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  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    Critical Investor

    1) how much ahead of schedule is the WilHunter?
    I haven't a clue. I don't know what the original schedule was or the basis for the option when the contract was set - or why there was no rate set in the option. I could speculate - but that is all it would be - speculation.

    What I do know is what management stated as to the reasons for extending the option expiry and the negotiations for future work. And based upon those statements, they ought be announcing a new contract with Hess at some point in time.

    2) "Why they would deliberately give away precious cash flow" by performing their work so efficiently "they would shoot themselves in the foot for no reason"? Is that a serious question? Perhaps they run an ethical business. I know if I were Hess, I would appreciate that. ...and I know whom my preference would be to use for the vast remainder of the decommissioning work left to be done.

    But in any event, that proof will be in the pudding. If I'm right, a new Hess contract will be forthcoming, if I'm wrong, it won't. ...and you are waiting either way, so you will know for sure - about that.
    Dec 10, 2014. 12:07 PM | 1 Like Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    OK, I guess - but

    when you say earnings will "decline" in 2015, are you saying that they will be less than 2014 or less than forecast? ... because projected 2015 earnings have been fairly transparent for some time now (a year plus at least) and they obviously were always going to slightly lower than 2014 because of the scheduled yard time.

    As for 2016, the potential for real decline becomes much greater based upon both securing work and the rate that work will be at. Contrary to Critical Investor, I believe the Hess option is irrelevant - but do agree a new Hess Contract is important. Since I choose to believe management when they make direct statements on conference calls, I believe they are significantly ahead of schedule on the current Hess work and it is very possible if not likely that that job will be complete by the time the option would start. Therefore I am not expecting the Hess option to be picked up ... and I think that is a good thing. It would mean Awilco did a very efficient job for Hess and effectively saved them a ton of money. (235 days X pick a day rate) Based upon that view, I would also expect Awilco to be in the driver's seat for new Hess work and a new Hess contract. Assuming all this and assuming the new Hess work comes in at a lesser day rate there will be some earning decline in 2016 - but I'm still figuring 3.00 or more per share which at current price levels is still be a PE under 4 for 2016.

    To expand upon this. Failure to secure a new Hess contract, not option but contract, would be a major negative and failing in my view giving the specific statements by management both regarding the option and the negotiations already ongoing for further work. If they are doing such a good job, why wouldn't they get the follow on work? etc.

    Come mid 2017, unless you are projecting an oil recovery, there will be further decline in earnings. I had projected out 2.00 as my worst case earning projections - but that was based upon work being available and Awilco being the low cost bidder. Oil at $60 and maybe going lower was not part of that forecast. ... but if oil reaches a sustained level where new drilling stops, there will be no new work and earnings will plunge.

    At 2.00 in earnings PE will be about 5 and yield will be around 20% based upon current price. It would seem to me that the Market is currently pricing the stock as if oil is not going to recover, drilling will stop, and earnings will disappear.
    Dec 10, 2014. 11:01 AM | 3 Likes Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    They will be in demand either until they wear out or drilling stops at the depth they work at in the north sea.

    Except for the West Phoenix, which is a gen 6 rig drilling at almost 2000 ft there is not a single rig in the UK North Sea built after 1990 and only 3 built after 1983.

    The concern right now based upon the plunge in the price of oil seems more focused upon the drilling drying up.
    Dec 10, 2014. 10:20 AM | 1 Like Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    rxdoc1

    ?

    IF dividends hold that means earnings hold.

    The stock is trading at what, a PE of 2-3 now? If the stock price falls further, it'll go to 1-2? How would that be a "value trap". That would be a value.

    Concern would be div evaporating because earnings disappear, would it not?

    ...not the stock price falling further while earnings hold.

    Or did I misunderstand you?
    Dec 9, 2014. 12:12 PM | 2 Likes Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    Fun

    If pointing out the errors in what you post is uncivil, so be it

    You repeatly indicated Hess could opt for "Newer" "Better" then post a list of such that includes neither.

    Your list however much out of context in terms of "Newer" "Better" was also just plain wrong.

    The Noble Tan Van Langelveld and the Paragon MSS1 are listed as if they were two different rigs. Paragon renamed the Tan Van Langelveld the MSS1 after they acquired it from Noble.

    You go on to state "The major competitors for AWILCO are Noble..." when Noble has not a single rig in the North Sea in either UK or Norway. They are not even in the market - but to you they are a "major competitor"

    What is one to make of all that?

    I am sorry, but you are posting investment advice about something you don't know enough about to be doing so. You are presenting incorrect information in support of your recommendations. To me, THAT is uncivil, THAT shows a lack of respect to those wasting their time reading this.

    I seem to disagree a lot with Critical Investor - but mostly about "why" type things. But his general advice to those not comfortable with investing of waiting until the next contract is secured before entering (or not) is sound, is not going to cost anyone money and would certainly fall under the better safe than sorry rubric.

    Your recommendation to take a small punt on this stock because it is worth the risk, might be right or wrong - but what passes as your analysis does not appear to provide a basis for that recommendation - and that could cost people money.

    Sorry, but that's the way I see it
    Dec 8, 2014. 02:39 PM | 1 Like Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    I know you didn't read my comment properly :)

    "Name me the harsh water gen 3, 4 or 5 rigs approved to work in the UK North Sea not already working there"

    in response to Hess opting for "newer, better" but claiming you didn't mean gen 6.

    And you give me a list mostly containing the the rigs already there. ? and of the same or older vintage?

    And in the context of the scenario - there only being the one Hess job available, your transocean list is more than silly. The G.W. MacLean? The Arctic III? Seriously? How many Transocean rigs does it take to screw in a lightbulb? ... er I mean decommission a site?

    Already said there will be two Transocean rigs available at the same time as Wilhunter. ... which is one too many for the job

    The Dolphin Rigs will still be on contract

    The Diamond Rigs will either already have new contracts or be stacked
    The Vanguard is already stacked. The Nomad and Princes are Gen 2 1975 rigs.
    The Guardian is off contract in June 2015. They are not going to wait around for 8 months hoping they will be able to underbid Awilco and Transocean.

    The NADL rig is not rate competitive - gen 6 and only in the UKNS now because its drilling at almost 2000 ft depth - it is in an entirely separate competitive niche

    And finally the Noble Tan Van Langelveld IS the Paragon MSS1. Another gen 2 1970's rig off contract in June 2015.

    "The major competitors for AWILCO are Noble..." That will be kinda difficult for Noble since they don't have any rigs in the game.

    and in any event, none of these qualify as "Newer, Better"
    Dec 8, 2014. 12:33 PM | Likes Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    There are 7 comparable rigs that will come available before additional Hess work would be expected to start in Feb 2016.

    1) If new drilling continues and there are new contracts to be had most of those rigs will be off the market by the start of that new work.

    ... and there will be other work available at some acceptable rate

    and life goes on without any serious issues

    2) If new drilling stops and there are no contracts to be had, then most of those rigs will be stacked. I do not believe that companies are going to keep multiple rigs maintained and operational for the better part of a year in the off chance they get the one Hess contract available,

    nor do I think anyone is going to unstack a rig for such work

    Which leaves the two transocean rigs ... and they are not going to prep two rigs when only one job is available.

    ... and I think Awilco will very likely get the job

    but where that leaves the company in Mid 2017 if new drilling has stopped is not a good place.


    As for your more general question - the UK north sea is already there using only old rigs at the depths the old rigs can work at. They aren't making any more of these rigs and when they are gone, drillers will either have to pay up for the gen 6 rigs or stop drilling
    Dec 8, 2014. 11:52 AM | 1 Like Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    Critical Investor

    You repeatedly fail to make sense with your arguments

    The first occurrence was months ago regarding your perceived race to the bottom in rates because of all the rigs that were going to be shifted to the North Sea as they got bumped by newer gen 6 udw rigs

    the second had to do with whether or not Awilco could lie to investors on the conference call about the option extension and not open up a pandora's box of legal issues

    You have yet to respond on point or with specifics to anything I have rebutted you with, but rather deflect or divert then if that fails you just stop

    Back to the point - If you do not believe management when they make a direct statement on an investment conference call - then why are you even considering risking your money with them. Whatever is or is not going on in the North Sea is irrelevant if you can't trust the management
    Dec 8, 2014. 11:25 AM | Likes Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    "I do not buy it... The PPS went down like a stone from 26 to 11 in three to four months. The street is placing a high risk on this stock and I do not understand why? This is a steep sell off."


    1) run up some after announcement of div
    2) went ex dividend
    3) Owner sale at 18
    4)general glut in UDW rigs which market fails to appreciate doesn't affect Awilco
    5) add in general lack of understanding of thinly traded pink sheet stock
    (and just to add, Awilco even at its high was carrying twice the yield and half the PE of other drillers - more than enough of a premium for its "small size" risk)
    6) Scottish referendum
    7) plunge in oil prices

    anyone want to add anything else
    Dec 5, 2014. 06:15 PM | 1 Like Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    You still can't have it both ways "Better and more modern" and "equal price"

    1) There is one gen 4 rig in the UK north sea - it was built in 1990.

    There is maybe one gen 5 rig in the UK north sea - I think there may be an error in the data because it is listed as being built in 1974.

    "However, HESS may opt for better and more modern rig at equal price. " is your quote.

    The only rigs that might qualify as "better and more modern" than the Awililco rigs - especially given all the new work put into them - would be gen 6 rigs.

    ... and they can't compete at "equal price"

    2) Name me the harsh water gen 3, 4 or 5 rigs approved to work in the UK North Sea not already working there that can provide competition for the Wilhunter come Feb 2016 - there aren't any.

    As I remarked above, in a downturn the only real competition for new Hess work come Feb 2016 if there aren't any other jobs to be had out there are the two Transocean gen 3 rigs which date from 1982/83, have not been modernized as much or as recently as the Wilhunter, do not have the decommission experience and record with Hess that Wilhunter has and are assumed to have at least comparable costs if not higher costs than the Wilhunter - and may well need yard stays of their own which RIG may not feel is worth paying for - certainly not for both if at best only one can get work. So if there is only one rig to be employed and Hess is the contractor, the betting favorite to get the work would have to be Awilco.
    Dec 5, 2014. 05:35 PM | 2 Likes Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    To be honest - I'm scared to death that I'm missing something
    Dec 5, 2014. 05:07 PM | Likes Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    ? Again, did you not listen to the earnings CC?

    answered above
    Dec 5, 2014. 04:59 PM | 1 Like Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    My explanation - "the market can't remain irrational longer than you can remain solvent" comes to mind ...

    ... and you overstate my position. They are going to earn about $4/ share next year. They are going to pay out about $4/share next year. That is a reasonably "safe" assumption - it's already contracted for.

    For the 6 quarters after that - they will show a profit based upon what is already contracted. That also is a reasonably "safe" assumption.

    I believe that they will reup with Hess at some number north of $250k which will leave the earnings and div in the $3/share range or better. This might not be so "safe" an assumption. Longer term, I expect both of rigs to be out on greater than $250k contracts which leaves the earnings/div floor in the $2/ share range. Again maybe not a "safe" assumption, but mine.

    FWIW - Find me another sustainable business with a PE less than 10 and a yield above 10? ... which would be this stock at a price of $20 even given my pessimistic case.


    Of course if oil goes into a long term price decline and despite stated government policy to maximize revenues out of the UK North Sea, all new drilling stops at the depth these rigs work at - then the world will have changed in a fundamental way - and this stock will be in trouble. But not nearly the trouble the other drillers will be in because before the spit might hit the fan with this stock, there will be at least another $7-10 paid out in dividend - which means on a total return basis, you might lose 25% on your investment if the whole drilling sector goes belly up some few years hence and you ride the stock down to zero, whereas with SDRL and RIG, etc., you'll lose 100%.
    Dec 5, 2014. 04:57 PM | 3 Likes Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    Did you not listen to the conference call?

    Management stated that the reason the option was pushed off was because absent an abnormally harsh winter, the work contracted for would be complete before the current contract is over and they would be no need to exercise the option.

    They also stated that they were in negotiations with Hess for new follow on work. Does that mean they get the new contract, no. But it doesn't sound negative.
    Dec 5, 2014. 04:20 PM | 1 Like Like |Link to Comment
  • Awilco Drilling: A Whopping 39.1% In Dividend. What Is The Catch? [View article]
    "However, HESS may opt for better and more modern rig at equal price. "

    OP that is pure fantasy. A gen 6 can not compete on price with the Awilco rigs. To start with they take almost twice the crew to operate. It's just a silly thing to say.

    You can't have both a race to the bottom on rates and at the same time Gen 6 rigs participating in that race. It's not possible. You might be able to argue that drillers might want to pay up a little (an extra $100k per day) from current rates to secure a gen 6 rig which might come available - but the argument there is modern rig trumps absolute price as costs will rise. That's a different argument than cheapest rate is going to win. It can't be both.
    Dec 5, 2014. 03:55 PM | 2 Likes Like |Link to Comment
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