Protected Principal Retirement Strategy - Why We Have Added More North Atlantic Drilling

| About: North Atlantic (NATDQ)
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I have been anxiously watching North Atlantic Drilling (NATDF.PK) over the past several days (not exactly happy with its recent price slide) and decided to do a little more in-depth research.

At first blush I thought there might be something quite negative in their recent annual report, so I started with it.

Here's some of the highlights:

  • For the quarter ending December 31, 2012 (fourth quarter) NATDF earned $.218 U.S.
  • Revenues for the quarter were $283 million vs. $261.5 million quarter-over-quarter.
  • Its profit was $97.5 million vs. $105.5 million for the quarter ending December 31, 2011 ($8 million less).
  • Restated its intention to maintain the dividend at $.225 per quarter.

In some of the fine print I noted that the $8 million lower profit was due mostly to one month's rig downtime. Further, NATDF is anticipating about 25 days of downtime during the first quarter of 2013. Hence, NATDF anticipates that earnings for the first quarter of 2013 will be roughly the same as for the fourth quarter of 2012.

Drilling Rigs

NATDF presently operates eight rigs, including four semi-submersibles, one drillship, and three harsh environment jack-ups. One additional semi-submersible will be coming on-line during the first quarter of 2015, and on-going construction of one new harsh environment jack-up will be completed during the fourth quarter of 2013.

Of the eight operational rigs, all are presently under contract. One contract will expire in 2014, two in 2015, two in 2016, two in 2017, and one in 2019.

That said, I find no problems whatsoever from an operational standpoint.

Other Financials

NATDF's price earnings ratio is presently 7.8, its current profit margin is 25 percent and the return on equity is 35 percent.

In 2013, earnings are anticipated to increase to $1.40 from $1.30 in 2012.

The five-year forward compound annual growth rate [CAGR] is 7.4 percent.


After completing the research, I can only conclude that the recent NATDF price action has been the result of the delay in its listing on the NYSE. I am not even certain that it is a delay, as there has been no recent news to that effect. It might only be the perception of investors that no news is bad news in this case. I believe that at some point in 2013, NATDF will achieve listing on the NYSE which will afford the stock much higher visibility.

Based upon the foregoing, I added additional shares of NATDF to the Protected Principal Retirement Strategy portfolio this morning (Tuesday).

Disclosure: I am long NATDF.PK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article does not constitute either a buy or sell recommendation for any of the stocks mentioned.