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, 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. 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. 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. 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. 12, 2014, 3:23 PM
- It's another down day for offshore drillers after rig owner Noble Corp. (NE -4.5%) signs a pair of new contracts for work in the Gulf of Mexico at substantially reduced dayrates.
- NE's updated fleet status report highlighted a new contract for the Danny Adkins in the Gulf in a minimum 200-day program at $317K/day vs, its previous rate of $498K/day and analyst expectations for the high $300K; the less than rosy update prompts Johnson RIce to lower its 2014 and 2015 EPS estimates to $3.06 and $2.98 from $3.16 and $3.27 previously.
- Seadrill (SDRL -5.4%) also is getting smacked after offering up its own pessimistic take on the offshore drilling industry, and its deal with Rosneft could be threatened by the latest sanctions imposed on Russia by the U.S. and EU.
- Also: RIG -3.6%, ESV -3.6%, DO -3.7%, RDC -1.4%, PACD -2.9%, SDLP -4.1%.
Apr. 7, 2014, 3:33 PM
- Things could get worse before they get better for offshore drillers, and even market favorite Rowan (RDC -3.6%) could get hit, Morgan Stanley says as it cuts its rating on the stock to Underweight.
- RDC has fallen less than companies with exposure to the floater market thanks to its greater exposure to jackups, but Stanley sees a surge in jackup orders, driven largely by speculative drillers at Chinese shipyards; the jackup orderbook now stands at a record 140 units, of which only ~20 have been contracted.
- In the sector, the firm recommends yield plays such as Seadrill (SDRL), Seadrill Partners (SDLP) and North Atlantic Drilling (NADL), and prefers premium asset exposure through Atwood Oceanics (ATW), Ensco (ESV) and Pacific Drilling (PACD) over lower-end fleets via Diamond Offshore (DO), Noble (NE) and Transocean (RIG).
Feb. 3, 2014, 3:39 PM
- Raymond James maintains its bearish stance on offshore drillers and cuts its estimated 2015 sector EPS by ~18% while noting that this a typical cyclical slowdown and not permanent.
- The firm estimates the industry needs to cold stack ~6% of both the floater and jackup fleet over the next three years to maintain 90% utilization; assuming the pace of newbuilds slows, this should improve the supply/demand dynamics by 2017.
- Rowan Cos. (RDC +0.2%) earns an upgrade to Outperform, joining Pacific Drilling (PACD -1.9%) and Ocean Rig UDW (ORIG -2.1%) as drillers who would rank atop the list of any would-be acquirer given the high spec nature of the fleets.
- Atwood Oceanics (ATW -4.1%), Ensco (ESV -2.4%) and Noble Corp. (NE -0.3%) are downgraded to Market Perform, as offshore stocks are in “full-blown meltdown mode."
- The firm maintains Transocean (RIG -1.9%), Diamond Offshore (DO -1.6%) and Hercules Offshore (HERO +0.4%) at Market Perform, noting that “lower quality assets are too risky as we head into a sloppy market."
Sep. 3, 2013, 2:59 PM
- Ensco (ESV -2.1%) is downgraded to Equal Weight from Overweight with a $60 price target (from $82) at Barclays, which sees continued high levels of unplanned downtime prompting concerns with ESV's operational execution, despite its high-quality mixed fleet of relatively standardized assets.
- The firm prefers ultra-deepwater pure-plays, including Ocean Rig (ORIG +2.1%) and Pacific Drilling (PACD +2.6%), and catalyst-rich offshore drillers led by Noble Corp. (NE -0.4%), which is undergoing operational improvements and is moving forward with a meaningful non-core asset divestiture.
Jan. 25, 2013, 10:27 AMHalliburton (HAL +4.6%) hits a 52-week high following upside Q4 results, leading the oil services (OIH +1.5%) and energy (XLE +0.8%) sectors; peers SLB and BHI also move up. Barclays sees up-and-coming offshore drillers Atwood Oceanics (ATW), Ocean Rig (ORIG) and Pacific Drilling (PACD) coming along for the ride as ways to gain exposure to the global proliferation of offshore drilling. | 1 Comment
Sep. 27, 2012, 11:08 AMPacific Drilling (PACD +2.2%) is initiated with a Buy rating and $12.50 target price at Dahlman Rose, which says PACD is a pure-play ultra-deepwater driller with one of the world's youngest and most capable fleets. The UDW market "has tightened considerably and has been effectively running at 100% utilization since the middle of 2011," the firm says. | Comment!
Aug. 16, 2012, 10:58 AM
Jun. 22, 2012, 9:37 AM
Mar. 16, 2012, 6:04 PMPacific Drilling (PACD) +4.4% AH after announcing it has exercised an option to "construct its seventh ultra-deepwater drillship with Samsung Heavy Industries." The ship is expected to cost roughly $600M, and be delivered in May 2014. Pacific will pay for the ship using a combination of debt and cash flows from operations. | Comment!
PACD vs. ETF Alternatives
Pacific Drilling SA is an international offshore drilling contractor committed to becoming the preferred provider of ultra-deepwater drilling services to the oil and natural gas industry through the use of high-specification rigs.
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