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December Offshore Driller Report

|Includes: Atwood Oceanics Inc. (ATW), DO, ESV, HERO, NADL, NE, ORIG, PACD, PGNPQ, RIG, RIGP, SDLP, SDRL, VTGDF
  1. Offshore Driller December Performance
  2. Fleet/company changes in December
  3. Added company's debt ratings by Moody's

Happy New Year to everyone, I hope everyone had a Merry Christmas as well! Going into 2016, I hope to provide a monthly report that further helps investors analyze the offshore drillers. In this report, each company's credit rating is included (provided by Moody's). If there is anything you would like to see in future reports, comment below, message me, or email me at "investor496@gmail.com". To see the fleets of the companies covered, click here!

So, on to the report, some activity occurred in the offshore drilling industry in December. There were some new contracts, extensions, and cancellations. First, we'll start with the monthly performance of the drillers.

Company Stock/unit performance

Company

Month (%) Change

Atwood Oceanics (NYSE:ATW)

-37.05

Diamond Offshore (NYSE:DO)

-7.58

Ensco PLC (NYSE:ESV)

-10.78

Hercules Offshore (OTCPK:HEROQ)

-42.13

Noble Corp (NYSE:NE)

-21.79

North Atlantic Drilling (NYSE:NADL)

-53.58

Ocean Rig (NASDAQ:ORIG)

-14.21

Pacific Drilling (NYSE:PACD)

-35.88

Paragon Offshore (PGNPF)

NA

Rowan Companies (NYSE:RDC)

-17.61

Seadrill (NYSE:SDRL)

-44.33

Seadrill Partners (NYSE:SDLP)

-54.94

Transocean (NYSE:RIG)

-12.82

Transocean Partners (NYSE:RIGP)

-12.31

Vantage Offshore (OTCPK:VTGDF)

-89.52

Average

-32.47

Vantage performed the worst with 89.52 percent drop in its stock price. Diamond performed the best with a 7.58 percent drop.

Company Changes and Fleet Updates

Atwood Oceanics

Atwood didn't release an updated fleet status report in December, but they released info regarding the Atwood Admiral and the Atwood Archer.

  1. The Atwood Admiral will be delivered September 30th of 2017 (originally March of 2016).
  2. The Atwood Archer will be delivered June 30th of 2018 (originally June of 2016).
  3. In order to delay the drillships (two above), Atwood will be paying DSME (shipbuilder) $50 million for each rig.
  4. Atwood's credit rating was downgraded at Moody's on October 19th to Ba3, down from Ba2.

The next rig to end its contract is the Atwood Falcon, which will be available in March.

Diamond Offshore

Diamond Offshore had a really slow month (for investors anyway). There were no press releases, so as far as we know, no major changes have taken place.

  1. On October 19th, Diamond was downgraded by Moody's to a credit rating of Baa2 (from A3).

The Ocean Scepter, Ocean Ambassador, and the Ocean Rover are the next rigs to end contracts in March.

Ensco PLC

Ensco also had a fairly slow month.

  1. On December 7th, Ensco announced that Carey Lowe will replace Mark Burns as Chief Operating Officer. Burns is retiring from the company.
  2. Moody's downgraded Ensco's credit rating on October 19th to Baa2 from Baa1.

The Ensco 8506, Ensco 83, and the Ensco 107 are the next rigs to end contracts in February.

Hercules Offshore

Hercules released an updated fleet status update on December 17th. There were a few minor changes:

  1. The Hercules 205 received an extension, now ending January 10th (originally December 18th). It will end the contract with Renaissance on March 30th (originally March 7th).
  2. The Hercules 264 worked till Jan 1st (originally December 3rd). The rig is now ready stacked until January 31st, when it will start a 30-day contract with Byron Energy (ending March 1st).
  3. Hercules has a Moody's credit rating of Caa1 (as of November 5th)

The Hercules 264 is the next rig to roll off contract on March 1st.

North Atlantic Drilling

North Atlantic was busy during December.

  1. On December 3rd, North Atlantic announced a deal with the Jurong Shipyard regarding the West Rigel. If North Atlantic doesn't secure a contract for the rig by June, Jurong will own 77% of the rig, North Atlantic 23%, and North Atlantic will continue marketing the rig.
  2. On December 28th, North Atlantic held a special meeting proposing a reverse split. On December 30th, a 1-for-10 reverse split occurred.

The West Alpha is the next rig to roll off contact in July.

Noble Corp

Noble released an updated fleet status report on December 17th with a few changes:

  1. The Noble Amos Runner worked until mid December (originally late November).
  2. The Noble Bob Douglas had 30 days of downtime due to repairs and maintenance
  3. The Noble Discoverer ended its contract mid December, and is now expected to be stacked. Because Shell cancelled the contract early, they will be Noble 90% of the backlog of the rig.
  4. The Noble Regina Allen worked till mid December (originally late November), and is now available.
  5. There were a few other minor changes to the fleet.
  6. Noble has a Moody's credit rating of Baa3, confirmed October 19th.

The Jim Day and the Danny Atkins are the next rigs to roll off contact in January (this month).

Ocean Rig

Ocean Rig (finally) announced 2015 third quarter results on December 7th.

  1. Earnings came in at $0.58 per share (versus analyst estimates of $0.46 per share) because the company repurchased debt at a major discount.
  2. Revenue of $437.17 million beat analyst estimates of $433.52 million.
  3. Investors had fears that a major announcement would occur during the conference call, but nothing major came out of it.

Other than earnings, it was a relatively slow month for Ocean Rig.

  1. On December, Moody's downgraded Ocean Rig's credit rating to Caa2 from a Caa1.

The Eirik Raude is the next rig to end its contract in January (this month).

Pacific Drilling

No major news was released by Pacific Drilling in December.

  1. On October 19th, Moody's downgraded Pacific's credit rating to Caa2 from B3.

The Pacific Khamsin is the next rig to roll off contract in January (this month).

Paragon Offshore

Paragon released an updated fleet status report on December 14th:

  1. The MSS1 will be working two extra months, ending in February, at a day rate of $200,000 (down from $225,000).
  2. The M826 will be working an extra month and half, the contract now ending at the end of January (this month).
  3. There were a few other minor changes.

On December 29th, Paragon was delisted from the NYSE to the OTC markets, now trading under the symbol "PGNPF". This was due to Paragon failing to meet the NYSE requirements.

  1. On December 21st, Moody's downgraded Paragon to a credit rating of Ca from Caa2.

The next rig to roll off contract is the C20052 in January (this month).

Rowan Companies

Rowan has not released any new information since the November Offshore Driller Report.

  1. On December 19th, Moody's confirmed a Baa3 rating on Rowan's credit rating.

The Joe Douglas is the next rig to end its contract in February.

Seadrill

Seadrill has not released any major changes in December.

  1. On October 20th, Moody's downgraded Seadrill's credit rating to a Ba2 from a Baa3.

The West Cressida is the next rig ending its contract in April.

Seadrill Partners

Seadrill Partners kept investors busy in December:

  1. On December 8th, Seadrill Partners secured one-year extensions for its two barges, the T15 and T16. Originally ending their contracts in July and August of 2018, the contracts now run through July and August of 2019, respectively.
  2. On December 18th, Seadrill Partners cut their distribution from $0.5675 per quarter to $0.25 per quarter (a 56% cut).
  3. On October 20th, Seadrill Partners was downgraded by Moody's from a Ba3 credit rating to a B2 credit rating.

The West Aquarius and the West Capella are the next rigs rolling off contract in April of 2017.

Transocean

Transocean kept investors busy with three major changes to their fleet:

  1. On December 7th, Transocean secured a two-year contract for its Henry Goodrich at a day rate of $200,000. It will start its contract in the second quarter of 2016.
  2. On December 17th, Statoil cancelled the contract with Transocean's Discoverer Americas. The rig was supposed to work till May, and because of the cancellation, Statoil will pay Transocean a termination fee for the full backlog of the rig.
  3. On December 28th, Shell cancelled the contract with the Polar Pioneer, which was set to expire in July of 2017. Shell will be paying a lump-sum to Transocean as a termination fee.
  4. On December 17th, Transocean announced that starting March 30th, Transocean will no longer trade on the Swiss Exchange.
  5. On October 19th, Transocean was downgraded by Moody's to a credit rating of Ba2 from Ba1.

The Transocean John Shaw is the next rig ending its contract at the end of January (this month).

Transocean Partners

Transocean Partners had no major events occur in December.

  1. Transocean Partners carries no debt, and does not carry a credit rating.

The next rig to roll off contract will be the Development Driller 3 in November.

Vantage Drilling

Vantage Drilling released an updated fleet status report on December 17th.

  1. The Emerald Driller received a four-month extension, ending in January (originally September of 2015) at a day rate of $84,920.
  2. The Sapphire Driller is ready stacked, but will start a two-month contract in February at a day rate of $75,000.
  3. The Aquamarine Driller Started a contract in December ending in May of 2017 at a day rate of $80,000.
  4. The Topaz Driller received a three-month, ending in March, with a day rate of $99,000.
  5. On December 2nd, Vantage declared bankruptcy. They reached a deal with lenders and noteholders in a debt-for-equity swap, so we will soon see the effects.

The next rig to roll off contract is the Emerald Driller at the end of January (this month).

Conclusion

From this report, we can see that the activity is still very slow in the industry. With oil prices now below $40 a barrel, companies are cutting capital expenditures going into 2016. Many oil majors also have said further cuts will occur in 2017. Hercules and Vantage have already declared bankruptcy. I believe Paragon and North Atlantic will be the next to fall, most likely this year. I believe we will see the bottom in oil this year, and if you have your eye on any driller (or oil company, for that matter), I think it would be best to start accumulating. I would stick with the financially stronger companies to provide some downside protection. Looking at the company bond prices can be a helpful indicator when looking at volatile companies. Lower bond prices indicate that a company is more risky and more likely to go under. Bond prices are more rational than the stock prices because there are less traders, and typically, only the experienced mess with bonds.

Again, if you have any comments or suggestions, comment below, message me, or email me at "investor496@gmail.com". I have a website where you can view the 15 different fleets of the companies covered here. It is updated weekly with new info regarding the company fleets!

Thanks for reading and good luck to all traders and investors in 2016!

Disclosure: I am/we are long RIGP AND PACD.