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  • North Atlantic Drilling: Fleet Analysis And Q3 Results  [View article]
    this will answer your questions:
    Dec 2, 2014. 01:01 PM | Likes Like |Link to Comment
  • North Atlantic's Dividend Suspension Overshadows A Good Quarter  [View article]
    Mr. Wright,

    very good observations in my view. If I may, your term "viable businesses" seems one to comment upon.

    Is Seadrill losing money?
    Is Nadl losing money?

    Perhaps the question now that investors seem to be fixated on: how much money will they lose? I am not willing to speculate. Just the facts. SDRL and NADL need to drop $2B in EBITDA before that happens. And what could make that happen? Day rates sub 400k, and really sub-400k. If that were to happen, RIG, DO and others are toast. SDRL, NADL, PACD, ESV and maybe ORIG are not. Oil majors need new stuff to extract with efficiency, and the latter mentions have it.

    When was the last time we saw companies with cash flow of 30-50% of their market cap and no hard evidence of that becoming otherwise?

    You are so right about the airline stocks. The market has a short memory. Those with a longer one make out. It's so obvious.

    Oil always finds it's way to market. And the dreaming analysts and public who buy the "$42/bbl" shale cost analysis may find that a bit more analytical homework might pay off. With a depletion rate over 10%/annum,
    labor and financing costs in the stratosphere...the marginal shale well is not anywhere near $42. More like 82.

    Want proof? Ask Wall Street how many shale oil debt deals they are doing right now.

    Anyone selling NADL or SDRL now is making a mistake. Unless, of course, one knew for sure BABA was going to 200...and soon.
    Dec 1, 2014. 08:04 PM | 1 Like Like |Link to Comment
  • North Atlantic Drilling: Fleet Analysis And Q3 Results  [View article]

    Unfortunately I go back only to the early 1980's. Your comment about "weak sisters" is quite appropriate. The maritime industry, of which offshore drilling is a part, is littered with bodies who follow the mantra of chasing freight rates (or day rates for rigs) and rushing in at their heights. And dumping at lows. The countercyclical investment, such as you suggest, is rarely made. Vessel owners included. But, how is it that Fredriksen has taken capital of $50mm to $10B since 1995? By doing the opposite. Invest, conserve, and be opportunistic when times are bad and values are down. They always come back because since 5000 BC, stuff has to be shipped. And that includes oil from the bottom of the seabed.
    Dec 1, 2014. 07:24 PM | 1 Like Like |Link to Comment
  • North Atlantic Drilling: Fleet Analysis And Q3 Results  [View article]

    It might be time to clear up a few things about this. Any bankruptcy speculation for NADL is non-sense. There are a several reasons for this:

    1) NADL is incorporated in Bermuda. Bermuda does not have a bankruptcy court. There is no such thing as a "bankruptcy, i.e. chapter 11" in Bermuda. Your choice is therefore a liquidation, or, a complicated and unlikely effort to establish nexus (a clearly defined legal concept) for NADL in the United States. This is sometimes, but rarely, accomplished by companies in serious trouble. In the case of NADL, there is zero US nexus. Bankruptcy is not possible in Bermuda for them.

    2) Seadrill owns 70% of NADL. 30%+ of John Fredriksen's net worth is tied up in Seadrill, ergo, NADL. Fredriksen has roughly $4B cash on hand. That is roughly 8X the market cap of NADL.

    3) No Fredriksen company, ever, has filed for bankruptcy or been liquidated, a 30 year track record. Witness the step-up to handle Frontline in late 2011. There is zero evidence anywhere that suggests any current issues NADL may have are not financially manageable.

    4) There is no incentive whatsoever to liquidate NADL. Why would there be?
    Is anyone suggesting that the absolute best management team in offshore drilling since 2005 cannot find employment for their rigs?

    Unfortunately we are in an environment of massive uninformed fear. Add to that a mis-understanding of Fredriksen's motivations. But I can assure you of this: despite the opposite perception by the markets, he is one of the rare ship-owning magnates that is friendly to shareholders. Not because of any benevolence, but rather because he eats the same dog food as the rest of us. He owns the same thing and isn't selling any of it! Not only owns the same thing, but is by far the biggest shareholder.

    5) And finally, to aid with handicapping (just as an amusement because a BK is out of the question), permit me to ask a question:

    If you were unquestionably the world's number 1 Western maritime vessel owner/manager/investor for the past 30 years, with $10B in unencumbered assets, would you be thinking of liquidating the world's no.1 harsh-environment driller?
    Dec 1, 2014. 07:06 PM | 2 Likes Like |Link to Comment
  • What Does Frontline's Share Price Tell Us?  [View article]
    No. The only way that could happen is via a war in the Middle East, and one that does so much damage that Hormuz is shut down for months.

    The reason to own FRO equity is for direct exposure, i.e. cash earnings power, to VLCC and Suezmax spot rates. These fluctuate, a lot. But, over time and when deliveries slow, the spot price will fluctuate from a higher base line as the market becomes balanced (no longer too many ships).

    We may see this in 2014-2015, and thus $10/share. It could spike in between, no way to predict. That would be a 30% per year return from here. $20 would require 50k per day in TCE for an extended period. We a few years away from that, on a fundamental basis.
    Jul 15, 2012. 04:11 PM | 1 Like Like |Link to Comment
  • What Does Frontline's Share Price Tell Us?  [View article]
    Would advise to become much more familiar with the tanker market before making these statements. Let me a clear a few things up. First, FRO has virtually no debt and it owns no vessels other than the ITCs. The FRO fleet is chartered in from SFL, and as such is a LEASE, which can be terminated. That is not the same thing as having to pay back a bank loan.

    Second, if you think you are going to make money by shorting JF's first born, you are taking on risk that borders on insanity. Do you think he and Tor are just going to walk away from 33 million shares? Of course not. FRO is generating cash, and will continue to do so in any decent rate environment. JF and Tor are simply waiting out the worst part of the cycle. If FRO needs more, they will take care of it. Tor told you that in Oslo last year things will be bad for several years. None of us know what exactly they will do, nor when, but it will be positive. FRO has, and will have, cash it needs to ride the cycle out.

    Now for DHT. Are you serious? These two companies are not even close to being in the same league. That maneuver on the equity raise was just nuts and cut the stock in half. Did you read the presentation they sent around. And then telling everyone that this will mean a much higher price. Talk about forward looking statements. Have you looked at DHT's insane poison pill features? This company could issue shares at the stroke of a pen with no approvals needed from the board. So, look at the raw deal you got as a shareholder. Nice.
    Have you calculated what the dilution was to get this money from the boys in Boston? Tell me, what is the strategy at DHT? MGMT hanging on for dear life, that's what.

    What matters is what you have trade with when the rates turn up and what resources you have to stay be in business when the time comes. DHT is at the mercy of the distressed equity sharks. And let me suggest another thing, take a look at the percentage of companies that did a reverse split and ended up with a higher market cap later. You will be surprised. Clear and present danger signal.

    A little history on how much rates matter. Rates are everyhting. Recall a couple of years ago when Golar was a 4 dollar stock and everyone called it a dog and the LNG rates were terrible. Now rates are sky high and Golar is at 38. There has been virtually no new contracting for VLCCs in the past 18 months, a 40 year low. That means, except for a bit of slippage, there will be a dearth of deliveries n 2014. You will have your worst nightmare if you are short FRO.

    Forget all this NAV nonsense. Vessel values can go up 5x in a hurry if we have a sustained supply squeeze which WILL happen. And that is 2 years away. So, that is all that is going on here, nothing more. JF is simply biding time.

    To get up to speed on how our business really works, suggest you order Maritime Economics, by Martin Stopford. Mandatory reading. And to understand FRO, you need to understand JF. Reading up on Hilmar Reksten will give you some insight there.

    Good luck with your FRO short, but my advice is that you cover it and soon.
    Jul 13, 2012. 01:33 AM | 2 Likes Like |Link to Comment
  • Frontline Restructuring: Breaking Even In The Oil Tanker Industry  [View article]
    I should think in this environment, and having made a $500mm commitment, prudence may be in order at Hemen. SFL, FRO, GOGL, MHG, Deep Sea etc, save SDRL and the LNG assets, have taken fairly big hits and are leveraged.

    Should the market get some positive surprises, which it does not expect, then the beaten down assets will recover to such a degree that the extra given "back" on FRO12 is not significant.
    Dec 20, 2011. 04:41 PM | 2 Likes Like |Link to Comment
  • Box Ships: High Yield With Instant Two-Bagger Potential  [View article]
    Dear J,

    Excellent thoughts, I will study TEU a bit more. But I would like to point out that you are seriously mistaken with your comment about DCIX. Please consider doing a similar amount of digging deep.

    First, you say DCIX has failed to perform? How can you say that when the company has not even started yet? 3 of the 5 vessels in the DCIX fleet were not delivered to the company until the last few days of Q2. As you surely know, there are start up and provisioning expenses that occur in advance and these were booked in Q2, but no income from these three ships. Obviously the results will "look" poor. However, in this coming quarter, full income will be recognized. Average daily vessel expenses are in the 9k/day range, perhaps a bit lower now that bunker has dropped. Average daily income is around 22k/day. The vessels are chartered to Maersk, a high quality credit, into 2013. The company has no debt and close to 50% of its market capitalization in cash!

    The payout policy is 70%. The vessels are the right size, management is simply once of the best, perhaps the best, out of the Greek shippers. No speculation and no raising the larder.

    You may easily have company in "2 bagger" land, and a very attractive dividend stream at today's prices. When investors wake up from their Euro induced stupor and actually SEE the earnings and dividend, it will be too late.

    Sep 30, 2011. 01:08 PM | Likes Like |Link to Comment
  • Frontline's Idealistic Proposals Will Not Save the Day  [View article]
    STNG good value here. Product market tighter than people think. Cash flow will be strong post deliveries IF we have decent demand levels. However, it will not be possible to time entries. The shares trade thin. If GNK can get lifted 100% because of a decent rate move and one institutional buyer in a week, STNG will lift on much lower volume. STNG is an investment, not a trade, and the price available today is a substantial discount to PV of projected cashflows under almost any economic scenario. I own some.

    N.B.: Wilbur Ross and Stevenson paid more for their assets than what you get with STNG stock today.
    Sep 27, 2011. 03:46 AM | Likes Like |Link to Comment
  • Frontline's Idealistic Proposals Will Not Save the Day  [View article]
    Correct. Need only compare GASS and GLNG.
    Sep 27, 2011. 03:34 AM | Likes Like |Link to Comment
  • Frontline's Idealistic Proposals Will Not Save the Day  [View article]
    Dear Clemens,

    the video is hilarious!
    Sep 27, 2011. 03:32 AM | Likes Like |Link to Comment
  • Risk Premium Factor Model Shows S&P Undervalued By More Than 20%  [View article]

    Please explain the Jan 09 spread, (which is a replica of the current spread, other than the current spread is even more extreme), to the present situation.

    Given that reported earnings trail events, and given that the summer was a disaster for business and guidance 'hopeful" at best, would you not say that the chances of the predicted value coming down hard are quite good?

    It doesn't take a severe recession to bring S&P earnings down a lot from their super-elevated, based on cost cutting and no hiring heights, aided by exports.

    Equity prices are based on the discounted value of expected future cash-flows and those expectations are heavily influenced by confidence in the probability of their future improvement.

    Therefore, would you not agree that there is a no. 4 in your scenarios, which is that predictive values fall precipitously, and catch up to a falling equity market, where both reach equilibrium, at a much lower point?
    Sep 18, 2011. 02:34 PM | 2 Likes Like |Link to Comment
  • Diana Containerships (DCIX -5%) reported a smaller Q2 loss this morning on solid Y/Y gains in revenue, but missed Street expectations on reduced demand, higher maintenance expenses and increased fuel costs.   [View news story]
    I'm sorry but the above has got to take top honors for stupid reporting. How can there be reduced demand if all 5 vessels are employed well into 2012-2013?

    Missed the Street expectations of higher maintenance expenses? How stupid is that? They took delivery of vessels mid-quarter. Hoe can you have higher maintenance expenses affect earnings when there were fewer assets to maintain?

    The higher expenses are start-up expenses which are always higher when deploying additional ships, especially mid-quarter when the expenses count but the charter revenues are not enough to offset the timing! There was no miss at all.

    Finally, the charter income of the 5 vessels is 100% higher than the vessel daily operating expense across the ships.

    So, why is this company selling at 50% of liquidation value and 2x cash in the bank? And ZERO debt?

    This is what I call stupid. When was the last time you got to buy a dollar bill for 55 cents?

    Aug 10, 2011. 03:19 PM | Likes Like |Link to Comment
  • Frontline Floundering as Rates Sink  [View article]
    Dear hcstorey,

    I couldn't agree more on the trailing PE b.s., but I think you are overconfident on the orderbook being financed. I do not think so. The outstanding financing requirement is well over 300 Billion, that number is higher than the market cap of the top 25 shipping banks combined. There is no bank equity to support the financing needed. 50% of the bulk book simply will not deliver. The Chinese government is not going to supply the difference for any number of reasons. Yes, there is structural "capacity" in the yards, and pressure on nb prices will continue.

    EVERYONE has this baked in - The orderbook will be financed. It will not, and that is the surprise coming. This will take catch people off-guard. You cannot compare this to past times. We did not have the banking insolvency we have today.

    You are more likely to see here what happened in the container market three years ago. The projected asset markdown may happen, but if so, it will likely be short term. I do not think the deals will be there because the banks will not force fire sales. They cannot. And, there is no incentive to shift loan book assets from one sink-hole into another. The banks will not mark these to market, they will ride these assets to demo.

    You act in a different market. Of course there will be "one-off" picks and I am well aware of this. But that has nothing to do with FRO for example. This company will be used by equity to mop up, the question is when does capital decided they don't want to miss it. And we are in the range. The equity is already being bought by some very astute friends. I don't care if it goes lower by another 20%, so what.

    If we have a long term demand collapse, all bets are off. But I do not see that, even though that is what is driving the macros.

    We'll see. Maybe Vale will sell you one of their giants.

    There will be some serious money making opportunities in equities (different from your business), just like Golaar/BP years ago.
    Aug 1, 2011. 11:54 AM | Likes Like |Link to Comment
  • Frontline Floundering as Rates Sink  [View article]
    Most impressive. Kindly enlighten me as to the market share of Gdansk yards in global shipbuilding.

    Please cite your source for tonne-mile demand decline of 50% in the last 18 months. Please specify the routes on which this decline occurred. My log indicates WA-E alone up 73% y/y.

    Counterparty risk? Obviously for those who cannot get a solid credit to hire them. Makes the offer useless, doesn't it.

    You cannot link a vessel price loaded with a 5 year T/C and apply it to second hand values across the board. Apples and Oranges.

    As part of your analysis of our industry, you might consider that $320 billion of the total orderbook has yet to be financed. Perhaps you might enlighten me as to where that financing is coming from? Perhaps the Chinese government to complete the oderbook for free? Or maybe the Kremlin will chip in? Not D.C., that's for sure. The orderbook is soft, really soft.

    As a last suggestion, if you run NPV's at least three years past the delivery tail of the tanker orderbook you will see a positive number even at ridiculous discount rates. What you cannot know is when the market for equities of the leaders (FRO) decides to discount that and lift values of the equity despite intermediate term bad rates.

    No one knows how demand will play out. However, what we know, and you know as well, is that in oversupplied markets the best ships with the best managers get hired by the top credits (assuming they make their assets available) and everyone else fights for scraps, takes risks, and gets killed. That is why Frontline will be there and the amateurs and hobby operators will not - if it gets really tough. Securities markets are not the shipping markets and they act way in advance. I don't care if I have to wait for 5 years. I like the of the security now. Others may want to wait until $20 to confirm that it has gone up. The early bird gets the worm.

    Not everyone on this board is an idiot.

    Cheers and a pleasant weekend.
    Jul 29, 2011. 05:42 PM | 1 Like Like |Link to Comment