difficult to maintain the consumer-focused economy in the United States.
    • So far this year, wages have at best kept up with reported inflation. This is not a sign of a growing economy.
    • A significant number of the new jobs created pay below average wages.
  • Seadrill Is Well-Positioned For The Current Difficulties In The Industry
    Editors' Pick • Wed, Oct. 1 SDRL 168 Comments

    Summary

    • Seadrill has been one of the most rapidly growing offshore drilling contractors over the past decade.
    • Today, the company has one of the largest ultra-deepwater and shallow-water fleets in the industry.
    • Seadrill's contract position is much stronger than that of the other large offshore drilling companies.
    • Seadrill's modern fleet better positions it to weather the current ultra-deepwater weakness than its peers.
    • The company remains cautiously optimistic about the shallow-water market going forward, due to the large number of old rigs that may be scrapped and replaced.
  • Norway's Telenor Offers High Yield And Growth Prospects
    Wed, Sep. 24 TELNF 7 Comments

    Summary

    • Telenor is one of the largest telecommunications concerns in the world, boasting more than 176 million mobile subscribers.
    • Many of the company's subscribers are in Asia, in nations where smartphone penetration is low and few people use mobile data.
    • As smartphones become commoditized, prices should drop and many of these non-users will begin to purchase and use them.
    • This will result in steady growth going forward.
    • Telenor currently yields nearly 5% and is likely to increase its dividend going forward.
  • Debunking The Bear Case For Seadrill
    Editors' Pick • Tue, Sep. 23 SDRL 39 Comments

    Summary

    • Analysts issuing warnings about Seadrill's dividend being in jeopardy make some valid points but they may be overstating the problem.
    • Demand for modern units such as those owned by Seadrill is much stronger than for older drilling rigs.
    • Seadrill has some opportunities available to it to pay down its near-term debt including refinancing and selling West Jupiter to Seadrill Partners.
    • Seadrill has no floating rigs coming off of contract this year, but it may see pressure on its cash flow next year if it fails to secure new contracts.
    • The risks of a dividend cut are currently priced into the stock at the current levels.
  • Ascendas REIT Offers Growth Potential And A High, Stable Dividend
    Thu, Sep. 11 ACDSF 2 Comments

    Summary

    • Ascendas REIT is a large and well diversified business space and industrial real estate investment trust.
    • The trust's properties are occupied by 1,330 tenants from a wide cross section of industries.
    • The long-term commercial leases that the trust has with its tenants provides it with protection against short-term market fluctuations.
    • Ascendas REIT purchased a new property a few weeks ago that should allow it to continue its historical growth in net property income and distributions.
    • Ascendas REIT currently yields 6.03%, making it a good play for an investor seeking growth and income.
  • Seadrill Partners' Second Quarter Results Show Growth And The Sustainability Of The High Distribution
    Mon, Sep. 8 SDLP 1 Comment

    Summary

    • Seadrill Partners' second quarter results show significant quarter-over-quarter growth.
    • This growth was primarily due to improved rig uptime performance and the presence of a new rig in its fleet.
    • For the first time since the first quarter of 2013, Seadrill Partners generated sufficient cash flow to cover its 6.63% distribution in full.
    • The company's long-term contracts should ensure that its cash flows are stable to growing going forward.
  • Seadrill's Results Stronger Than Headlines Claim And Reveal Strong Forward Growth Potential
    Wed, Sep. 3 SDRL 56 Comments

    Summary

    • Seadrill's failure to meet the expectations of analysts and the cautious outlook issued by the company resulted in the stock being punished.
    • A closer look at these results reveal that the company's results are actually stronger than they initially appear.
    • Seadrill's recent success at winning rig contracts for its newbuilds will result in growth going forward.
    • Drilling rig dayrates have been falling due to competitive pressures but Seadrill is well-positioned to weather this.
    • The company's macro-environment is likely to improve in the future.
  • North Atlantic Drilling's Earnings Report And Rosneft Deal Show Strong Growth Potential
    Wed, Sep. 3 NADL 17 Comments

    Summary

    • North Atlantic Drilling's revenues and profits grew significantly quarter-over-quarter, as evidenced by its latest earnings report.
    • The improved fleetwide uptime and new rig were the reasons for this growth.
    • The West Linus rig is likely to result in further quarter-over-quarter growth in the third quarter.
    • North Atlantic Drilling's deal with Rosneft will result in further growth due to the company needing to construct two more rigs to meet its contract.
    • The company will also see further growth due to its purchase of Rosneft's onshore drilling fleet.
  • Pacific Drilling Second Quarter Results Show Growth Story Playing Out
    Thu, Aug. 28 PACD 21 Comments

    Summary

    • Pacific Drilling announced very impressive second quarter results earlier this month.
    • The company achieved its highest revenue in history due its lack of downtime and solid reliability from its rig fleet.
    • The company has a new rig starting on its first contract in the third quarter that will result in both third and fourth quarter growth.
    • Pacific Drilling has two more new rigs that will serve as drivers for its growth going forward, assuming they can obtain contracts.
    • There is a good chance that Pacific Drilling's new rigs will obtain such contracts before they are ready to begin working.
  • Noble Corp.'s Contract Status Could Have An Adverse Impact On Revenues In The Near Term
    Wed, Aug. 27 NE 1 Comment

    Summary

    • Offshore drilling giant Noble Corp. has a number of drilling rig contracts that will be expiring prior to the end of 2014.
    • The expiration of these contracts will put downward pressure on revenues, should the company fail to secure new contracts.
    • There are signs that Noble will be able to secure new contracts for at least some of these rigs prior to the end of the year.
    • Lower dayrates on the new contracts may still put pressure on revenues.
    • Noble still has the potential for growth throughout 2015.
  • Understanding The Current Conditions In The Offshore Drilling Industry And Understanding Future Trends
    Wed, Aug. 20 ESV, NADL, PACD 45 Comments

    Summary

    • Various Wall Street firms have downgraded the companies in the offshore drilling industry. While their concerns appear to be valid, it is a more complicated situation than most think.
    • There is no weakness in the harsh-environment market at all.
    • The jack-up market was the bastion of the strength in the industry and still is, although recent trends are concerning.
    • The conditions in the ultra-deepwater market do not appear to be as bad as the market believes.
    • The long-term future of the ultra-deepwater industry is quite bright.