Awilco Drilling PLC AWLCF
February 28, 2013 - 7:46pm EST by
udaman
2013 2014
Price: 14.56 EPS $1.28 $3.70
Shares Out. (in M): 30 P/E 11.4x 3.9x
Market Cap (in M): 440 P/FCF 13.8x 4.0x
Net Debt (in M): 98 EBIT 56 132
TEV: 537 TEV/EBIT 9.5x 4.0x

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  • Offshore Oil and Gas
  • Energy services
  • Oil and Gas
  • Norway
 

Description

Long: Awilco Drilling PLC (AWDR NO)

Note: Values in write-up are converted using 5.7 USD/NOK exchange rate.

Full PDF write up can be found at: https://www.box.com/s/6hdv8nn9lg4zxfm37aja

Summary

Awilco Drilling (AWDR NO or AWLCF in the “grey market”) is an incredibly attractive opportunity to get long a stock before a generous dividend policy re-rates the shares higher. During the second half of 2014, Awilco will be generating sufficient cash flow to support an annual dividend of approximately $150mm v. the company's current equity market capitalization of ~$440mm, resulting in a yield of ~30%+ on today's market cap. While hard to precisely determine where the equity price may ultimately settle as the introduction of yield can often lead to premium valuations based upon more traditional valuation metrics like EV/EBITDA or P/E, a guess says that the yield could conservatively settle in the high-teens % (let's call it 17% for arguments sake), resulting in a share price of ~150 NOK, or over 90% upside from current levels. Price appreciation through the end of 2014, coupled with an estimated ~$200 mm paid in dividends in 2013 and 2014 would yield a total return of almost 150% over the next 24 months.

Details

Awilco Drilling PLC (AWDR NO) is UK-domiciled company that was formed in 2009 to acquire two midwater semi-submersible drilling rigs from Transocean as a result of anti-trust concerns related to the Global SantaFe merger. Both of the rigs are currently operating under term contract in the UK sector of the North Sea at an average dayrate of approximately $315k/d. The WllPhoenix (previously the Arctic II) is a 1982 vintage semi-submersible rated for 1,200 feet of water and was upgraded in 2011. The WilHunter (previously the GSF Arctic IV) is a 1983 semi-submersible rated for 1,500 feet of water and was also upgraded in 2011.

With only two assets and no newbuild projects on horizon, the company appears to be running to maximize cash flow, consistent with the statement from the Q4 2012 report:

The Company’s intention is to pay a regular dividend in support of its main objective to maximise returns to shareholders. A dividend payment on a quarterly basis is expected to commence during the first half of 2013. All of the company’s free cash flow is intended to be distributed subject to establishing a robust cash buffer to support operational working capital requirements and planned capital expenditure. In the case of attractive growth opportunities the company will endeavor to maintain a meaningful dividend distribution.”

The UK sector of the North Sea market for floating rigs is currently extremely tight and recent dayrates have reflected this trend. There is no availability for 2013 and limited availability of rig time in 2014, which has driven leading edge rates for midwater semi-submersible rigs rig to $400k/d - $425k/d. Awilco recently extended the WilHunter with Hess through November 2015 for plugging and abandonment work at $385k/d (which, when adjusted for $10-$15k/d in lower operating costs in fact is equivalent to $395-$400k/d), Transocean just extended a contract on the Sedco 714 (almost the exact same specs as the two Awilco rigs) for an additional 18 months beginning in April 2014 for $435k/d. The WilPhoenix will have an opportunity to reprice in mid-to-late 2014 from its current contract rate of $315k/d.

So what does this all mean financially? The company is extremely simple to model. Revenues are modeled simply as dayrate x % utilization. Their operating costs are $85k/d per rig. SG&A is roughly $3mm per quarter, interest expense is around $12mm per year, depreciation is $18mm and total capex in 2013 is estimated to be $15mm (maintenance levels). Tax rate appears to be around 10%. The company has generally been able to achieve operational uptime on its rigs greater than 95%, but for modeling purposes, we'll be more conservative and assume 93%.

The company currently has 30.2mm FD shares outstanding and around $98mm of net debt, yielding a current enterprise value of ~$540mm.

A simple model is included below (only visible in the PDF write-up), which highlights the most likely earnings scenarios for 2013 and how the company is positioned exiting 2014.

One valid concern as it relates to Awilco would be that these assets are old and their remaining useful life is unclear. In general, I would say it's difficult to determine exactly the remaining life of these assets. They weren't "rebuilt" in 2011, more like "refurbished." All an offshore rig really is is a bunch of steel and components. If you maintain the asset well and replace the components, these assets have already shown they can last 40 years or more. There are still jackup rigs in the Gulf of Mexico operating that were built in the 1950's and 1960's (admittedly not many). My best guess is these can work another 15-20 years, but the longer they work, the more refurbishments will be required.

Another concern might be that the assets are earning an unsustainable rate of return currently and that when they reprice after their contracted period there is significant risk of reversion to the mean. I'll concede that these assets are over-earning at current leading edge rates. To replace an asset like this brand new would likely cost $400-450mm. The interesting point is that these rigs are relatively low specification floating rigs and no one would ever build one like these again. A brand new, state of the art ultra-deepwater rig costs around $650mm and takes around 2.5 years to construct. At current dayrates of $400k/d and operating costs of $85k/d, each one of Awilco's rigs are capable of generating $80mm-ish in free cash flow, which would imply an after tax cash on cash return of approximately 20% (assuming $400mm replacement cost). My best guess as to the FMV value of each rig in current condition would be ~$250mm, which would yield around 30% on that basis. Brand new drillships are being contracted for around $575-$600k /d, which yields around around $150mm of annual EBITDA (roughly $135 of free cash flow) or roughly a low 20% after tax unlevered return.

Offsetting this is the fact that there is some ability to lock in rates under term contracts, as with all offshore rigs. The WilHunter was recently locked up through November 2015 at a rate of $385k/d (which is equivalent to $400k/d when accounting for a lower operating coat for the particular type of work this rig will be doing). The WilPhoenix is well positioned with some of the only 2014 availability in the region and I would expect this rig to be contracted through early 2016 at a rate of $400k/d within the next few months. We see no real pricing risk until beginning of 2016. For this type of asset, it's unusual to see term of more than 2 years. I would characterize the cash flows as basically locked in through 2015.

I think it's fair to look back to the trough of the market to see where dayrates for these assets troughed out. $250-$260k/d is about as bad as it got in 2009-2010, while dayrates were $315k/d in 2011 when Awilco finished refurbishing these assets. At $250k/d, assuming 95% utilization, each rig can still generate around $55mm of gross margin per year, but corp FCF is reduced to ~$70mm or so after deducting G&A, interest, and maintenance capex. The cash in cash return relative to replacement value in this case would be less than 10%. Of course, if the market is bad enough, the assets could stack out all together, like any oilfield business.

These assets are most definitely mobile between geographic regions, but the stringent safety requirements and customer specifications in the North Sea make it more difficult for midwater rigs to migrate into this market. To being in a rig from Brazil or West Africa (which we view as the only realistic sources of supply), it would take more than $100mm in incremental capex in some cases and $30mm or so to mobilize the asset to the region. I believe there will be a few rigs that could come back (in fact, Diamond Offshore is already doing so), but that they will only do so on the back of 2-3 year contracts that will justify the incremental capital investment. In fact, despite the strength in this market, some operators in other markets are electing to cold stack / scrap midwater rigs because they are too old and dilapidated to justify investing additional capital. In order for rigs to leave the UK market, it would likely take a doomsday scenario for the floating rig space.

In terms of supply / demand factors, this is never something easy to pin down for offshore drilling assets. Supply is fairly visible as there is a global database of every rig, it's current contracted status, dayrate etc. There are 70 or so UDW rigs under construction today, but almost all of these rigs will go to markets that demand the leading edge technologies like West and East Africa, Norway, Brazil, and the Gulf of Mexico. The UK North Sea is a mature market where you don't need capability to still in 10,000 feet of water and you don't need the shiniest new equipment to get the job done. Most of the work being done today is development and remediation of existing oil fields. Demand is driven by oil prices and, quite honestly, other than the tightness if availability in 2014 and high dayrates, I don't know how to predict future demand in this region. I would say, however, that at $115 Brent, pretty much every project is economic. And the UK North Sea is filled with marginal investments.

I haven't run a full DCF on the company, but what I would probably do is assume a terminal value for each rig at the end of 2016 and liquidate the company then. But if you get $150mm of dividends per year for next three years and liquidate company at $200mm per rig total undiscounted cash flow to equity would be like $750mm (before tax) on a $450mkt cap today.

While you can't value the company on yield alone, it does do a lot to determine equity prices in the short run. I hate unsustainable yield hogs (money shufflers) with the most fiery passion of my belly, but this is simply just milking these assets for what they are worth. I would also point to a company like Diamond Offshore's valuation and yield. If you strip out the few newer assets they have, the quality is similar or worse than Awilco's and they trade at a 5% dividend yield and 12x eps. Clearly this is a smaller cap, but I feel confident in saying that the current equity value is fully supported by the contracted (or soon to be contracted rigs) and you're getting the terminal value for free.

Investment Risks

  1. Awilco only has two assets. If one of them is damaged or has extensive unpaid downtime, this could have a major impact on the company's ability to execute its strategy.

  2. Awilco's assets are old. How much longer can 30 year old offshore drilling assets last? Unclear, but they are still running well and are clearly in high demand.

  3. High dayrates in the North Sea could attract additional capacity. Two additional midwater semis will be entering the UK North Sea during 2013 and 2014, which could have an adverse impact on pricing / utilization for the existing assets. Mitigating this risk somewhat is a strict regulatory regime in the UK as it relates to rigs..

  4. The company decides to execute M&A and pay either a lesser dividend or no dividend at all.

 

Catalysts

  1. Given the tightness of the UK semi market, it is reasonable to expect Awilco's remaining 2014 availability on the WilPhoenix to be contracted and extended well into 2015.

  2. Dividend should be initiated by the end of 2Q2013. The company would like to build another $20mm of cash or so on the balance sheet as a working capital / capex buffer before paying out cash, so it might take a couple of quarters to ramp up to the full dividend level.

I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

  1. Given the tightness of the UK semi market, it is reasonable to expect Awilco's remaining 2014 availability on the WilPhoenix to be contracted and extended well into 2015.

  2. Dividend should be initiated by the end of 2Q2013. The company would like to build another $20mm of cash or so on the balance sheet as a working capital / capex buffer before paying out cash, so it might take a couple of quarters to ramp up to the full dividend level.

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    Description

    Long: Awilco Drilling PLC (AWDR NO)

    Note: Values in write-up are converted using 5.7 USD/NOK exchange rate.

    Full PDF write up can be found at: https://www.box.com/s/6hdv8nn9lg4zxfm37aja

    Summary

    Awilco Drilling (AWDR NO or AWLCF in the “grey market”) is an incredibly attractive opportunity to get long a stock before a generous dividend policy re-rates the shares higher. During the second half of 2014, Awilco will be generating sufficient cash flow to support an annual dividend of approximately $150mm v. the company's current equity market capitalization of ~$440mm, resulting in a yield of ~30%+ on today's market cap. While hard to precisely determine where the equity price may ultimately settle as the introduction of yield can often lead to premium valuations based upon more traditional valuation metrics like EV/EBITDA or P/E, a guess says that the yield could conservatively settle in the high-teens % (let's call it 17% for arguments sake), resulting in a share price of ~150 NOK, or over 90% upside from current levels. Price appreciation through the end of 2014, coupled with an estimated ~$200 mm paid in dividends in 2013 and 2014 would yield a total return of almost 150% over the next 24 months.

    Details

    Awilco Drilling PLC (AWDR NO) is UK-domiciled company that was formed in 2009 to acquire two midwater semi-submersible drilling rigs from Transocean as a result of anti-trust concerns related to the Global SantaFe merger. Both of the rigs are currently operating under term contract in the UK sector of the North Sea at an average dayrate of approximately $315k/d. The WllPhoenix (previously the Arctic II) is a 1982 vintage semi-submersible rated for 1,200 feet of water and was upgraded in 2011. The WilHunter (previously the GSF Arctic IV) is a 1983 semi-submersible rated for 1,500 feet of water and was also upgraded in 2011.

    With only two assets and no newbuild projects on horizon, the company appears to be running to maximize cash flow, consistent with the statement from the Q4 2012 report:

    The Company’s intention is to pay a regular dividend in support of its main objective to maximise returns to shareholders. A dividend payment on a quarterly basis is expected to commence during the first half of 2013. All of the company’s free cash flow is intended to be distributed subject to establishing a robust cash buffer to support operational working capital requirements and planned capital expenditure. In the case of attractive growth opportunities the company will endeavor to maintain a meaningful dividend distribution.”

    The UK sector of the North Sea market for floating rigs is currently extremely tight and recent dayrates have reflected this trend. There is no availability for 2013 and limited availability of rig time in 2014, which has driven leading edge rates for midwater semi-submersible rigs rig to $400k/d - $425k/d. Awilco recently extended the WilHunter with Hess through November 2015 for plugging and abandonment work at $385k/d (which, when adjusted for $10-$15k/d in lower operating costs in fact is equivalent to $395-$400k/d), Transocean just extended a contract on the Sedco 714 (almost the exact same specs as the two Awilco rigs) for an additional 18 months beginning in April 2014 for $435k/d. The WilPhoenix will have an opportunity to reprice in mid-to-late 2014 from its current contract rate of $315k/d.

    So what does this all mean financially? The company is extremely simple to model. Revenues are modeled simply as dayrate x % utilization. Their operating costs are $85k/d per rig. SG&A is roughly $3mm per quarter, interest expense is around $12mm per year, depreciation is $18mm and total capex in 2013 is estimated to be $15mm (maintenance levels). Tax rate appears to be around 10%. The company has generally been able to achieve operational uptime on its rigs greater than 95%, but for modeling purposes, we'll be more conservative and assume 93%.

    The company currently has 30.2mm FD shares outstanding and around $98mm of net debt, yielding a current enterprise value of ~$540mm.

    A simple model is included below (only visible in the PDF write-up), which highlights the most likely earnings scenarios for 2013 and how the company is positioned exiting 2014.

    One valid concern as it relates to Awilco would be that these assets are old and their remaining useful life is unclear. In general, I would say it's difficult to determine exactly the remaining life of these assets. They weren't "rebuilt" in 2011, more like "refurbished." All an offshore rig really is is a bunch of steel and components. If you maintain the asset well and replace the components, these assets have already shown they can last 40 years or more. There are still jackup rigs in the Gulf of Mexico operating that were built in the 1950's and 1960's (admittedly not many). My best guess is these can work another 15-20 years, but the longer they work, the more refurbishments will be required.

    Another concern might be that the assets are earning an unsustainable rate of return currently and that when they reprice after their contracted period there is significant risk of reversion to the mean. I'll concede that these assets are over-earning at current leading edge rates. To replace an asset like this brand new would likely cost $400-450mm. The interesting point is that these rigs are relatively low specification floating rigs and no one would ever build one like these again. A brand new, state of the art ultra-deepwater rig costs around $650mm and takes around 2.5 years to construct. At current dayrates of $400k/d and operating costs of $85k/d, each one of Awilco's rigs are capable of generating $80mm-ish in free cash flow, which would imply an after tax cash on cash return of approximately 20% (assuming $400mm replacement cost). My best guess as to the FMV value of each rig in current condition would be ~$250mm, which would yield around 30% on that basis. Brand new drillships are being contracted for around $575-$600k /d, which yields around around $150mm of annual EBITDA (roughly $135 of free cash flow) or roughly a low 20% after tax unlevered return.

    Offsetting this is the fact that there is some ability to lock in rates under term contracts, as with all offshore rigs. The WilHunter was recently locked up through November 2015 at a rate of $385k/d (which is equivalent to $400k/d when accounting for a lower operating coat for the particular type of work this rig will be doing). The WilPhoenix is well positioned with some of the only 2014 availability in the region and I would expect this rig to be contracted through early 2016 at a rate of $400k/d within the next few months. We see no real pricing risk until beginning of 2016. For this type of asset, it's unusual to see term of more than 2 years. I would characterize the cash flows as basically locked in through 2015.

    I think it's fair to look back to the trough of the market to see where dayrates for these assets troughed out. $250-$260k/d is about as bad as it got in 2009-2010, while dayrates were $315k/d in 2011 when Awilco finished refurbishing these assets. At $250k/d, assuming 95% utilization, each rig can still generate around $55mm of gross margin per year, but corp FCF is reduced to ~$70mm or so after deducting G&A, interest, and maintenance capex. The cash in cash return relative to replacement value in this case would be less than 10%. Of course, if the market is bad enough, the assets could stack out all together, like any oilfield business.

    These assets are most definitely mobile between geographic regions, but the stringent safety requirements and customer specifications in the North Sea make it more difficult for midwater rigs to migrate into this market. To being in a rig from Brazil or West Africa (which we view as the only realistic sources of supply), it would take more than $100mm in incremental capex in some cases and $30mm or so to mobilize the asset to the region. I believe there will be a few rigs that could come back (in fact, Diamond Offshore is already doing so), but that they will only do so on the back of 2-3 year contracts that will justify the incremental capital investment. In fact, despite the strength in this market, some operators in other markets are electing to cold stack / scrap midwater rigs because they are too old and dilapidated to justify investing additional capital. In order for rigs to leave the UK market, it would likely take a doomsday scenario for the floating rig space.

    In terms of supply / demand factors, this is never something easy to pin down for offshore drilling assets. Supply is fairly visible as there is a global database of every rig, it's current contracted status, dayrate etc. There are 70 or so UDW rigs under construction today, but almost all of these rigs will go to markets that demand the leading edge technologies like West and East Africa, Norway, Brazil, and the Gulf of Mexico. The UK North Sea is a mature market where you don't need capability to still in 10,000 feet of water and you don't need the shiniest new equipment to get the job done. Most of the work being done today is development and remediation of existing oil fields. Demand is driven by oil prices and, quite honestly, other than the tightness if availability in 2014 and high dayrates, I don't know how to predict future demand in this region. I would say, however, that at $115 Brent, pretty much every project is economic. And the UK North Sea is filled with marginal investments.

    I haven't run a full DCF on the company, but what I would probably do is assume a terminal value for each rig at the end of 2016 and liquidate the company then. But if you get $150mm of dividends per year for next three years and liquidate company at $200mm per rig total undiscounted cash flow to equity would be like $750mm (before tax) on a $450mkt cap today.

    While you can't value the company on yield alone, it does do a lot to determine equity prices in the short run. I hate unsustainable yield hogs (money shufflers) with the most fiery passion of my belly, but this is simply just milking these assets for what they are worth. I would also point to a company like Diamond Offshore's valuation and yield. If you strip out the few newer assets they have, the quality is similar or worse than Awilco's and they trade at a 5% dividend yield and 12x eps. Clearly this is a smaller cap, but I feel confident in saying that the current equity value is fully supported by the contracted (or soon to be contracted rigs) and you're getting the terminal value for free.

    Investment Risks

    1. Awilco only has two assets. If one of them is damaged or has extensive unpaid downtime, this could have a major impact on the company's ability to execute its strategy.

    2. Awilco's assets are old. How much longer can 30 year old offshore drilling assets last? Unclear, but they are still running well and are clearly in high demand.

    3. High dayrates in the North Sea could attract additional capacity. Two additional midwater semis will be entering the UK North Sea during 2013 and 2014, which could have an adverse impact on pricing / utilization for the existing assets. Mitigating this risk somewhat is a strict regulatory regime in the UK as it relates to rigs..

    4. The company decides to execute M&A and pay either a lesser dividend or no dividend at all.

     

    Catalysts

    1. Given the tightness of the UK semi market, it is reasonable to expect Awilco's remaining 2014 availability on the WilPhoenix to be contracted and extended well into 2015.

    2. Dividend should be initiated by the end of 2Q2013. The company would like to build another $20mm of cash or so on the balance sheet as a working capital / capex buffer before paying out cash, so it might take a couple of quarters to ramp up to the full dividend level.

    I do not hold a position of employment, directorship, or consultancy with the issuer.
    I and/or others I advise hold a material investment in the issuer's securities.

    Catalyst

    1. Given the tightness of the UK semi market, it is reasonable to expect Awilco's remaining 2014 availability on the WilPhoenix to be contracted and extended well into 2015.

    2. Dividend should be initiated by the end of 2Q2013. The company would like to build another $20mm of cash or so on the balance sheet as a working capital / capex buffer before paying out cash, so it might take a couple of quarters to ramp up to the full dividend level.

    Messages


    SubjectI'm sure almost no one cares
    Entry03/29/2013 09:58 AM
    Memberudaman
    But at this point you're only 2-3 months away from getting the first dividend and the NOK has weakened so the stock has gotten even cheaper (all of their revenues are in dollars anyway).  I have chatted with several industry contacts and this management team and these assets have a very good reputation.  I expect the first dividend to be $3 on an annualized basis, or a ~23%-ish yield, going higher once the contracts roll over to better rates.

    SubjectRE: RE: I'm sure almost no one cares
    Entry03/29/2013 07:24 PM
    Memberudaman
    Share price performance has been a combination of a small cap illiquid stock being more recognized by the market and the fundamentals in the UK floater market improving at a rapid pace.  I believe that the initiation of the dividend will force more attention and liquidity to the name. 
     
    I don't know the ownership group that well, but their strategy and comments certainly suggest they are here to maximize dividends. 

    Subject2 questions
    Entry04/17/2013 01:39 PM
    Membermpk391
    thanks for the idea.  you mention that your best guess as to FMV for these two rigs is $250m each.  how do you get that number?  500m is less than the current EV, so wouldn't that invalidate your thesis?
     
    dumb question: if this is UK domiciled but Norway listed, which country's laws apply to dividend withholding taxes for US investors?  (UK withholding is 0% vs Norway at 15%)
     
    thx

    SubjectRE: RE: 2 questions
    Entry04/18/2013 02:37 AM
    Memberudaman
    Doesn't appear dividends will be subject to withholding tax, per the company's prospectus:
     

    "Dividends received from UK companies by a personal shareholder resident outside Norway, is not subject to taxation in Norway unless the personal shareholder (i) holds the shares in connection with the conduct of business activities in Norway or (ii) has been a tax resident of Norway within the five calendar years preceding the year of the sale or disposition and whose gains are not exempt pursuant to the provisions of an applicable income tax treaty, whereby the shareholder is taxed in the same way as a similar Norwegian personal shareholder."


    SubjectRE: RE: 2 questions
    Entry04/18/2013 12:45 PM
    Membermpk391
    thanks for your replies.  regarding FMV, there seems to be a disconnect here: if these rigs can really generate over USD 400m in dividends over the next three years, and they still have even just a few more years of useful life after that, then I don't understand why anyone would say their value today is only USD 500m... even if rates do come down eventually.
     
    maybe there is some risk of a big uptick in maint capex?  maybe you've way overestimated remaining useful lives?  I dunno - just trying to think up any reason to explain this
     
     

    SubjectRE: RE: RE: 2 questions
    Entry04/18/2013 02:06 PM
    Memberudaman
    There is not a deep pool of capital trying to buy older assets...that's why they trade at a discount. All the public players want brand new shiny rigs even though these older rigs can generate 75% of the daily cash margin at 40% of the price.  Awilco wouldn't sell these assets for $250mm each today and no one would really want to buy them. Not because they aren't valuable, but because the market would not reward any public driller for buying an older semisubmersible at this point. 
     
    The risk with these assets is definitely a useful life / terminal value problem.  I tend to think these older assets can do the job just fine and won't go quietly, especially in the hands of a small company that really cares about keeping them working. 

    SubjectRE: Rates / Capex
    Entry04/27/2013 01:16 PM
    Memberudaman
    Siren, the offshore drilling rate structure and history is pretty transparent thanks to centralized rig database ODS-Petrodata.  That's where you can get the historical rates.  Also, I have been an analyst covering this industry for quite some time so these are things I just know off the top of my head. 
     
    The capex question is a bit more complex as it's impossible to know the exact condition of each rig.  I'm assuming since these rigs were very recently bought from a gigantic company like Transocean and refurbed / upgraded by Awilco that they are in better than average condition.  You'll often find that the smaller rig contractors do a better job with maintaining their assets because those are the only assets that they have.  Bigger companies tend to have more top down driven capital budgets that can choose to neglect certain assets from time to time. 
     
    I will say almost for sure that the book DD&A is an underestimation of what the true "maintenance capital" of these rigs are.  They can probably get away with spending $15-20mm per year total for a couple of years but when the 5-year surveys come about they will certainly require a decent chunk of capital.  Honestly, each rig could need $20mm of capital each, or they could take $100mm each...it's just impossible to know with certainty.  My best GUESS would be to be prudent management should spend or reserve more like $10-$20mm/yr per rig. 
     
    If rates go back to $250k/d, that would likely mean a lower utilization environment, so I wouldn't count on that math necessarily.  These assets are overearning right now and being milked for cash.  Hopefully you'll strip enough out of the company where in 4 years you'll get all of your money back and end up owning these assets free and clear.  Terminal value is clearly the biggest risk with this investment.

    SubjectQ1 Earnings and Dividend
    Entry05/14/2013 05:02 PM
    Memberudaman
    Earned 82c and, more importantly, declared a USD $1.00 per share dividend for Q2. Annualized this is $4.00 on a $15.00 stock. They intend to pay dividends every quarter.  Stock moves to 120 NOK is my guess.  This is better than I was looking for. 

    SubjectRE: Q1 Earnings and Dividend
    Entry05/15/2013 10:19 AM
    Memberbroncos727
    Umm...10.55?

    SubjectRE: Q1 Earnings and Dividend
    Entry05/15/2013 11:02 AM
    Memberotto695
    are you still expecting the dividend to be bumped frorm $1.00 to $1.25/quarter as in your original writeup?  if so, any sense of rough timing for that to occur? 
     
    Also, are you estimating opertions to improve from the 82 cents they reported for the current quarter in order to support this high a dividend or perhaps even up to $1.25/quarter dividend?

    SubjectRE: RE: Q1 Earnings and Dividend
    Entry05/15/2013 03:10 PM
    Memberudaman
    The company said on their call this morning that their strategy is to pay out all FCF to shareholders. The combination of higher utilization and higher dayrates over the next two years should allow them to increase the dividend further from here. I'm awfully happy with $1.00 for now. 

    SubjectRE: RE: Q1 Earnings and Dividend
    Entry05/15/2013 03:11 PM
    Memberudaman
    That was a bad tick. Someone got face ripped off in the grey market. 

    SubjectFYI - stock went ex-dividend 1.00 USD on May 24
    Entry05/28/2013 07:04 PM
    Memberudaman
     

    SubjectWilPhoenix Contract - very positive
    Entry06/24/2013 09:36 AM
    Memberudaman
    Awilco Drilling PLC has signed a Letter of Intent (LOI) with Apache North Sea Limited and TAQA Bratani Limited for the provision of WilPhoenix for a 3 year firm term commitment plus up to a further 2 years of options. The contract value for the firm term is estimated to be approximately USD 424 million. The contract is expected to commence in the second half of 2014.  

    This is very positive development for Awilco.  Locks one of their two rigs up through late 2017 at roughly $387k/d. Puts roughly $310mm of EBITDA into backlog.  Puts more visibility behind the 25% dividend.  

    SubjectRE: WilPhoenix Contract - very positive
    Entry06/24/2013 10:28 AM
    Memberbaird909
    Thanks very much for this idea, udaman. My recent distribution at Fido looks like about 95c/sh. I assume the difference between that & 1.00 is exchange rate changes and/or currency conversion costs?

    SubjectRE: RE: WilPhoenix Contract - very positive
    Entry06/24/2013 04:05 PM
    Memberudaman
    I noticed the same thing in my account. FX changes since the ex-date is the culprit for the shortfall. Kind of lame. 
     
     

    SubjectPrice on Oslo Exchange
    Entry08/07/2013 09:40 AM
    Memberbaird909
    Udaman, any thoughts about the price depreciation on the Oslo exchange? We're pretty close to the next dividend announcement. Thanks.

    SubjectRE: Price on Oslo Exchange
    Entry08/07/2013 09:51 AM
    Memberudaman
    No real special insight.  Management has only committed themselves to paying out all excess free cash flow, so maybe people are worried that the dividend won't be $1 again this quarter? Seems pretty likely they keep it though. Then again, it's just kind of a thin stock and maybe someone who bought it at 60 NOK is deciding to unload. This is still my largest PA position and I won't sell any until 2014 when I get into LT gain territory.  I still think this thing can trade to the 150 NOK level. 

    Subject$1/sh quarterly dividend maintained
    Entry08/15/2013 04:54 PM
    Memberudaman
    Off of earnings of right around $1 per share. Earnings will go higher in 2014 as average day rates move toward leading edge, but I suspect they will probably keep the dividend at about these levels, perhaps raising it to $4.50 per share on an annual basis.  I still think this stock can trade toward 150 NOK, but even if it doesn't, I will sit here and collect a 20% dividend.  Total return of this idea after the dividend is paid in September is right around 50%  

    SubjectRE: RE: $1/sh quarterly dividend maintained
    Entry09/12/2013 10:05 AM
    Memberudaman
    To me, this slide highlights that the rigs are still a decent shape and are solid for what their customers need. It also highlights that they anticipate the next surveys to not be as expensive or time consuming as the last ones.

    Subject"World's Most Undervalued Company" !?
    Entry10/24/2013 02:51 PM
    Memberbaird909
    Have to laugh, Udaman, at the SA article. You just didn't provide enough hyperbole, I guess. Anyway, thanks again for the idea.

    SubjectOBJECTIVELY the world's most undervalued
    Entry10/24/2013 07:18 PM
    Memberudaman
    *eyeroll* obviously I COMPLETELY agree.  It's good to see the stock get some attention...I guess.  Certainly, it's getting closer to fair value, which I still think is probably another $4 higher or so.  I have been happy with my ~55% total return thus far and more would be gravy.  The global offshore drilling market is in flux right now with some weakness in some 4th and 5th gen floaters, but I don't think I have seen any weakness YET in this particular asset class.  We will see.  I will probably be mostly out of this position by the middle of 2014. 

    Subjectproposed tax
    Entry12/11/2013 03:30 PM
    Memberbaird909
    Udaman, I guess the weakness here is the proposed tax increase by Britain. Any way to handicap that?

    SubjectRE: proposed tax
    Entry12/11/2013 04:39 PM
    Membernha855
    Cann you elaborate on the proposed tax? Is this just the employee payroll type taxes that are going to increase costs that were discussed on the last call? Or is there another tax?

    SubjectRE: RE: proposed tax
    Entry12/11/2013 05:56 PM
    Memberbaird909
    Here's the comment from IR:
     
    We believe today's dip in the share price is due to a new tax proposal put 
    forward by the HMRC (The British tax authorities) late last week. The proposal 
    could potentially increase Awilco Drilling's effective tax rate at a group 
    level. A consultation period for the proposal is scheduled for January 2014 and 
    the final outcome is therefore not yet known. It is also worth noting that the 
    proposal has been pushed through by the HMRC and has not necessarily been 
    approved in principal by the Treasury. The Treasury has previously indicated 
    that there would be no more "tax surprises" for the oil & gas sector, and that 
    they would be more interested in ensuring the longer term benefits that can be 
    reaped from a stable oil & gas sector rather than a short term hit. There is 
    currently a strong pushback form the oil & gas industry on this proposal and 
    several meetings with both the HMRC and the Treasury will take place to present 
    the Industry's view on the proposal. Until the consultation period is over and 
    we know more of its outcome, it is difficult to be more specific of any 
    potential consequences. 


    Kind regards, 
    Cathrine Haavind


    SubjectRE: RE: RE: RE: proposed tax
    Entry12/11/2013 07:01 PM
    Membersnarfy
    Which rig market is about to collapse?  Old midwater floaters?  All asset classes?
     

    SubjectOffshore drilling is a disaster
    Entry02/07/2014 01:16 PM
    Memberudaman
    Get out. 
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