Boat Company/ Drilling Company Stocks

Has anyone thought about investing in any offshore companies stocks from the recent downturn? From an insiders point of view would right now be a good time to but in the offshore sector? It seems that this supply glut of crude along with OPEC will keep oil prices depressed for the foreseeable future but can these companies survive until the next boom? As bad as this downturn is for the entire maritime industry, stock prices are down as much as 90%, this downturn has created investment opportunities for those who are willing to gamble. What are your thoughts, what companies do you see surviving or going under through this bust cycle?

I have thought long and hard about it. Either way it is truly a gamble but I can tell you that there is opportunity to make some real money here. Say you put 100,000 in a particular drilling contractor. Pick one that you think may survive. One I have my eye on is a target price for me at $2.00. That would be 50,000 shares. Let´s say it goes back to $40 dollars a share that is $2,000,000 plus what ever dividends may end up paid out on 50,000 shares. Even if that takes 10 years to go back up it would be worth it. There are so many things that could go wrong, though. What if the contractor does a reverse split say 5 to 10 to 1. The way I understand this is my shares would go from 50,000 to 5 to 10,000 shares. Then going back to 40 dollars is only 200,000 to 400,000 thousand dollars. Taking the gamble for 2 million could be worth it. What if the company goes bankrupt. Then what happens to my shares? Am I willing to lose this money? I want to so bad, but I just don´t know. I really feel like this may be a perfect opportunity to do something. Maybe spread the risk and put 20,000 in 5 different ones. Maybe that is the way to go. Only one needs to succeed for a positive payout. This type of crisis is definitely an opportunity for the bold and the brave or you could just lose your money and feel like a turd. I wonder what the worse feeling is. To lose a 100k or not follow your gut for the chance at 2 million.

The market price of stocks reflects the likelihood of the company going out of business. “Insiders” don’t know anything the investment professionals don’t and usually know way, way less about even their company. If one has the money to gamble, go for it but it isn’t an “investment”. (Also, please don’t gamble on the stock of your company. If you do and the company tanks then you’re out a job and your savings.)

[QUOTE=Capt. Lee;177200]I have thought long and hard about it. Either way it is truly a gamble but I can tell you that there is opportunity to make some real money here. Say you put 100,000 in a particular drilling contractor. Pick one that you think may survive. One I have my eye on is a target price for me at $2.00. That would be 50,000 shares. Let´s say it goes back to $40 dollars a share that is $2,000,000 plus what ever dividends may end up paid out on 50,000 shares. Even if that takes 10 years to go back up it would be worth it. There are so many things that could go wrong, though. What if the contractor does a reverse split say 5 to 10 to 1. The way I understand this is my shares would go from 50,000 to 5 to 10,000 shares. Then going back to 40 dollars is only 200,000 to 400,000 thousand dollars. Taking the gamble for 2 million could be worth it. What if the company goes bankrupt. Then what happens to my shares? Am I willing to lose this money? I want to so bad, but I just don´t know. I really feel like this may be a perfect opportunity to do something. Maybe spread the risk and put 20,000 in 5 different ones. Maybe that is the way to go. Only one needs to succeed for a positive payout. This type of crisis is definitely an opportunity for the bold and the brave or you could just lose your money and feel like a turd. I wonder what the worse feeling is. To lose a 100k or not follow your gut for the chance at 2 million.[/QUOTE]

I tend to agree with the advice that RBS recently gave its clients: “Sell everything”

We are in for a rough ride that is really unpredictable.

I have a relatively small amount of my 401k in an energy fund, which I bought into when oil first really started tanking a year or so ago. While it hasn’t appreciated and has lost money per share I bought in well below peak values and the dividends from many oil majors keep coming to help the situation. Rather than roll the dice on service providers I’d buy into a similar fund heavily invested in the majors and infrastructure companies like pipelines etc when it seems to bottom. It can’t go to $0 after all and even if it drops to $20, $25 it can’t stay there indefinitely. Short term get rich investing will bankrupt you. If you buy in now (or better re-allocate some 401k) and forget about it for 5,10 years I think you’ll get an above average return.

<-----amateur advice of course.

[QUOTE=z-drive;177213]Rather than roll the dice on service providers I’d buy into a similar fund heavily invested in the majors and infrastructure companies like pipelines etc when it seems to bottom.[/QUOTE]

Buying into a fund is definitely less risky than buying individual stocks but you also lose the big payoff one gets if they gamble on the right company.

no different than a horse race or sports betting. Those are less risky I’d say actually.

The better play is to try and double your money, with the outside hope it may go batshit and hit the home run. I played financial equities in the wake of the sub-prime crisis of 2008/2009 in a similar way but on a much smaller scale.

I never bet on a horse race unless I was told who would win, same for companies you need a banker to tell you who will survive and who is in trouble

[QUOTE=powerabout;177232]I never bet on a horse race unless I was told who would win, same for companies you need a banker to tell you who will survive and who is in trouble[/QUOTE]

with the rig owners it is fairly easy to see who the survivors will be because they are all public and must release their financials. Those who’s balance sheets are way over on the debt to equity to revenues metric will have a hard time to make it in this market long term. Didn’t the Koreans finance most of the drillships they built? You know they will not want to repossess any as they will only get stuck with them having to pay to sit on the elephants.

However since most of the service vessel owners are private that is not so easy to determine who has the revenues to cover debts. The only salvation to these companies who are over their head in debt is that the lenders will not want to cause liquidation of the assets as they will fetch only a tiny fraction of what these lenders are owned and that these bankers will allow the owners a deferment on debt service for the present with the hope they will be able to collect their money after there is a price recovery however that debt never goes away and even if an owner makes it through the rout taking place now they’ll be hamstrung in their ability to borrow in the future.

I still expect bankruptcies this year in both drilling and service sectors.

here is a good article

[B]Rig Trends: 2015 - A Year to Forget for Rig Market[/B]

by Terry Childs

Monday, January 11, 2016

Last year was dismal for the rig market, but 2016 could be worse.

This past year in the offshore rig market was one many would like to forget. Oil prices plummeted to below $40, and as a result, rig utilization declined throughout the year and day rates followed suit. Early contract terminations, particularly for floating rigs (semisubmersibles and drillships), have become more commonplace than at any other time in history, and delivery dates for rigs under construction continue to be delayed. Spending by oil companies fell by 20 percent in 2015 and a further 11 percent drop has been forecast for this year. However, as bad as 2015 may have seemed, indications are that 2016 could be just as bad or even worse – so forgetting about the past year may be easier than one would think. The following is a recap of some of the key numbers from 2015 and how those numbers might change this year.

As of Dec. 30, 2015, the price for Brent crude oil was $36.46. Prices hit a high for 2015 at $64.56 May 31, 2015, representing a 43 percent drop by the end of the year. Even as of Oct. 31, prices stood at $48.12, meaning prices fell another $12 the final two months of 2015. Overall for the year, Brent crude averaged around $55. According to RigOutlook, which provides a three-year outlook of the offshore rig supply, demand and day rates, the price for a barrel of Brent crude should average around $45 in 2016, with the range running from $40 to as high as $55. Obviously, the oil market faces many uncertainties heading into 2016, including the pace and volume at which Iranian oil reenters the market, the strength (or weakness) of energy demand and the responsiveness of non-OPEC production to low oil prices.

Turning to the rig market, the decline in rig utilization can be illustrated quite simply. In January 2015, worldwide jackup utilization stood at 75.1 percent, with 396 of 527 units under contract. By the end of December, it had dropped to 62.1 percent, a 13 percent decrease. For floating rigs, it was a similar story. In January 2015, 254 of 366 units were under contract for utilization at 69.3 percent. At the end of December, 201 of 359 floaters were contracted for utilization at 55.9 percent, a 14 percent decline. While some regions of the world will fare better than others, the uptick in early contract terminations, drilling project postponements and the number of operators not exercising options on existing contracts will very likely continue to drive utilization down in 2016.

Looking at new construction, there were 33 rigs delivered in 2015, consisting of 11 drillships, 18 jackups and four semisubmersibles. As of Jan. 5, RigLogix showed there were 103 rigs (excluding four tender-assist units) scheduled to be delivered in 2016, made up of 76 jackups, 14 drillships and 13 semisubmersibles. However, it is doubtful all of these rigs will end up being delivered. There have already been 96 delivery dates extended and with market conditions expected to remain in place or deteriorate a bit further, rig owners will continue to postpone final rig payments (some are as much as 95 percent of the construction cost) as long as possible. In addition, some construction contracts will be cancelled, turning shipyards into sales agents as they try to dispose of unwanted rigs that are either completed or near finished.

As for rig attrition, RigLogix shows there were 41 rigs removed from service in 2015, comprised of 15 jackups, 20 semisubmersibles and six drillships. Most of the 41 rigs were retired during the first-half of the year – 31 to be exact. The slow pace of attrition that occurred in the last six months of 2015 was unexpected, but we believe that as 2016 progresses the heightened pace of attrition will resume.

When utilization falls, day rates are never far behind, and 2015 was no exception to that rule. According to RigLogix, the average day rate contract fixture for the jackup market in January 2015 was $122,167. By the end of the year, not only had the number of fixtures dropped, but so had the average to $98,016, a 20 percent decrease. For floating rigs, the decline was even more severe. In January, the average contract fixture averaged $392,417, but in December the number had fallen to $264,571, a 32.5 percent decline. It should be noted that these averages include numbers for all rigs, notwithstanding region or rig class. For this article, fleet averages were used only to illustrate the direction of the market. In some areas of the world, rates currently being signed for new jackup contracts are approaching operating costs, while in others significant rate reductions have taken place. However, on a positive note, some of those contract renegotiations have also resulted in additional contract term. For those jackups and floating rigs still earning the high day rates agreed to from a few years ago, it is likely just a matter of time before those are renegotiated down or in the most extreme cases contracts terminated.

In summary, 2016 is likely to be a survival year for those companies that operate in the offshore rig arena. Oil prices, barring any political or other unforeseen events, will likely stabilize in a range that will not enable much spending by operators. Contract terminations will continue to strip rig owners of much needed revenue and rig attrition could reach record numbers. Utilization will continue its downward slide and day rates will follow, and new construction deliveries will be kept to as much of a minimum as is possible.

[QUOTE=Capt. Lee;177200]I have thought long and hard about it. Either way it is truly a gamble but I can tell you that there is opportunity to make some real money here. Say you put 100,000 in a particular drilling contractor. Pick one that you think may survive. One I have my eye on is a target price for me at $2.00. That would be 50,000 shares. Let´s say it goes back to $40 dollars a share that is $2,000,000 plus what ever dividends may end up paid out on 50,000 shares. Even if that takes 10 years to go back up it would be worth it. There are so many things that could go wrong, though. What if the contractor does a reverse split say 5 to 10 to 1. The way I understand this is my shares would go from 50,000 to 5 to 10,000 shares. Then going back to 40 dollars is only 200,000 to 400,000 thousand dollars. Taking the gamble for 2 million could be worth it. What if the company goes bankrupt. Then what happens to my shares? Am I willing to lose this money? I want to so bad, but I just don´t know. I really feel like this may be a perfect opportunity to do something. Maybe spread the risk and put 20,000 in 5 different ones. Maybe that is the way to go. Only one needs to succeed for a positive payout. This type of crisis is definitely an opportunity for the bold and the brave or you could just lose your money and feel like a turd. I wonder what the worse feeling is. To lose a 100k or not follow your gut for the chance at 2 million.[/QUOTE]

Your shares are gone - basically. In Chapter 11, the bond holders are higher in the pecking order. Investing in corporate bonds is an options depending on the asset considering the equity stake you’ll have after restructuring. Right now, I doubt a CEO of a drilling contractor would give $1 for a 6th generation drillship just for the fact that it would be a liability for the foreseeable future. I put a little bit on Shell, but staying away from all contractors. The only reason I did that was #1) A Major will not go under #2) A major stock repurchasing plan is underway. #3) The BG purchase was a smart play in the long run, and restructuring will streamline both business units into one with the highly coveted Libra assets in Brazil, which Petrobras is close to divesting their shares in. This can become a coup in the long run for Shell off the back of PB’s troubles. #4) The arctic is now in the past. #5) Best dividend return.

where we are headed is many companies will be one drilling cancellation from bankruptcy
here today, gone tomorrow