Pacific Drilling: Fleet Analysis As Of January 7 And Commentary
- Pacific Drilling has been caught in an exceptional bearish oil environment, and is unjustly suffering from a steep sell off. However PACD has few immediate issues.
- Pacific Drilling is a modern mid-tier offshore driller specialized in Ultra-deepwater drilling. PACD fleet is comprised of eight UDW drillships, including one under-construction.
- The Pacific Mistral is going off contract this month without securing an extension with Petrobas, and The Pacific Meltem and the Pacific Zonda are still without a contract.
Pacific Drilling Is Still Not Attractive As A Stand-Alone Company
- Despite continued share price sell-off the company appears to be fully valued.
- Cash flow from operations is expected to plateau in 2015.
- Outright sale or accelerated debt repayments should be on management's table as value-enhancing alternatives.
Pacific Drilling Appears To Offer Impressive Opportunity Despite Risks
- Pacific Drilling has one of the most modern and technically-capable fleets of ultra-deepwater rigs in the industry.
- This positions the company quite well in the industry due to the preference that customers have for these modern rigs.
- Pacific Drilling has a history of strong growth and the potential to continue on its growth trajectory even with the current weakness in the industry.
- Pacific Drilling has some potential risks to its cash flow in the coming months but this should not have the impact that the market is implying.
- At its current levels, the stock appears to be oversold and could offer an intriguing opportunity for investors.
Pacific Drilling's Latest Results Show Company's Growth Potential And An Improved Ability To Weather Industry Downturn
- 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.
Update: Pacific Drilling Results Are Decent, But Stock Has Limited Upside
- Liquidity is secured to cover near-term debt obligations and newbuild payments.
- The company is doing an excellent job of managing costs.
- Pacific Drilling does not expect to secure long-term contracts for its two newbuilds at least for the next six months.
- I continue to see limited upside given the current UDW floater supply/demand environment and correspondingly prevailing dayrates.
Pacific Drilling: Fleet Analysis As Of November 2014, And Recent Third-Quarter Results
- Pacific Drilling released its third-quarter earnings results, which top analysts' estimates. EBITDA reached $145.5 million, up 51% from last year, and cash flow from operations was at over $100 million.
- Pacific Drilling stock price has been crushed these past few weeks by a bearishness of the price of oil, which pushed the street to sell off indiscriminately all the offshore drillers.
- PACD is initiating a stock repurchase program up to 8 million shares to take advantage of the low stock price. One concern remains: the Pacific Medlem has no contract yet.
Despite Some Risks, Pacific Drilling Could Offer Interesting Opportunity
- 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.
Pacific Drilling Second Quarter Results Show Growth Story Playing Out
- 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.
- One of worst performing sectors of the market in 2014 has been offshore drillers due to worries about overcapacity and possible impacts to day rates.
- Being a contrarian investor, I have continued to build positions in the sector including recently adding to my stake in Pacific Drilling.
- This Luxembourg based offshore drilling play has a new fleet, cheap valuations, great growth prospects and some possible significant payouts in 2015.
Pacific Drilling: Fleet Analysis As Of August 2014, And Recent Second Quarter Results
- Pacific Drilling S.A. is a mid-tier offshore driller specialized in UDW drillships based in Luxembourg. The company delivered its Q2 earning impressive results on August 6th, 2014.
- PACD now owns six ultra-modern rigs and two others in-construction. The company has an imposing backlog of $3.3 billion, which is protecting it from any temporary market softness.
- PACD is a pure play in the UDW drillers sector, and it offers a strong growth prospect. I am rating the stock as a BUY.
Pacific Drilling: Fleet Analysis And Recent Q1 Results Comments
- Pacific Drilling S.A. is a mid-tier offshore driller specialized in UDW drillships based in Luxembourg. The company delivered impressive Q1 earning results on May 6, 2014.
- The company owns an ultra-modern fleet of 6 contracted rigs, and 2 under-construction rigs as of May 2014. Pacific Sharav is about to commence operations in the GOM.
- The recent earnings are confirming that PACD has strength and is well-equipped to provide continued growth. Recently, PACD declared a dividend expected for Q1 2015. It is a BUY.
Pacific Drilling: An Attractive, Contrarian Drilling Play
- North American land drilling activity continues to be strong bolstering the fortunes of land drillers such as Halliburton.
- In contrast, offshore drilling plays have been hit hard in the market over the past six months.
- Pacific Drilling is one of those beaten down names that looks ripe for investment by patient contrarian investors.
Pacific Drilling's Modern Fleet And Newbuilds To Contribute To Outperformance
- Pacific Drilling owns and operates the most modern fleet of ultra-deepwater drilling rigs in the world.
- Exploration and production companies are demanding the use of modern rigs much more strongly than older rigs.
- The reason for this strong demand is because modern rigs have much better performance characteristics.
- Demand for modern ultra-deepwater rigs is expected to exceed supply in the coming years.
- This demand coupled with the company's new rigs should make it one of the fastest growing companies around.
Dec. 19, 2014, 5:25 PM
- Transocean (NYSE:RIG) shares finished sharply higher today (+7.9%), but it’s hard to ignore the largely negative December fleet status report that came out late yesterday.
- In lowering his stock price target to $17 from $20, Cowen analyst J.B. Lowe said RIG secured one attractive contract this month, not enough to fill much needed ultra-deepwater floater availability; while RIG was able to put two idle floaters back to work, it had four additional rigs go idle, including one where the customer canceled the contract.
- Lowe believes falling oil prices will put increased strain on dayrates and utilization during 2015.
- Most offshore drilling service contractors racked up strong gains today as crude oil prices rebounded: NE +9.5%, ESV +9.5%, RDC +5.9%, DO +0.5%, ATW +7.1%, PACD +14%.
Dec. 19, 2014, 11:44 AM
- Transocean (RIG +4.6%) discloses that it plans to scrap seven of its older, lower-quality deepwater and midwater vessels, and adds that it may not be finished getting rid of parts of its fleet, even as oil prices and demand for offshore rigs have fallen.
- RIG says it expects to take a related $100M-$140M charge in Q4.
- RIG's decision to put the rigs up for sale comes after a string of vessel retirements and a $2.76B writedown of the company’s asset value in November.
- Most offshore drilling service contractors are higher: ESV +5.1%, RDC +1.7%, DO +0.8%, ATW +3.1%, PACD +8.4%, but SDRL -4.3%.
Dec. 8, 2014, 7:05 PM
- "Not much else bad can happen" to Seadrill (NYSE:SDRL), Credit Suisse analyst Gregory Lewis said this morning in maintaining his Neutral rating while edging his target price lower to $15 - 6x the firm's 2016 EBITDA estimate, a discount to the peer average but warranted given SDRL’s above average leverage (~56% and rising) and no dividend.
- However, a lawsuit was filed today in U.S. District Court citing "materially false or misleading statements with respect [SDRL’s] commitment and ability to continuing to pay a dividend to the exclusion of other opportunities and needs for the same capital.”
- Oilfield service companies and contractors, whose revenues depend on drilling activity, fell today in reaction to continually declining crude oil prices and ConocoPhillips' reduced capex guidance: SDRL -6.1%, SDLP -5.8%, NADL -17.9%, RIG -4.9%, RIGP -3%, ESV -7.2%, RDC -3.7%, PACD -6.8%, OIH -4.5%, but DO +1.3%.
Dec. 3, 2014, 2:53 PM
- Offshore drillers are rising modestly today after suffering a beating this year, but Jefferies cautions against seeing a buying opportunity in the beleaguered group.
- The firm says neither fundamentals nor valuation paint a compelling enough picture of the group; "more importantly, current softness masks the evolution of deepwater drilling to where specifications matter."
- Transocean (RIG +1.6%), which Jefferies says has the biggest contracting challenges both near-term and in the longer-run given a disproportionate mix of older UDW/UK floaters, is the least favorite name, while the firm sees relative value in Atwood Oceanics (ATW +0.7%) and Rowan (RDC +1.2%).
- Among other offshore drillers: DO +3.1%, PACD +3.1%, ESV +1%, NE -0.7%, SDRL -0.7%.
Dec. 1, 2014, 3:19 PM
- A bit late, Guggenheim analyst Darren Gacicia downgrades Seadrill (SDRL -5.5%), Transocean (RIG -4.5%) and Diamond Offshore (DO +3.3%) to Neutral from Buy, finally admitting that downward pressure on oil prices and a potential for capital markets to become shy to fund newbuild deliveries has undercut the tenets of his previous bull thesis.
- SDRL and RIG remain the most levered to deteriorating offshore market conditions, he says, believing SDRL shares may also suffer from an ownership transition from income to value investors and RIG perhaps sharing the same fate, with a 2015 dividend cut likely amid the potential for further asset writedowns.
- At DO, Gacicia sees risk of a dividend cut, rig retirements and deteriorating offshore market fundamentals as negative near-term catalysts; the firm also downgrades Seventy Seven Energy (SSE -16.2%), Cameron (CAM -2.8%), Frank's International (FI -0.1%) and FMC Tech (FTI -0.1%).
- In the space, the analyst prefers drillers with high-quality assets, solid contract coverage and a lack of funding needs, such as Noble Corp. (NE -0.2%) - which also has a buyback catalyst - Atwood Oceanics (ATW -0.1%) and Pacific Drilling (PACD -3.7%).
Nov. 28, 2014, 9:45 AM
- The sector was wrecked on Wednesday as Seadrill suspended its dividend amid "significant deterioration" in the oil market, and its North Atlantic Drilling suspended its payout because of the same combined with the delay in its Rosneft deal.
- The market "deteriorates" even further today with OPEC's decision yesterday not to cut production. WTI crude is "off the lows" as they say, but still down 5.8% at $69.43 per barrel.
- Seadrill (SDLP), North Atlantic Drilling (NADL -8.3%), ENSCO (ESV -8.8%), Atwood (ATW -7.7%), Rowan (RDC -7.2%), Pacific Drilling (PACD -4.5%).
Nov. 26, 2014, 10:42 AM
- Seadrill (SDRL -19.2%) shares are plunging after the drilling contractor suspended dividend payments due to "significant deterioration" in the broader markets, and North Atlantic Drilling (NADL -13.8%) suspends its dividend because of the delay of its agreement with Rosneft as well as the weaker market.
- The move is slamming the entire sector, and Wells Fargo says that although SDRL is the first driller to cut its dividend, Diamond Offshore (DO -8.3%) and Transocean (RIG -4.7%) will "ultimately have to follow suit."
- Also: SDLP -6.6%, ESV -4.8%, ATW -4.3%, RDC -3.3%, NE -3.2%, PACD -6.5%, ORIG -2.7%, HP -1.1%, RIGP -2.5%.
- ETF: OIH
Nov. 17, 2014, 3:59 PM
- In the wake of Halliburton's (NYSE:HAL) $34.6B offer for Baker Hughes (NYSE:BHI), it appears the next hot sector for M&A action is energy: More consolidation is likely, given the weakness for stocks in the oilfield services subsector, low interest rates, and as a drop in demand for oil increases cutthroat pricing competition.
- Speculation is running rampant as investors try to figure out who is next in an industry that is sure to undergo some more consolidation; some names identified as possible candidates include Kodiak Oil and Gas (NYSE:KOG), Marathon Oil (NYSE:MRO), Northern Oil and Gas (NYSEMKT:NOG), Anadarko Petroleum (NYSE:APC), Pioneer Natural Resources (NYSE:PXD).
- GE could go after National Oilwell Varco (NYSE:NOV) to show it is serious about the energy industry after last year’s purchase of pumpmaker Lufkin, Royal Bank of Canada says, and Oppenheimer says even BP could be an acquisition candidate.
- But Morgan Stanley does not see offshore drillers getting in on the action, as larger players like Diamond Offshore (NYSE:DO), Transocean (NYSE:RIG) and Seadrill (NYSE:SDRL) are still addressing dividend concerns while smaller companies such as Atwood Oceanics (NYSE:ATW) and Pacific Drilling (NYSE:PACD) still trade close to replacement value.
Nov. 5, 2014, 12:03 AM
Nov. 3, 2014, 5:35 PM
- ADEP, AMRS, ATVI, AWAY, AXLL, BIO, BIOL, BIRT, CALD, CBSO, CDXS, CERS, CHUY, CKEC, COHR, CORT, COUP, CRTO, CSU, DOX, DVN, ENPH, EXAM, EXEL, FANG, FEYE, FOXA, FRGI, GAS, GHDX, HR, ITRI, IVR, JAZZ, JIVE, JKHY, JMBA, KAR, MITT, MOSY, MPO, MYGN, NP, NRP, NSTG, NYMT, OAS, OCLR, OKE, OKS, PACD, PAYC, PBPB, PCYC, PEGA, PHH, PRI, PXD, PZZA, REGI, REXX, RLOC, RNR, RP, SBAC, SN, SPA, SQNM, TMH, TNET, TRIP, TTGT, TWO, TWOU, TX, UIL, WPX, XEC, XNPT, ZAGG, ZU
Nov. 3, 2014, 2:58 PM
- Offshore drillers are broadly lower after Atwood Oceanics (ATW -5.2%) discloses in its latest fleet status report that it is delaying two deliveries in its fleet, and Diamond Offshore (DO -4.7%) is downgraded to Strong Sell from Sell at Nordea.
- The damage is minimal at Ensco (ESV -0.9%), however, as Johnson Rice analysts offer positive commentary on the "top-tier producer" after ESV's Q3 results displayed impressive operational execution while management made several positive moves during the quarter to improve the company’s financial flexibility.
- While management continues to expect further floater utilization and dayrate challenges through 2015, the jackup market was described as a potential near-term offset to floater headwinds as ESV cited record backlog within the jackup fleet and expected incremental Middle East jackup demand in H1 2015.
- Also: Caledonia deal not likely to held Transocean (RIG -2.8%) shareholders, analyst says.
- Also: RDC -2.8%, SDRL -3.1%, NE -1.1%, PACD -2.4%.
Oct. 20, 2014, 6:14 PM
- Seadrill (NYSE:SDRL) was downgraded to Neutral/High Risk from Buy today at Citigroup, which cited a combination of disappointing exploration, further investment decision delays and increased oil price uncertainty as leading to a 10% reduction in its medium-term rig demand forecast.
- Citi believes the decline, combined with significant supply added in 2015, likely will extend the current market weakness into 2016, which could materially affect SDRL’s ability to sign and thus finance the next wave of its newbuilds; it also sees increased risk of dividend cuts to maintain the leverage ratio within covenants.
- SDRL finished flat today but most offshore drillers rose even as the firm lowered its growth estimates across the sector to reflect a slowdown in investment: ATW +3.4%, HP +3.3%, RDC +3.2%, DO +2%, RIG +1.8%, NE +1.7%, PACD +1.2%, ESV +1%.
Oct. 17, 2014, 5:18 PM
- A fifth Chevron (NYSE:CVX) drillship has arrived in the deepwater Gulf of Mexico, as newbuild ultra-deepwater drillship Pacific Sharav will start work for CVX under a contract with Pacific Drilling (NYSE:PACD).
- The vessel, working under a five-year charter at a dayrate of $555K, is the fifth drillship contracted by CVX for deepwater operations in the Gulf, where it aims to bring on stream the Jack-St Malo project later this year.
- Meanwhile, PACD is said to be touting sister drillship Pacific Meltem in a Petrobras (NYSE:PBR) tender for drilling work in the giant Libra pre-salt area off Brazil but has yet to line up a contract for a further newbuild drillship under construction.
Oct. 6, 2014, 3:42 PM
- If offshore drillers didn’t have enough to worry about, they now have to be concerned with new rigs coming onto the market, Credit Suisse analysts say.
- "2015 looks tough, real tough" for offshore drillers, the firm says, pointing to the newbuild drillship Maersk Venturer, which "has finally left the shipyard without a contract, well sort of... Expectations are that the rig will end up with Total in southeast Asia for some short-term work... While this was the first newbuild drillship to leave a shipyard without its’ maiden contract inked it will not be the last! We expect 1H15 to see peak floater deliveries."
- The companies are trading mixed today: RIG +2.8%, SDRL +2.2%, DO +2%, RDC +1.1%, ATW +0.9%, ESV +0.9%, PACD +0.7%.
Sep. 24, 2014, 12:27 PM
- Offshore drillers continue their dramatic recent slide, as rigs go idle and analysts cut their ratings, and Wells Fargo piles on with a new report explaining why it’s still too early to buy into the group.
- The firm sees offshore spending facing a structural slowdown, the offshore rig count set for anemic growth through 2015, further downside risk In offshore rig utilization and dayrates, and OSV utilization and rates likely to face downward pressure.
- Wells initiates coverage on Transocean (RIG -2.9%), Seadrill (SDRL -1.9%) and Diamond Offshore (DO -2.5%) at Underperform, while Noble Corp. (NE -2.5%), Rowan (RDC -0.5%), Ensco (ESV -1.9%), Atwood Oceanics (ATW -1%) and Pacific Drilling (PACD -3%) are started at Market Perform.
Sep. 23, 2014, 3:16 PM
- In its latest fleet status update, Transocean (RIG -0.4%) said it had idled one of its rigs, and Credit Suisse analyst Gregory Lewis says there's more of the same ahead for the offshore drilling services provider.
- The idling of the Jack Ryan puts RIGs ultra-deepwater idle fleet count at three rigs, and RIG has another six UDW rigs rolling off contract by year end; the analyst warns of more rigs to idle later this year.
- The news wasn’t all bad, however, as some new contracts were at or above expectations, according to RBC.
- Offshore drillers are mixed today after recent sharp declines: DO +1%, ATW +0.6%, SDRL -0.9%, RDC -0.9%, ESV -0.6%, PACD -0.2%.
Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.