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Ocean Rig Was Up 90% On No News. Should We Be Surprised?


  • On March 28, 2017, ORIG filed for Chapter 15 bankruptcy protection in the USA, leaving nearly nothing to common shareholders.
  • The question, as always, is what will be the share value after the restructuring is completed. This is often a problem without any solution.
  • Trading the stock is now extremely risky, but if you can grasp the best timing, the game can turn out very profitable.

Semisubmersible Eirik Raude - Ocean Rig UDW (NASDAQ:ORIG)

Investment Thesis:

It is hardly a secret how poorly the offshore drilling industry has done recently. Drillers are struggling to survive while waiting for a recovery that seems to slip away due to a stubborn low oil price environment, which is not enough to push oil majors to invest again in exploration CapEx.

While the market is not at equilibrium, it is far from being dead. I have noticed some tendering activities the past few months, especially in the jack-up segment. Recently, the floaters segment has appeared to move a little as well.

However, for a few offshore drillers such as Ocean Rig, talking about a potential and elusive recovery is not going to help. On March 28, 2017, the company filed for Chapter 15 bankruptcy protection in the USA.

In a filing with the U.S. Bankruptcy Court in New York, Ocean Rig UDW President Antonios Kandylidis said the company had reached an agreement with a group of lenders to convert $3.7 billion of debt into new equity.

Due to the uncertainty attached to the situation and the high level of volatility the stock will experience until the company emerges from bankruptcy, I recommend avoiding the stock and only day trade on special occasions.

Today's surprised rally on no news.

Let's have a look at the chart starting March 28, 2017, when the bankruptcy was announced.

ORIG was about 0.50 and lost about 75% of its value in three months and a half. The market was undecided about the value of the stock and traded until mid-May just below 0.30. Then, the stock started to weaken until yesterday with a low around 0.12.

The fall was not a surprise because the news on March 28 indicated clearly:

... If the Schemes are sanctioned, the

This article was written by

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As an experienced investor, I will help you stay on task more efficiently.

I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.

I live mostly in Sweden with my loving wife.

I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.

“Logic will get you from A to B. Imagination will take you everywhere.” Einstein.

Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

I day trade ORIG on special occasions.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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