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William M. Wright

 
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  • Transocean Ltd: Fleet Analysis As Of October 15 And Commentary [View article]
    "Transocean Ltd., and the whole offshore driller industry have entered a bearish cycle due to the sudden drop of the price of oil."....Very true. But also true looking at the charts it along with almost every offshore and deep-water drillers has been in a downward bearish trend with extremely weak relative strength to the market trends since the beginning of 2014 and in RIGs case since 2013. Clearly more is at play than just the last two months fall in oil prices (unless institutional investors became clairvoyant on Oil prices in the last quarter of 2013).

    This is a cycle business and dividends get expanded in good times and cut in bad times so I wouldn't worry over that so much. It will happen in a downturn. I'd worry more about the success of America's land drilling and advanced recover methods slowing down the large oil companies deep-water exploration spending. Plus a strong market has brought out new offshore driller IPO's e.g. NADL. And with NE's SDRL's and ESV's expansion during those 2005-2008 deep-water boom years RIG is no-longer considered the King of Offshore drilling. A dividend is only as safe as the future demand/outlook for a companies product. And expanding competion combined with slowing demand is always a bad combination for any company/industries profitability/outlook.

    Still, I agree with "FUN" RIG is in no near-term financial danger and it's to early to know how long oil may stay this low. Some "experts" feel it could easily fall to the mid-to-high $70 before holding near-term. Those who believe it will quickly fall to $60 or jump back to $100 soon will most likely be proven wrong.

    So I'd worry more about RIG's declining market share and the large supply of new rigs coming on-line in the middle of a projected slow down in world economic growth and falling oil prices.

    In 2009 during the worst of the financial markets panic and complete collapse in oil prices to $50 or about 40% below current levels RIG stock never fell below $42. In 2010 with the deep-water horizon disaster RIG never fell below $41. Today RIG is below $30 even after a 250 point bounce in the market and with oil holding above $79. Examining ESV's and SDRL's price action during the same period would cause me to conclude they've gained market share at DO's and RIG's expense. (Fair disclosure just so no one thinks I'm looking to short RIG at these levels. I don't short individual stocks. And I did just buy back into RIG @ $29 and SDRL @ $23 in hopes of a little value bounce this November)
    Oct 19 05:44 PM | Likes Like |Link to Comment
  • Seadrill Looking To Make Lemonade From Lemons [View article]
    Always great to have banking/financing flexibility. If crafty Fredriksen, owns 23.3% of SDRL, and is open to making more open market purchases of SDRL shares following his purchase of 2 million shares on September 23 which was at around $28. I'm willing to buy back my summer sold shares of SDRL today under $23. But if you've got one of the most modern deep-water fleets with about 30% contact openings in 2016 then don't waste time looking for bargain basement prices on aging and outdated equipment...that would be a major mistake....SDRL doesn't need expanded leverage/capacity....it just needs to focus on it's renewal contracts and finding leases for those new Rigs coming on-line in 2015 and 2016.
    Oct 16 11:34 PM | 2 Likes Like |Link to Comment
  • The Market Seems To Be Overestimating Seadrill's Risk [View article]
    Excellent summary of the issues and opportunities for SDRL. "There are currently about 300 floating rigs worldwide and approximately 128 of these are more than 25 years old." With nearly 50% of the deep-water Rigs over-the-hill and the 'Deepwater Horizon' oil spill costing BP (alone) $20+ billion it's likely lessees and their insurance companies will want their new contracts with the newest and safest RIGs.
    Oct 16 11:05 PM | 5 Likes Like |Link to Comment
  • Morgan Stanley optimistic about Seadrill, but still eyes lower dividend [View news story]
    SDRL dividend levels are at mortgage REIT levels after their panic selling back in 2013. This whole deep-water rig sector has sold off these last two months (along with commodities) like institutions are expecting EPS to be cut by 50% in 2015. Has anyone heard any analyst anticipating that scenario? The last time it was down to $22-19 levels was back in 2010. Even a 50% dividend cut means new buyers would be getting a dividend double the average integrated oil company.

    Some institutions must think the bottoms in for DO based upon the price action I've been following last week and this week. It traded down to around 32.75 on 10-03-14 and today it's at 38.75 climbing after ever day opening sell-off to close up. No idea why anyone would want to make DO their first buy (unless there was a buy-out rumor). Even during today's markets 400 point fall and yesterdays tumble in oil prices it was still $4.00 above it's 10-03-14 level. ESV, RIG and SDRL are all starting to get buyers coming in this week on every opening day sell-off. Today even NE got buyers stepping in. So it looks like it's time for me to dive-in and buy back what I sold this summer.
    Oct 15 08:58 PM | 5 Likes Like |Link to Comment
  • The Forgotten Issue Facing Seadrill [View article]
    Dan it's a well written good article pointing out the supply risk of new SDRL rigs coming online in a slowing market obviously already well supplied with declining oil prices. Claims from names from parts unknown that Dan's article provided nothing new or was just another "Bashing on SDRL" is ridiculous, as others more frankly pointed out. Analyst began downgrading the 2015 outlook for deep-water drillers months ago. But value lovers (my self included) back then considered it unnecessary bashing when one analyst downgraded SDRL to a price target of $30-28. There's a reason institutions have been selling off their positions in deep-water drillers and they don't get paid to write "Stock Bashing" articles nor refuting those who refuse to understand the macro-trend changes since 2008. In a growing world economy with China and emerging markets in high gear and declining USA land drilling and everyone pushing "Peak Oil" fears increasing leveraging with the latest technology fleet would help SDRL contract pricing power and gain market share. But this isn't 2005-2008 anymore. Nor is it the oil price and economy/market rebound of 2009-10. Yes, SDRL, ESV and NE have an excellent newer fleet. But that didn't prevent their stock prices from falling with the rest of the oil sector Sept-Oct market massacre. Yes the USA economy is stable but increasing oil and rig supply combined with falling oil prices, slowing world economies and geo-political risk promoted institutional investors to be net sellers. Now you've got a whole market in correction mode. And if the VIX which has had a three day super-nova spike to over 24 today doesn't fall back soon more negative market days are ahead. Even the major airlines who's 2015 profitability outlook is outstanding is getting both a Market Correction and Ebola Panic haircut this month too.
    Oct 14 12:09 AM | 4 Likes Like |Link to Comment
  • Pacific Coast Oil Trust And Measure P [View article]
    At this point for those outside a qualified retirement plan seeking to reduce their risk ROYT options maybe the best opportunity. VIX is hitting another new 1 year high today @ 22. In the past VIX two year VIX spikes to this level it took large drops in the following week. If it doesn't fall below $20 soon that's an ominous sign for market/stocks (regardless of USA economic/earnings outlook) and doubtful we'll get the usually buy on the 5% dip institutional buying as in the past. As mentioned ROYT now has the added problem of falling oil prices (and a falling market) which is likely the primary reason for the last $1 to $2 or 10% to 20% drop. Yet, at this point it's hard to image new ROYT purchases getting hurt much after this months massacre.

    Interesting to note for those interested in dividends: Traditional mortgage REIT which got clobbered during last years and this summers expected rise in interest rates stop declining and are on the rise again e.g. WMC, OAKS, MTGE, MITT, AGNC (fair disclosure I've purchased all of them for accounts I manage inside qualified retirement plans)
    Oct 13 11:12 AM | Likes Like |Link to Comment
  • Seadrill: Falling Knife Or Not, The Fundamentals Say 'Buy Me' [View article]
    Clearly this massive sell off in deep-water drillers which has been much worse than the market is in anticipation of downward earning revisions for the whole sector in 2015. Recall this spring/summer analyst downing grading earnings outlook for this sector and I believe putting a $30 price target on SDRL (so lucky I sold out at $34).

    SDRL now appears in free-fall down to 2010's $20 price levels. Anyone recall what SDRL's EPS where in 2010 vs. today and vs. a possible 2015 cut?
    Oct 11 08:44 AM | Likes Like |Link to Comment
  • Pacific Coast Oil Trust And Measure P [View article]
    Is this just published 10/7/2014 Measure P Ordinance clarification communication by the SB County Board New information or just old information reposted? It seems to make it clear the measure would only impact NEW permits and even then allow for exceptions to new permits. Does this clear up any worries about closing down ROYT's existing operations?

    "The Santa Barbara County Board of Supervisors approved an ordinance today that will implement Measure P, "The Healthy Air an d Water Initiative," if passed by the voters in November. Measure P would ban new "high-intensity" oil production in the County, including techniques like fracking, acidizing and steam injection. Measure P allows ongoing oil production in the County to continue, while protecting the health, air and water of local residents."

    http://bit.ly/1sc69YQ
    Oct 8 03:00 PM | Likes Like |Link to Comment
  • Pacific Coast Oil Trust And Measure P [View article]
    Is this 10/7/2014 clarification communication from Santa Barbara Measure P new information or old? Does it clear up anything we were wondering in Sept?

    "Measure P would ban new "high-intensity" oil production in the County, including techniques like fracking, acidizing and steam injection. Measure P allows ongoing oil production in the County to continue, while protecting the health, air and water of local residents."

    http://bit.ly/1sc69YQ
    Oct 8 02:32 PM | Likes Like |Link to Comment
  • An Undervalued Income Stock That Yields Almost 8% [View article]
    Do (Diamond Offshore) is falling below $42 today. It broke below it's March 2014 $44 low. RIG's morning price rise got sold into and now it's barely holding it's March 2014 lows. NE at $27 is below it's March 2014 low too. Easy to rationalize RIG is a value stock but it's current trend isn't a sign of buying strength in a market hitting new highs. And like any industry/sector these offshore driller stock prices are highly correlated. They're all confirming "The Trend is not Your Friend".

    Topping it off we know there's been a five year shift in on-shore shale drilling growth and less focus on new deep-water well drilling relative to the 2005-2008 offshore boom. And that 2005-08 deep-water offshore drilling boom resulted in a major expansion in new deep-water rig construction which is now impacting pricing negatively.

    If all that weren't troubling enough for RIG management we know the industry behemoth has the 2010 BP/RIG oil spin ghost hanging over it's head and now faces major deep-water rig competition from ESV and SDRL with newer rig fleets and no past ghost overhang.

    Finally the ten year weakening US dollar (along with world demand) helped drive the price of crude oil to record highs in 2006-2007. Those days are gone. The dollar has been strengthening and steady as the China economic steamroller slowed and (the once booming) Europe now continues to remain much weaker than the USA. Go back and look at oil and drillers stock prices in the 1990's when the US dollar remained strong and steady. Bottom line, it looks like a near-term classic value trap. Still if we get a major market down draft in driller stock prices or SDRL, DO, RIG and NE can hold their current prices on any market pull back then as Arnold Schwarzenegger would say, "I'll be back!"
    Sep 4 03:15 PM | Likes Like |Link to Comment
  • Transocean Partners +3% as Morgan Stanley starts at Overweight [View news story]
    "Overweight" with a $31 price target? Either Morgan Stanley means a $41 price target or they just wanted to see who's paying attention with RIG already above $37 this morning (now over $38.60)? Clearly todays MS "Overweight" has motivated buyers to rush in and purchase RIG 20% over that $31 price target.
    Aug 26 02:03 PM | Likes Like |Link to Comment
  • Offshore drillers whacked at Deutsche Bank, several names cut to Sell [View news story]
    Analyst are reporters. They tend to be better at reporting what has happen and outlining known trends in place then predicting turning points or future stock prices. The trend towards expanding on-shore drilling and recover technics using new horizontal drilling/fracking in USA's shale fields has now been in place for nearly a decade. And the notion that onshore fracking is more environmentally dangerous than drilling in mile+ deep-water is nonsense. One need only review the history of offshore drilling (and oil spills) environmental disasters to know that fact. Of course offshore drilling in deep-water will continue to expand but at a slower near-term rate amidst greater competition pricing pressures from many new rigs and companies like ESV and SDRL who just entered the deep-water drilling business over the last decade. The biggest boom in offshore drilling and rig pricing appears to have peaked around 2007/08. At the same time over the last decade there has been an expansion in the delivery of more modern deep-water drilling rigs. One need only look at the stock price trends of DO and RIG vs. ESV and SDRL to know whose stock prices benefited from having a younger more modern deep-water drilling fleet since 2007.

    Bottom-line one can rationalize their favorite offshore-drillers strengths. But in the short-run these stocks are highly correlated and move in tandem. I'm glad I sold all my RIG, ESV and SDRL shares in July after buying in March and April (thinking that was the near term bottom). If all the deep-water drillers have declined since last November 2013 in a booming stock market I'm now in no hurry to buy them back in todays weak market given todays increased risk of a market pull-back or correction now in place.
    Aug 4 12:01 PM | 1 Like Like |Link to Comment
  • Update: Seadrill Outstanding Shares Up 5% Post Bond Conversion [View article]
    Expanding middle-east conflicts no long push up offshore drillers prices like the 2005-2008 days. Another poor day for Offshore drillers. Are they going back to their March-April lows or will they hold a little above those lows? Will I get to buy back SDRL shares at $33 again or is $35 a new short-term floor?
    Jul 28 12:38 PM | 3 Likes Like |Link to Comment
  • Transocean: The Street Does Not Understand This Company [View article]
    "So, what's keeping the lid on the price of the shares and what amount of idle and stacked rigs would justify the current market price?"

    "The industry is experiencing a cyclical downturn due to a hefty amount of new supply. Rigzone shows that the number of active rigs today equals the number a year ago, however the utilization has dropped from 87% to 80% due to 67 new rigs entering supply. Obviously, this supply has affected Transocean's ability to renew contracts and the number of stacked rigs and those held for sale has increased substantially"

    Excellent value analysis with the addition of your most important points you make above which individual stock value investors on RIG (and every other offshore driller) usually always ignore.
    Jul 25 10:28 PM | Likes Like |Link to Comment
  • Update: Seadrill Bond Conversion A Done Deal; Little Guys Might Not Benefit [View article]
    Thanks DividendInvestorLA....... been familiar with offshore drilling since the 1970's. So your first four points, I'm well aware of. I've seen no research showing the rate of offshore drilling growth and pricing is rising above the 2007-08 peak-levels. If you have any please post it. The stock prices of old-line deep-water drillers reflects my point about rising onshore and slowing offshore drilling growth rates. Recall many individual RIG investors in 2007 so certain RIG stock was going to over $750 they refused to sell in 2008. Fortunately for me I was NOT that certain and had no problem selling in 2008. Just as a point of reference, I've traded in and around RIG, ESV and SDRL several times. So I'm not married to anyone of these offshore drillers. The most recent was loading up on SDRL @ $33 and selling @ $40 into Junes market strength (and after collecting that fat dividend). I've never purchased DO. Nor would I purchase DO simply because it's the least leveraged.

    Your point #4 is what relates directly to my question. I was hoping to expand the discussion in that area. However your statement, "Generally, if you think SDRL is "overleveraged", what are you doing even considering buying the stock. I wouldn't if I thought that. I think it is using leverage very astutely"....makes no sense to a guy with a finance degree like me. I said, "SDRL is the most leveraged" is that not a fact?

    My question was, "So is SDRL now in a unique case where overleveraging on new equipment makes SDRL the winner of new contracts in a weak near-term offshore drilling market? Or as others argue DO is the least leveraged and therefore financially better positioned to weather near-term weakness?"

    Perhaps your interpreting my use of the word "Overleveraging" to mean it must be negative or bad. Not so. Said another way SDRL is more leveraged than every other driller. That's a fact but I don't mean it to be an absolute bad fact. In Finance Leverage can be good or bad (just like with a margin account) depending upon the outcome. Certainly if it helps you win new contracts that's a positive. And as I said I've never purchased DO just because it's the least leverage. So it sounds like we're in agreement on SDRL. Its leverage of newer equipment rigs maybe just the reason it's stock hasn't fallen back to 2008 levels while DO's lack of leveraging on new equipment is why it's stock price is about 1/3 where it was in 2008. I'm just looking for as many views on my question above to hear what others feel. Thanks again for commenting.
    Jul 25 10:05 PM | 1 Like Like |Link to Comment
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