Almost all drilling contractors are in the same boat since COVID. It was looking good late last year with the tenders. All are still in play but getting kicked to the right - late 2021, or 2022. PD already has a prepackaged restructering plan with bond holders to be out in 60 days, but the court has to review and approve the plan… You will see a lot of debt/equity swaps, and possibly M&A opportunities.
No stress here. Nothing changes with operations and I’ve had other options for years. I just like what I do now.
seriously…what is not correct in the status report?
PACIFIC MISTRAL, SCIROCCO & MELTEM are stacked in Las Palmas, PACIFIC BORA stacked in Oman
PACIFIC SANTA ANA is on a $100k/day rate in Las Palmas until March next year when become stacked
PACIFIC KAMSHIN ended working for Equinor in September this year (and I guess will remain stacked in the GoM)
PACIFIC SHARAV is currently in the GoM not working but will be starting a 10 well job for Murphy in Q2 next year at $180k/day (+/-450 days) earning something like $81m over that period (which I am sure you will agree with as pretty thin and watery soup for any company the size of Pacific to live on)
So I see one rig earning $100k/day at the moment which will end right as another rig starts earning $180k/day in something like 5months time. Is this not correct? And more importantly, what prospects are there for any of the stacked ships finding work at ANY dayrate? None I can see. How can anyone say that the company is not sucking wind even if the bonds are converted to equity? Still gonna need to get outside cash from some source.
Then you mention there being M&A opportunities after the Chapter 11 is approved. Who will be in a position to buy them other than with a stock swap which will mean pennies buying pennies. Not very attractive to Pacific Drilling’s new shareholders. The only chance of any cash offer would be from some outside speculator who would have their pic of dozens and dozens drillships to buy at less than a nickle on the dollar. Even if there is such a speculator out there (which I don’t see) then the haircut the shareholders would take in no way helps. The market is flooded to overflowing with idle ships and very simply, there is no hope for any of the drilling companies until that surplus is reduced (which means scrapping) and a reduction in the number of drilling contractors bidding on the few tenders out there.
I know you are an intelligent man so ask how can any of this be not clearly seen? The weakest MUST go first and I say that starts with Pacific even though it is a bitter lump for you to swallow.
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No he really isn’t…TLDR: the numbers don’t work. PDC projects themselves to exit restructuring and have to spend the entirety of their 5 year exit loan in 1.5 years just to stay afloat.
So, taken directly from the Chapter 11 filing last updated November 5th:
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Plan to exit restructuring with $80mil exit funding facility
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Drillship breakeven costs of $130-$180,000 per day
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Stack fleet cost of $85,000 per day ($45K+7.5+7.5 for Scirocco/Mistral/Meltem)+($25K for Bora)
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Khamsin expects to end contract and come off-rate early Nov 2020 (it is now early Nov)
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Santa Ana on standby at $103,600/day until Jan 1, 2021, then $296,000 per day for remainder of 350 day contract
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Sharav is idle until 2Q 2021, then $180,000 per day for 450 days. Idle cost not mentioned but must be between $25-$130K per day
Add that up and taking mid to low range of PDC provided estimates:
- $85K stacking cost
- $130K Kamsin operating cost
- $130K Santa Ana operating cost
- $90K Sharav operating cost
Total for Offshore Costs: $435,000/day
Total for Onshore Costs: undisclosed
Total revenue:
- $325K/day until early Nov (now)
- $103K/day Nov-Jan 2021
- $296K/day Jan 2021-est May 2021
- $476K/day est May 2021 - Jan 2022
- $180K/day Jan 2022- Aug 2022
So for the next 20months PDC projects themselves to lose on average $136K/day , or $81 Million dollars, not counting shoreside or un-stacking costs. And that $80 Million exit loan is repayable quarterly over 5years at 12% interest. PDC has already this year laid off 50% of its offshore workers, cut base pay by 10-12%, and touts their super cost efficient “smart stacking”, so there is limited further cost savings.
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Correct for the fleet status report, but the Bankruptcy filing Section 3.2 provides further guidance:
The Pacific Santa Ana is currently under a contract with Petronas to perform integrated services for a plug and abandonment project estimated to last 350 days but, due to force majeure caused by the COVID-19 pandemic, is currently on stand-by at 35% of the contractual dayrate of approximately $296,000, inclusive of integrated services.
On September 30, 2020, Petronas provided notification for the rig to resume work on January 1, 2021.
I do not know how much of the 350 day contract was completed prior to the Force Majeure stand-by. Any amount at all only swings the numbers more negative for them.
Onshore Costs: I am sure with their G&A expenses (fancy building and simulator costs, plus everyone is a VP or higher) don’t have much left.
Yeah, they project G&A at $40-50 million per year.
I don’t like being a pessimist here, as my own financial situation was drastically reduced due to another struggling rig company and I feel for anyone affected by Pacific’s plight. But being overly optimistic is equally flawed.
Just look at Exhibit E Financial Projections in the filing. Pacific management assumes Fleet Utilization of 47% in 2021, 65% in 2022, and over 95% for 2023 onward. If that is what they require to remain a going concern then it almost seems irresponsible.
I know c.captain brought up liquidation. They do cover what Chapter 7 would look like if Chapter 11 fails. In Exhibit C they figure the recovery on the book value of their fleet is 10-14%…scrap value.
[E] Property, Plant, and Equipment: The value of the Company’s drill ships has been estimated based on indications of value for similar assets, which contemplates that in a liquidation scenario certain rigs may be scrapped. Other nondrillship PP&E has been evaluated as a percentage of net book value based on expected recoverability. The estimated recovery of $175 million to $257 million of total PP&E implies a recovery estimated at 10% to 14% of net book value of total PP&E.
Thanks for taking the time to answer a few questions with facts. There is no illusion of the state of the industry. The point was the inaccuracy in what C.Captain mentioned and where correct information could be found. Thanks again for taking the time which I do not have. If not for COVID, I believe a merger would have already happened, and this was even an expectation. I do still see that happening in the near future with a smaller fleet. I do not see stacked vessels going back to work, industry-wide, unless for a significant shift in fundamentals. It just costs too much to reactivate a rig and those multi-year contracts to support such an endeavor are non-existent. Clients want the “most capable” hot rigs with good crews, not a reactivated rig if given the choice. Those rigs are few and far between, but work is still out there if the timing is right.
As previously mentioned, information is on the website. See below from two clicks and a copy/paste.
“The Pacific Santa Ana is currently under a contract with Petronas to perform integrated services for a plug and abandonment project estimated to last 350 days but, due to force majeure caused by the COVID-19 pandemic, is currently on stand-by at 35% of the contractual dayrate of approximately $296,000, inclusive of integrated services. On September 30, 2020, Petronas provided notification for the rig to resume work on January 1, 2021”
What is the basis of determining this “net book value” of $1.75B they are saying they can get 10-14% recovery? Figuring each ship was $700M new would mean the original capital value as being about $5B for the whole fleet. $1.75B would be approx 33% of the original cost or a current
market value of $250M per ship which by and itself is a fallacy as with no market other than scrap to sell such ships to renders them without any value other than scrap!
Anyway, by this they are saying that they can get $25M to $30M per ship as scrap, yet I am honestly not sure they can get $10M per ship. VITORIA 10000 sold for only $15M one year ago before COVID. I think $7M or 1% of newbuild is the best to hope for right now today.
so by this you are inferring that only 1 ship in 7 at Pacific will continue to be marketable because eventually SHARAV will be the only one with a job. “Smart stacked” or not, they are still stacked and the longer they remain so, the reality is that is now they will remain until the board cries uncle and off they go on to only exist as photographs on shipspotting.com.
what a hideous and wretched bloodbath this whole ugly trainwreck of an industry has become! Everybody loses…no one at all wins anything from it (except the underwriters of all those bonds and shares who pocketed more money from their sale than we can ever imagine). Billions upon billions might as well have just been taken as cash in $100 bills and set alight in a massive pyre!
just did a quick calculation of the size of a pile of the cash lost if it was in $100 bills.
One million dollars in $100 bills is 55cu/ft so one billion is 55x1000 or 55000cu/ft and if $40B is the write off for the industry (just my own estimate) then that great pyre set alight would be 55k x 40 or 2,200,000cu/ft of crisp Benjies or if stacked 1000’ per side would be 22’ tall. You would run out of room trying to fill one of the largest bulk carriers on the planet (the Valemax ships) with all of them but you could always deck load the leftovers.
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Pacific Drilling stock currently has a price to earnings ratio of 0. Which means for every dollar you invest in it you should expect nothing in return. This is only marginally worse than the other drilling contractors. The sellers of the bonds and the officers of the company made money when times were good. That is the way the drilling business works whether at sea or on land.
I don’t think it will matter much in the long run but when running the numbers for how much money this company has coming in, the Pacific Kamshim is still on contract demobbing with Total Energy in an area called South Platte in the GoM. According to somebody I know working there, the demobbing should take another 1.5-3 weeks. The joint venture between Equinor/Total was up in September but Total kept them employeed until now. From what I heard, the Kashim will go to stack off of Grand Isle, La & Total is going to pick up another drilling rig & 2 OSV’s to take to Guyana. Total was hoping to hit pay dirt at the South Platte location then move to North Platte but came up dry so they are leaving the GoM for now.
Check you math. The dimensions of paper money currently in the US are 2.61 inches wide, 6.14 inches long and 0.0043 inches thick. One million dollars comprised of (10,000) $100 bills is more like 689 cubic inches or 0.4 cubic ft.
The volume of a $100 note is 1138 mm³
A billion in short scale is 10⁹
1 billion ÷ $100 is 10,000,000 notes. Each with a volume of 1138 mm³, that gives 11,380,000,000 mm³ which is 11.38 m³
$40B is 455.2 m³ or 16 075.2363 cubic feet
I can see a hi-cube 20’ container with 3 billion and room for me to do a few laps through it Scrooge McDuck style. Makes you realise how much some people are worth.
If you had a billion dollars & started on a spending spree of blowing $1,000 a day, the day Jesus was born, you still wouldn’t be 3/4 of the way through the billion dollars.
so to boil it down to its very essence…
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all the drilling companies are being forced to restructure which likely will include Transocean because the level of debt they assumed in a newbuilding spree requiring interest payments they simply do not have cash to make let alone pay off once maturity is reached
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all these companies are being allowed filing bankruptcy under Chapter 11 which is permitting them to continue to operate. Shareholders are wiped out and bond holders have their debt converted to equity. Pacific has already filed Chapter 11 back in 2018 and is now doing so again.
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in every case with filing Chapter 11 filing, the bankrupt company must be granted further loans in order to keep operating. I am assuming the money comes from the original bond holders who are now shareholders in order to keep the company they now own alive so that they might somehow recover their investment in the future or somehow, bonds are able to be sold to other “outside” investors. Pacific would have had one of these “exit” loans already when it filed Chapter 11 previously and all that cash is now gone. Now they are asking for $80M more to exit the present bankruptcy.
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the industry has twice as many ships that can find work at the moment which is depressing the dayrates they can earn when they do work to rates where they can only earn their direct opex. a tremendous degree of scrapping has already happened over the past 5 years but that only came from the legacy drillers like Transocean. Companies like Pacific had no old ships they could rid themselves of and seem to be very reluctant to scrap any of their ships even though there is little prospect of them ever working again.
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Pacific Drilling is particularly weak because it has seven newer ships but soon only two will be working and then only one. Cash coming in over the next 18 months will in no way meet the cash needs of the operation and there are going to be operational losses for the next two years however they believe there will be a significant recovery in 2023 and that they will become profitable again. If their projections do not come to fruition, then I would certainly believe the next filing in bankruptcy court to be a chapter 7 which would mean a firesale liquidation of their fleet. Some believe there can still be a merger with one of the legacy drilling contractors but even if that happens it would be not be in cash but only stock which would be pennies buying pennies. The shareholders of Pacific might be tempted to take it with the hope a larger operation might be able to survive when Pacific can’t, but it in no way really changes anything at all since the oversupply of drillships does not change and the market remains in the toilet.
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We all know the past decades of deepwater drilling has been extremely volatile and as an industry it is presently in a near collapse state brought on by both the steep drop in the price of crude since 2014 due to over supply globally. If someone knew what the demand for deepwater offshore crude would look like in the future then they could make themselves quite wealthy, however no one does know that future and the consensus seems to be there is not going to be any or much of a recovery in the offshore drilling market until late 2023. Many feel (like I) that there will never be a complete recovery back to 2010 levels of activity in any foreseeable future. There simply are too many crude oil sources coming from places where production costs are much lower than deepwater offshore for it to be competitive and until those other sources are not able to influence the supply side of the market, crude will remain low even well after COVID is in the rearview mirror. Remember crude was still languishing in the $50/bbl range before the pandemic hit. In ten years the market may look totally different but many of today’s deepwater drilling contractors and their rigs will be long gone before a decade passes to get there. Short of some massive shift in everything very soon, there will be be fatalities. It is the nature of both nature and business…the strong survive and the weak ones don’t.
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and then repeat the cycle all over again because investors never seem to ever learn their lesson no matter how many times they get their heads handed to themselves
did I miss anything?
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Any stock analysis is no longer valid anyway. PACD been suspended from NYSE to be delisted and anyone holding the pink sheets PACDQ should try to get their 4-cents out of it, as they receive no recovery under the restructuring.
Class 1 Secured Claim holders get paid cash in full, Class 2 Priority Claim holders get paid cash in full, Class 3 Lien holders get 91.5% of New Stock, Class 4 Lien holders get the remaining 8.5% of New Stock. All else, including current stockholders get 0% of New Stock and zero recovery.
I think the lesson is if you absolutely feel you must invest in the industry, invest in the secured bonds.
if I end up reading this right there are two sets of shareholders who have completely lost their investments. The first were the original shareholders who bought the stock when PACD went public in 2010 or at least bought shares afterwards and then the second set who were the bondholders that ended up trading their bonds for shares of stock after the 2017 Chapter 11 filing. Now another group of bondholders are facing the same outcome but unless PACD survives to live another day, they will end up faceplanting as well. I am stunned that the second filing is being allowed but since it appears these bondholders realized that there could be nothing gained in a liquidation have nothing to lose to just stay aboard and kick in that $80M exit funding? Is someone being told by the judge they must put in more or is it all part of the rearranged plan? Is the money coming from the same bondholders who are now shareholders or is someone else putting in the money? is that $80M itself long or short term borrowing? Is it secured or unsecured? Who will have precedence later on if and when Pacific Drilling does to the wall yet again?
Lastly, I don’t know how much of his own money, Idan Ofer put in to this failed enterprise but I hope it was a lot and pray he lost every nickel of it!
Israeli billionaire throws extravagant €5 million party in Mykonos
obviously shame is something the extremely wealthy are incapable of feeling.