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  • Update: Paragon Offshore Fleet Status Report Shows Impressive Contracting  [View article]
    maybe anthony, thats def. true for paragons overall fleet as its old, however specifically on the 2 paragon rigs they now got 2 3 year contracts I Dont think its true. this is a lender, not an equity holder. they got collateral in 2 new rigs with 3 years of solid baglog, they can even threat to pull the termloan if any distributions should leave prospector, its easy for them to secure the value because the rigs are in a seperate entitity.
    Dec 11, 2014. 01:37 PM | Likes Like |Link to Comment
  • Update: Paragon Offshore Fleet Status Report Shows Impressive Contracting  [View article]
    determinate = terminate. typo.
    Dec 11, 2014. 01:26 PM | Likes Like |Link to Comment
  • Update: Paragon Offshore Fleet Status Report Shows Impressive Contracting  [View article]
    The term loan holder is a bank. they dont have a "put option", however they are of course having meetings with paragon. none of us know whats going to happen, but if anything they are more secured now than earlier as they have collateral in the high spec jackups as well as any ability from paragon to fund Prospector. as the term loan was in place before the rigs had any contracts, why would they suddenly wish to determinate that secured loans on the two jackups. any debt that paragon is servicing is from a debt perspective irrelevant for holders of prospector debt. with the added kicker that some capital might flow from Paragon to prospector but with restrictions the other way around (we wont know exactly).
    Dec 11, 2014. 12:59 PM | Likes Like |Link to Comment
  • Update: Paragon Offshore Fleet Status Report Shows Impressive Contracting  [View article]
    another point to add besides the breakeven point for shallow water oil in mexico is that alot of the other drillers are talking about how they want to exit the Jackup business because it is "vulnerable" to market changes as transoceans ceo puts it. what they mean by that is that a well drilled by a standard jackup typically only needs 3 months to completion which means that unless you know you got alot of wells to be drilled you are not going to contract the rig for any longer. as a CEO of a drilling company its alot more convient to have 3 year contracts than constantly having to go out and market your rigs, the flip side of this is that the cheapest oil can be drawn out with jackups. so there are pros and cons and I think the market is way too focused on deep water because its the largest pie right now. The big oil companies also shy away from the shallow water of mexico because there is no elephants to be found and a large oil corporation needs to report still higher reserves to attract a decent valuation, even if those reserves are more costly. the smaller players in GOM shallow water however are enjoying high margins and good returns on their investments.
    Dec 8, 2014. 02:13 AM | Likes Like |Link to Comment
  • Update: Paragon Offshore Fleet Status Report Shows Impressive Contracting  [View article]
    He started the company with little seed capital, the early investors made a fortune, its factual wrong what you write. he made value added M&A activity, what hurt hercules later is the financial crisis, the reason they didnt rebound after is not his fault, they have been worse at securing contracts and the costs have been badly managed, there was the BP oil spill that really hurt the GOM which is the primary focus area for hercules, there is alot of things that havent been done properly after his departure that you cant blame him for. I find it funny that you point to what happened after his departure which coincidentially is right before the financial crisis. operationally hercules did well under his tenure.
    Dec 5, 2014. 06:28 PM | Likes Like |Link to Comment
  • Update: Paragon Offshore Fleet Status Report Shows Impressive Contracting  [View article]
    I am talking about the bareboat charters not the acquisition.. the bareboat charters is added EBITDA much of it, however there is still capex on the 3 rigs as well as a little shore based staffing. people might think. "those rates are very low", but as they are pretty much pure EBITDA they are not comparable to rates that include operation as it is basically a "lease".

    In my view the bare boat charters is a much better news than prospector as it is 45-60 million of EBITDA each year added as they were idle before.
    Nov 19, 2014. 03:42 PM | 1 Like Like |Link to Comment
  • Update: Paragon Offshore Fleet Status Report Shows Impressive Contracting  [View article]
    What is so incredibly important to note about those 3 contracts on the idle rigs is that they are bareboat charters. meaning Paragon is not staffing the rigs an operator is. they take a fee for doing so meaning that the dayrates for those 3 rigs are purely to satisfy the asset (the rig). there is almost no costs associated with those 3 contracts, so basically the dayrate for those 3 contracts are pure EBITDA added. I agree that the acquisition might have been cheaper later. however with locked in contracts and options on 3 rigs, getting them under construction cost is value creating and it is cheap, last year Seadrill paid 250 million and had to pay even more on new equipment and relocationcost on another prospector rig. so their total investment was as much as 30-40% high than Paragons and Paragon got a contract to go with it.. However I feel the same way, I am not entirely sure this was the best way to create value, but I think its harsh to outright call it bad management decisionmaking.

    On a side note there were other extentions as well on top of those 3 new contracts, the new contracts were not counted into the number for backlog published in Q3 as the deal was made after the quarter.
    Nov 19, 2014. 11:36 AM | Likes Like |Link to Comment
  • Paragon Offshore buys majority stake in North Sea driller  [View news story]
    OKay. look at the adjusted number (without noble, last in the quarterly report).

    They had 75 million in provision for taxes this quarter which is substantially higher than they have ever had, this is a non cash provision that is reflected in the operating cashflow (via working capital changes), however because they are the same quarter had receivables increasing it looked as if the cashflow generation was worse than it was.

    an easier way to do this that would not be so horribly distorted by "random" movements on the working capital would be to take the adjusted EBITDA (only including after noble items) of 224 million USD. deduct interest. of 22 million. take a normalized tax that is higher due to the changes in tax structure, but is not including big provisions (76 million accounted for. last year they were less than half, the same the year earlier) so lets say 40 million are real taxes and not provisions not relating to the quarter (probably also high). deducting that you got 162 in cash generated for the quarter, then you deduct capex for the quarter of 72 million (which is higher than they have had the previous months as well and you end up at 90 million dollar in free cash.. and thats being really a downer on the numbers..

    Sorry I should perhaps explain that I look at bit more on the movements on the working capital than just deducting / adding the number uncritically.
    Nov 18, 2014. 05:04 PM | Likes Like |Link to Comment
  • Paragon Offshore buys majority stake in North Sea driller  [View news story]
    they generated more than 70 million of free cash in Q3. look at their balance sheet deduct where they money is going.

    Sorry on the caledonian thing, I got it mixed up with the earlier transaction to shelf drilling, I dont research much on transocean as it doesnt have my interest - besides listening to their conference calls to get different opinions from the industry.

    You cant say Q2 will be cash break even on current contracts if your assumption is that all their rigs that go off contract is going to coldstacked that could be true. what is it that will make paragon go cash break even in Q2 2015? do you know something about the future that we dont?.

    They made 400 million in the first 9 months in free cash after capex and including the abnormal taxes that will lessen. so thats around 133 million in free cash flow per quarter, they have just gotten 3 rigs to work on bareboat charters that will generate alot of cash for 3 years. None of us know the exact cash generation on a normalized basis. but its between 100 and 150 million+.
    Nov 18, 2014. 03:40 PM | Likes Like |Link to Comment
  • Paragon Offshore buys majority stake in North Sea driller  [View news story]
    Why they dont want to float Caledonia, which was their plans? maybe because they can see Paragon is selling at an price that indicates bankruptcy is inevitable when they are generating 150 million of cash each quarter and keep getting conctract extentions. Caledonia is their standard jackups and they chose to postpone the floating.. I am curious what it tells you? At the same time Shelf drilling also pulled their floating plans..why? I think I know why. with regards to the North sea comments from Transocean thats specifically for operators that work for Statoil.
    Nov 18, 2014. 12:20 PM | 1 Like Like |Link to Comment
  • Paragon Offshore buys majority stake in North Sea driller  [View news story]
    I heard transocean Q3 call and I dont undertand what conditions in the North sea you are referring to, the market is one with high barries of entry because they need harsh weather rigs.
    Nov 18, 2014. 09:51 AM | Likes Like |Link to Comment
  • Paragon Offshore buys majority stake in North Sea driller  [View news story]
    what I meant is that the added debt willl be paid back by the assets that they purchased rahter quickly, thats pretty strong, and thats by the revenue that is already in the backlog of those ships. however as I said I agree if the downturn is going to come hard debt downpayment would still be better as they would be able to buy rigs later at steeper discounts.
    Nov 17, 2014. 04:48 PM | Likes Like |Link to Comment
  • Paragon Offshore buys majority stake in North Sea driller  [View news story]
    well basically they made a low risk bet in that the rigs will pay for themselves the next 3 years which is the time of the contract. its pretty cheap for contracted rigs to be getting them at that price. however I am still reading up on prospector. my initial comments were false as to what was already paid. I still think its a pretty good deal and it gives them options going forward, however it needs to be compared to buying back debt. I am not sure which is the best move. if the market keeps turning south buying back debt would allow them to buy rigss later at an even steeper discount, but only time will tell if it was a good bet. time value of money also plays a large role in this investment. as the rigs have contracts they will pay for themselves more or less the next 3 years..
    Nov 17, 2014. 03:53 PM | Likes Like |Link to Comment
  • Paragon Offshore: Could Old Rigs Offer Good Value?  [View article]
    I am not sure to be honest. their stock is cheap for sure, however at the same time their own stock is cheap other drillers stock are cheap likewise. doing the purchase they get the time value of money compared to ordering themselves and they get backlog on both the rigs, on top of that they get the option to pursue 3 new rigs where they have had what sounds like indications from the shipyard that they would be willing to finance rather than sit with the rigs. the assets they purchased arent at 6.5 EBITDA. protector hasnt had a quarter with full operations because of delivery of rigs as well as relocation, but both rigs are now working on 3 year contracts.

    Its a hard question really because even if they could get their equity or debt very cheap now buying either would not solve their long term problem which is renewing the fleet. buying debt or equity would be the wiser move if they actually think thers is a significant downturn coming up, because that would mean they could acquire assets later at even lower prices. however buying assets with contracts that pay for themselves over a 3 year period is a pretty good deal. thats provided that they actually do get rid of much of the administrative staff at prospector.
    Nov 17, 2014. 03:46 PM | Likes Like |Link to Comment
  • Paragon Offshore: Could Old Rigs Offer Good Value?  [View article]
    Did you devle into their talks about the shipyard assuming long term financing. since its a shipyard backed by the chinese government and they are starting to shake a bit about newbuilts to speculators they will want to maintain a good relationsship with paragon, possibily by giving them financing for the 3 rigs? they mentioned they are in talks with the shipyard about financing those and mentioned the thoughts on the speculative newbuilts that the shipyard needs to handle. what are your thought on that? objectively.
    Nov 17, 2014. 02:58 PM | Likes Like |Link to Comment
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