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General Category => Investment Ideas => Topic started by: DTEJD1997 on May 06, 2013, 08:01:43 PM

Title: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 06, 2013, 08:01:43 PM
Hey all:

Does anybody follow or have any opinion on Awilco Drilling?

I think this is a rather interesting situation.   YOu have to be a little careful though as it is a small cap and only has two rigs.  There are other risks too of course.

It boils down to this...They are generating a TREMENDOUS amount of free cash flow.  After generating an adequate cash reserve, they are going to dividend out the majority of their cash flow.  They are almost at this level, and dividends should start up this year, perhaps as soon as next quarter.

There are lots of caveats here, but it is speculated that the dividend yield could potentially be 20% or so.  If that is correct, I am going to guess that the stock will trade a bit higher than what it currently is at. 

So you could be looking at rather substantial income AND a nice capital gain.

Any thoughts?
Title: Re: Awilco Drilling (AWLCF)
Post by: Radio Free Cash Flow on May 07, 2013, 08:58:27 AM
Awilco is a huge opportunity. My post on the company is here: http://otcadventures.com/?p=708 (http://otcadventures.com/?p=708)

We do seem to look at the same stuff!
Title: Re: AWLCF - Awilco Drilling
Post by: matts on May 07, 2013, 12:37:37 PM
How do you guys get comfortable with the (non) diversification risk?

One storm/mechanical problem and this stock can be cut in half, no? There are always risks, but this one seems very risky; almost like an option. Do you just mitigate that with a small position size?

Would appreciate your thoughts.
 
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 07, 2013, 12:55:34 PM
Historically, the big risks for oil drillers are:

1- Fluctuations in rig rates.  For example, the spinoff stock Seahawk Drilling went bankrupt due to low rates.

2- Disasters like Deepwater Horizon can affect rig rates.  Because of the incident, regulations went up and it may take a lot longer to get permits to drill.  (Laws and regulations vary from country to country and from state to state of course.)

I don't know if that caused demand for some types of rigs to go down.

I believe Transocean owned the Deepwater Horizon rig and had a lot of losses associated with the incident.

3- Debt magnifies the effect of #1.

Or... just read the risk factors.  Overall I think that the tail risk is low.
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 07, 2013, 01:14:18 PM
It might be helpful to look at spot rates for their rigs:
http://www.rigzone.com/data/dayrates/

---
The last time I looked at drilling, this is what I thought about the industry.

You make money in two ways:
1- Correctly predicting future rig rates (or the price of buying/selling a rig).  Or just buy when rig rates are extremely low because they will likely go up in the future.

2- Arbitraging discrepancies in pricing.  The public markets often gets things wrong in pricing these stocks.

Atwood Oceanics looks like the only company that generated unusual returns for shareholders.  But their old CEO is gone.  I'm not exactly sure how they made their unusual returns.

Dryships/Oceanrig did a lot of #2... but way too much of shareholder money ends up in the CEO's pocket.  If you compare the market cap of these companies compared to the current market value of these rigs, then sometimes there are discrepancies.  They may also have long-term contracts that should be accounted for.

3- Overall the drilling industry may not be the greatest industry around.  It is highly cyclical.  There are periods of oversupply which causes everybody to lose a lot of money.  I don't know if the industry makes more during the booms than the busts.  The industry might be close to break-even over the whole boom/bust cycle.  During boom times, the bankers will be busy doing IPOs and secondary offerings for these companies.  That's when you want to avoid the industry.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 07, 2013, 09:17:14 PM
Hey all:

Yes, there is certainly risk here, and many different flavors of it too!

HOWEVER, rates are high, and ARE GOING TO STAY HIGH for the near future, especially in the North Sea.  This could all change in a few years...but what if the cycle stays strong for another couple years after that?

There is a possibility that market rates strengthen.  Some people have been talking about "peak oil".  I am not convinced we are there, but we could be...so if that is the case, a LOT more rigs are going to have to be deployed to find the same amount of oil.  There is also growing demand for oil from the 3rd world (China I'm looking at you)!

You also could have a potential hedge against the decline of the US dollar.

This company only consists of two rigs.  So if one of them has severe problems, the company is going to have BIG problems.

Awilco could also have problems with their customers.  If one of them has problems paying the bills, Awilco is going to be in big trouble.

HOWEVER, I think a lot of those risks will be mitigated with a 20%+ dividend (possibly even a 30% dividend).  Get a couple years of dividends and a lot of risk has been removed.

Also let us assume that rates weaken in 3 years.  How far will rates weaken?  Might the dividend go from 30% to 10%?  Does the dividend have to go to zero?

These are older rigs, no doubt.  How much life is left in them?  I think that largely depends on market rates in the future.  If there is a demand, they will be used.  The terminal value of these things won't be zero. 

Also, I think there is some amount of protection here as both the rigs are working the North Sea, which is a strong demand area.

If you had a portfolio of 40 rigs dispersed across the world and held through all economic cycles, your return probably won't be that good.

If you hold a concentrated risk in a single market, you might be able to make a go of it, especially if the assets are mispriced (low) to begin with.

A good strategy might be to hold this for 12-18 months.  Collect some nice dividends and sell when the "retail" income investors come flooding in and push the price up. 

We'll see.  I think it is an interesting opportunity.

I would also highly recommend "OTC Adventures" blog.  There are many compelling opportunities that get a good & thoughtful writeup there. 
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 07, 2013, 09:37:03 PM
Quote
Also, I think there is some amount of protection here as both the rigs are working the North Sea, which is a strong demand area.
Umm... these rigs are regularly moved around the world.  Many competing rigs are being moved around the world.

Secondly, I think that you need to invert.  Not every business out there is a magical fountain of money.  Not every industry out there is wonderful (airlines suck, junior mining is terrible, insurance is marginal, drilling is marginal, etc.).

As a sanity check, rank every company in an industry.  Which ones are the best managed?  Which are the worst?  If you can't figure that then you probably should stay away from the industry.  I'll just give you some hints.  The ones with the most debt are probably poorly managed.  The ones where insiders pay themselves too much are bad.
You might also rank them based on the market value of their rigs+contracts.

2- Are they actually going to pay out a 20% dividend?  I doubt it, though I could be wrong.

Management is probably going to pay out a small dividend to make investors happy.  Then they're going to raise capital anyways (if the shares are overpriced) and go crazy buying up more rigs.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 08, 2013, 08:51:03 AM
The rigs can be moved?

Yes, but it can take several months and many millions of dollars.  Moving these things from one region to another is not a light undertaking.

Not every business is a magical fountain of money?

What?  Are you sure about that?  That isn't what my broker told me!

This company has only been public for a few years, and the rigs have only been deployed for a bit shorter a time frame than that.  They have contracted rates to established companies.  Assuming the contracts hold, it is fairly easy to see how much money this company will make.  Not a sure thing, but reasonably certain for the next 18 months or so...

They have signed contracts for both their rigs for the next 13 months.  One rig is contracted until November 2015 and the other until May 2014.  Both of them have renewal options.  Capacity in the North Sea looks tight well into 2015.

In the 4th quarter of 2012, they earned $.76/share.  Multiply that by 4 and you are over $3/share.    There is a strong chance that upcoming 12 months earnings could be somewhat higher than that for a variety of reasons.  So them paying $2.50/share in dividends might easily be possible.

Management has stated MANY times that they intend to pay out a vast majority of their free cash flow.  That could change if they see a rig for sale...but I am going to take management at their word.

Why would they raise capital at this point?  The shares are probably UNDERVALUED.  They have no need of capital, not now.

Sure, they could go crazy buying rigs...a million things could happen.  But if the company stays in a "steady state", this thing is going to throw off a LOT of cash.

We'll see what happens...
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 11, 2013, 07:13:00 AM
Started looking in this name as well.

Seems to me that earnings next year could be significnatly higher than $3/share. Whilphoenix was contracted at $290K/day from Oct till the end of Nov before the rate was raised to the current $315K/day. Wilhunter was contracted at $300K/day from Oct to mid Dec, and is currently contracted at $315K/day and this rate will increase to $360K/day in April. Not adjusting for the $3.6 million in bad debt in Q4 also seems quite pessimistic. FCF yield might be closer to 30% in 2013 than 20%.

Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on May 11, 2013, 07:43:24 AM
These appear to be fixed-up older rigs.  How did you get comfortable that they will not be obsolete in 5 years and you only get your money back.  I saw on the OTC adventures website that these have a 20 year remaining life but could find no source for rationale. 

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 11, 2013, 08:09:13 AM
I'm not comfortable with anything yet... but 20 year remaining life is simply based on the company estimate. It sounds reasonable to me, although maintenance expenses are probably going up after a couple of years.
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on May 11, 2013, 08:18:33 AM
Based upon the latest balance sheet it appears that they have an expected remaining useful life of 15.5 years.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 11, 2013, 08:57:27 AM
Hey all:

I think the remaining life of these rigs will LARGELY depend on market demand.

As long as they are maintained properly and receive retrofits every dozen years or so, their life can be quite long.  I read that there are still some rigs in the Gulf of Mexico that have been operating since the 50's!  Not to say these will last those long...but it is not impossible.

HOWEVER, is it worth it to make the maintenance & retrofits?  At this point in time, YES, no doubt about it.

What will the situation be in 5 years?  Hard to say...

The thing about this investment is that the near term cash flows are going to be SO STRONG that it indicates it is mis-priced.

As long as there is no catastrophe, cash flow is going to be EXTREMELY strong in the next 24 months...

We will see.
Title: Re: AWLCF - Awilco Drilling
Post by: HJ on May 11, 2013, 12:39:49 PM
As long as the company is committed to pay out the earnings from the currently very tight market, I think this is fine.  Diamond Offshore has a bunch of rigs working in the North Sea that were built in the 70's and 80's, and rated water depth is only  1500 feet.  They believe those were some of  the highest return on capital rigs in the industry.  North Sea market also operates with a very specific set of regulations.  It's not that easy to retrofit a GOM rig and move into that market. 

If they start talking about wanting to start a new build cap ex program, that's when this becomes more questionable.  But if you are just buying the current assets, and getting half of your money back within the first 2-3 years, how bad can it be?
Title: Re: AWLCF - Awilco Drilling
Post by: matjone on May 12, 2013, 02:37:19 PM
Thanks for posting this and thanks to otcadventures blog for the writeup. 

I thought I'd do a quick look at enterprise values, fleets and revenues on a few companies.

diamond: 30 semi-subs, 7 jack-ups, and 1 drill ships.  4 drillships and 2 semisubs under construction.  2.9 B ttm revenue, 9.8 B EV.

noble: 14 semi-subs, 43 jack-ups, 9 drill ships.  Also 5 drillships & 6 jackups under construction. 3.7 B ttm revenue, 14.8 B EV. 

Awilco: 2 semisubs.  Dayrates for both of them together for the next year look like they are going to be around 690k/day based on otcadventures writeup.  I am not sure what would be a reasonable amount of days to figure these are utilized.  I don't know if you should use 100%.  Maybe 80%?  That would be around 200 M revenue.  EV 521 M based on otcadventures writeup.

The majority of most of these companies' vessels can drill in water deeper than 1200 feet.  Obviously the shallow water stuff isn't where the big finds are happening, but there must be some left in shallow water or people would't be building and buying jack ups.

One thing that caught my eye - Awilco's operating margin last quarter was 53%.  Is this a little higher than might be expected long term?  The other companies seem to do a  worse than that.

I'm googling around and see if there have been any recent sales of semi-sub rigs that are comparable to these two.  I'm having trouble finding anything that's a good comparison, but Noble just sold the lewis dugger jack up for 61m and was getting a dayrate of 83k/day for it.  I imagine a semi-sub goes for a higher price/dayrate ratio than a jack up - that would put these two at at least 506 M.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 12, 2013, 03:57:50 PM
They had ~95% utilization in Q3 & Q4 last year. I think you should expect something a lot lower in Q1 this year since that was the winter season. Maybe high 80's?

I've also tried to get a better grip on the asset value of the two rigs. What I noticed is that Transocean took a ~300 million impairment on the two vessels in 2009 (oil hit a price below $40 then) and that they were sold for $195 million (at a loss of $15 million) early 2010. So these rigs used to have a book value around $500 million before the GFC and before being upgraded in 2011.
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 12, 2013, 04:06:12 PM
Quote
The Company owns two semi submersible drilling rigs, WilHunter and WilPhoenix, currently operating on the UK sector of the North Sea. The rigs were acquired from Transocean in January 2010 at an aggregate price of USD 205 million which was, in combination with working capital of USD 10 million, financed by seller’s credit of USD 165 million and equity of USD 50 million.

At the time the rigs were acquired from Transocean, the WilPhoenix required a significant overhaul and both WilPhoenix and WilHunter were due for a classification renewal. In addition, a programme of rig enhancement and upgrade was also established, initially for the WilPhoenix and latterly for the WilHunter. The rigs were subsequently sent to the Polish shipyard Remontowa to commence the project work. The aggregate cost for upgrading, maintenance and classification is estimated to be approximately USD 94 million for both rigs. This amount was part financed by a USD 65 million private placement of equity in October 2010, as well as by a USD 17.5 million private placement of equity in June 2011.
http://www.oslobors.no/obnewsletter/download/961ffa8dd773c86da97be747b9ea03f8/file/file/Awilco%20Drilling%20newsletter.pdf

Bought for US$205M, $94M was added to refurbish the rigs.  That totals $299M.  (You could also add interest / opportunity cost to that 299M.)

I suspect that the current market price for these rigs is a lot higher.
Title: Re: AWLCF - Awilco Drilling
Post by: SharperDingaan on May 12, 2013, 05:20:51 PM
You might want to consider why TransOcean sold these particular rigs, & not something else.

Just maybe ... TransOcean didn't think they could keep the rigs in service long enough to earn their minimum WACC? Hence to get the rigs, Awilco may have overpaid for them.

Just maybe ... Awilco did nothing more than luck out? They bought the rigs just as the market turned, & got their rates & utilization because they were the only ones with available rigs? It does occasionally happen, as Ari Onassis found out in the tanker trade.

Just maybe ... Awilco's CF is also being boosted by cutbacks in maintenance?, because they expect to resell/scrap these rigs as soon as the cycle starts to turn again?

They may well be able to hype themselves higher over the near term ... but one has to think that one may well make more, & do it more reliably, by progressively betting against them. Even Ari couldn't avoid  the pullback, & it eventually crippled him.

If you inverted; you would be looking at longer term investments in the Repsol's of the world, & have rig exposure at much less risk. Is this really worth that additional risk?

Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 12, 2013, 05:39:53 PM
To answer one of the maybe's... Transocean was forced to sell because of antitrust concerns after a merger (they had 65% of the UK market or something like that).
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 12, 2013, 05:58:27 PM
RIG was forced to sell these two rigs because of anti-trust concerns.

MAYBE Awilco got a GREAT DEAL on these because of government actions (forced sale)?

MAYBE Awilco has "lucked out" and is in a strong area/position?

It is my understanding that one of the rigs is not even drilling for oil.  They are capping dead/spent wells and doing maintenance work on the seabed.  It is my further understanding that drilling standards in the North Sea are extremely strict.  So oil field owners/operators will have to spend for this type of thing.

I think Awilco will make TONS & TONS of money for the next 24 months or so.  Beyond that?  50/50, who is to say?  I don't think anybody will know what will happen then.

HOWEVER, so what if rates go down?  These things are not going to be worthless, even if they are scrapped.  I doubt they will be scrapped after two years though....There is an argument to be made that ocean drilling is going to be a big thing for the foreseeable future, as the world needs more oil.  Eventually that might change, and holding this for 10+ years might not be the best thing...but the next few years could be very lucrative.

If this makes $3-$4/share in NET EARNINGS is this stock going to trade for 4X earnings?  I very much doubt that....

Will it trade for 12X earnings?  I doubt that too. 

I think this might trade for 7X, 8X, 9X earnings of $3.50/share.

We will see...
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on May 12, 2013, 06:03:46 PM
If Transocean had a choice of what to sell, they probably sold their highest cost/oldest rigs.  If that is the case, does anyone know enough about these rigs to know if they are lemons or hidden diamonds.  I don't know but maybe someone here with more O&G experience would know.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 12, 2013, 06:13:43 PM
I'd look at the private market value of these rigs and the drilling contracts.  If there is a large difference between the public and private market values, then there will be an arbitrage opportunity that you don't want to be on the wrong side of.

Quote
HOWEVER, so what if rates go down?  These things are not going to be worthless, even if they are scrapped.  I doubt they will be scrapped after two years though....There is an argument to be made that ocean drilling is going to be a big thing for the foreseeable future, as the world needs more oil.  Eventually that might change, and holding this for 10+ years might not be the best thing...but the next few years could be very lucrative.
Take a look at Seahawk's history.  Too much debt + lower rates spelled their death.

I don't think that Awilco has enough debt to push them into bankruptcy if rates were to fall a lot. 

Quote
If that is the case, does anyone know enough about these rigs to know if they are lemons or hidden diamonds.
Over time, maintenance/operating costs of the rig will go up.

Eventually there will be a point where the rig isn't cash flow positive.  So then you can idle the rig or sell it for scrap metal (Awilco's financials puts residual value at $15M).  These are all *estimates*.  The ultimate lifespan of the rig depends on drilling rates (and prices of scrap metal).
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on May 12, 2013, 07:20:53 PM
You might want to consider why TransOcean sold these particular rigs, & not something else.

Just maybe ... TransOcean didn't think they could keep the rigs in service long enough to earn their minimum WACC? Hence to get the rigs, Awilco may have overpaid for them.

Just maybe ... Awilco did nothing more than luck out? They bought the rigs just as the market turned, & got their rates & utilization because they were the only ones with available rigs? It does occasionally happen, as Ari Onassis found out in the tanker trade.

Just maybe ... Awilco's CF is also being boosted by cutbacks in maintenance?, because they expect to resell/scrap these rigs as soon as the cycle starts to turn again?

They may well be able to hype themselves higher over the near term ... but one has to think that one may well make more, & do it more reliably, by progressively betting against them. Even Ari couldn't avoid  the pullback, & it eventually crippled him.

If you inverted; you would be looking at longer term investments in the Repsol's of the world, & have rig exposure at much less risk. Is this really worth that additional risk?

Sharper has some good points. I would have sold some crappy rigs, and not top assets.
Also scrap value isnt worth anything in the Drilling Business. Ask Hercules and Seahawk about it.

Its interesting but there are alot of ways to lose inmo.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on May 12, 2013, 08:04:16 PM
I think Awilco will make TONS & TONS of money for the next 24 months or so.  Beyond that?  50/50, who is to say?  I don't think anybody will know what will happen then.

I agree.  I don't think the thesis depends on the long-term economics of the North Sea, whether these rigs last 10 or 20 years, or the price of oil in 5 years.  These are contracted for 1-2 years, we know how much Awilco will make in this time (barring an accident), and provided management isn't lying we know about how much we'll get in a dividend.  If we get that dividend, a yield hog will pay more for it than the share price now.  Can't an investment be just that simple sometimes?

To make money here, you don't have to Buffett and buy this company and hold it forever.  We have the luxury of buying now and hopefully selling it to someone else for more.  Just look at some of the crappy royalty trusts out there that are going to stop cashflowing in a couple years - they still get bid up based on the dividend.  This situation is at least as good. 
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on May 12, 2013, 10:37:29 PM
I think Awilco will make TONS & TONS of money for the next 24 months or so.  Beyond that?  50/50, who is to say?  I don't think anybody will know what will happen then.

I agree.  I don't think the thesis depends on the long-term economics of the North Sea, whether these rigs last 10 or 20 years, or the price of oil in 5 years.  These are contracted for 1-2 years, we know how much Awilco will make in this time (barring an accident), and provided management isn't lying we know about how much we'll get in a dividend.  If we get that dividend, a yield hog will pay more for it than the share price now.  Can't an investment be just that simple sometimes?

To make money here, you don't have to Buffett and buy this company and hold it forever.  We have the luxury of buying now and hopefully selling it to someone else for more.  Just look at some of the crappy royalty trusts out there that are going to stop cashflowing in a couple years - they still get bid up based on the dividend.  This situation is at least as good.

Very good counter argument, this was my thesis with ROIC and it worked out well.
Its also why I find myself drawn to this thread. With 2 rigs though not alot of room for error, downtime or any major accident by any major rig company would pretty much kill / maim the company in the short term.
Title: Re: AWLCF - Awilco Drilling
Post by: Green King on May 13, 2013, 12:56:08 AM
I think Awilco will make TONS & TONS of money for the next 24 months or so.  Beyond that?  50/50, who is to say?  I don't think anybody will know what will happen then.

I agree.  I don't think the thesis depends on the long-term economics of the North Sea, whether these rigs last 10 or 20 years, or the price of oil in 5 years.  These are contracted for 1-2 years, we know how much Awilco will make in this time (barring an accident), and provided management isn't lying we know about how much we'll get in a dividend.  If we get that dividend, a yield hog will pay more for it than the share price now.  Can't an investment be just that simple sometimes?

To make money here, you don't have to Buffett and buy this company and hold it forever.  We have the luxury of buying now and hopefully selling it to someone else for more.  Just look at some of the crappy royalty trusts out there that are going to stop cashflowing in a couple years - they still get bid up based on the dividend.  This situation is at least as good.

Very good counter argument, this was my thesis with ROIC and it worked out well.
Its also why I find myself drawn to this thread. With 2 rigs though not alot of room for error, downtime or any major accident by any major rig company would pretty much kill / maim the company in the short term.
wouldn't than be a better time to buy ?  when it becomes extremely miss priced. It feels like its fully priced in right now. If you buy it means you know the bad things above will not happen.
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 13, 2013, 01:14:30 AM
- I think the real risk here is rig rates collapsing.  A decade ago they used to be $50k/day.  I think that the chance of a major accident is remote.

*I have no idea where rig rates are headed.  They could go up.  You can figure out how many newbuilds are about to hit the market (a lot of them will hit the market 2013-2015).  Historically in the drilling and shipping industry, there are these boom/busts cycles.  Record profits leads to some players going crazy with new supply, which causes prices to crash and years of people losing money which leads to underinvestment, setting up a new boom.

- Awilco's presentations are worth reading as they contain day rate information not found in their annual and quarterly reports.
Title: Re: AWLCF - Awilco Drilling
Post by: HJ on May 13, 2013, 06:01:29 AM
- I think the real risk here is rig rates collapsing.  A decade ago they used to be $50k/day.  I think that the chance of a major accident is remote.

*I have no idea where rig rates are headed.  They could go up.  You can figure out how many newbuilds are about to hit the market (a lot of them will hit the market 2013-2015).  Historically in the drilling and shipping industry, there are these boom/busts cycles.  Record profits leads to some players going crazy with new supply, which causes prices to crash and years of people losing money which leads to underinvestment, setting up a new boom.

- Awilco's presentations are worth reading as they contain day rate information not found in their annual and quarterly reports.

But the general environment is So different now vs. 10 years ago.  In the aftermath of Asian crisis, oil went as low as $9, dollar was king, and oil companies have sustained a decade of relatively low oil prices, and are not quite as flush with cash as they are today.  Today, the environment is almost the exact opposite.  As long as oil stays above some generic number, say $80, it's very difficult to see day rate collapsing, certainly not within the forseeable future?

The new builds are primarily in the ultradeep category, and looking for day rates into $600k per day, a very different class of equipment.  That's where economics seem to be suspect on a 30 year horizon. 

These guys are probably due for regulatory inspection after the next 2 years, so an off year in utilization rate is up coming.

Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on May 13, 2013, 07:00:46 AM
Very good counter argument, this was my thesis with ROIC and it worked out well.
Its also why I find myself drawn to this thread. With 2 rigs though not alot of room for error, downtime or any major accident by any major rig company would pretty much kill / maim the company in the short term.

Congrats on ROIC! Watched for a while but never bought.

Yeah, the main risk here is any unexpected incident that results in downtime and/or a sudden need for cash.

wouldn't than be a better time to buy ?  when it becomes extremely miss priced. It feels like its fully priced in right now. If you buy it means you know the bad things above will not happen.

Yes, it would be a better time to buy.  And I'm going to size the position so that if there is a better buying opportunity I can still take advantage of it.

- I think the real risk here is rig rates collapsing.  A decade ago they used to be $50k/day.  I think that the chance of a major accident is remote.

*I have no idea where rig rates are headed.  They could go up.  You can figure out how many newbuilds are about to hit the market (a lot of them will hit the market 2013-2015).  Historically in the drilling and shipping industry, there are these boom/busts cycles.  Record profits leads to some players going crazy with new supply, which causes prices to crash and years of people losing money which leads to underinvestment, setting up a new boom.

- Awilco's presentations are worth reading as they contain day rate information not found in their annual and quarterly reports.

Rates might go up, and we get optionality on that upside.  But we know what rates will be for at least a year for one rig, two for the other.  They won't collapse over that duration.  And I think that duration is enough for this stock to get priced on dividend yield.
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 13, 2013, 02:41:34 PM
Quote
As long as oil stays above some generic number, say $80, it's very difficult to see day rate collapsing, certainly not within the forseeable future?

If you look at the drybulk shipping sector, commodity prices recovered in 2009/2010 but drybulk shipping rates have stayed low ever since.  The crazy thing about the drybulk sector is that there was a huge order book even after prices crashed 97% and there were very few cancellations.  The massive oversupply of drybulk ships may keep rates down for years.

(http://www.dryships.com/images/graph/chart1.jpg)
http://www.dryships.com/pages/report.asp

The drybulk shipping industry has been a terrible one historically- I believe it hasn't made money.  Offshore drilling may be slightly better.

Quote
And I think that duration is enough for this stock to get priced on dividend yield.
What happened to value investing? ;)
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 13, 2013, 04:06:24 PM
Wrote some of my thoughts on Awilco Drilling on my blog at http://alphavulture.com/2013/05/14/awilco-drilling-awdr-ol-cheap-with-a-catalyst-redux/ (cliff notes: I'm tempted to buy, but not so sure that it's a big enough bargain given the riskiness of the asset)
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 13, 2013, 04:12:31 PM
Nice writeup!
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on May 13, 2013, 07:20:14 PM
Quote
And I think that duration is enough for this stock to get priced on dividend yield.
What happened to value investing? ;)

Ouch!  ;)
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 14, 2013, 04:28:13 AM
I'am wondering: is there anyone who has an idea how much it would cost to build a new rig comparable with Wilhunter/Wilphoenix? How profitable it would be to build a new rig at current day rates? In theory this should determine what will happen with day rates in the long run.
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on May 14, 2013, 12:42:27 PM
I think that the relationship between the cost of a new rig and day rates vary wildly.

Personally, I think that the best way to value these companies is too look at the public versus private market value for these assets.  If there is a discrepancy then there is room for arbitrage.
After that, look at whether or not you want to buy drilling assets at current market prices.  This would be based on your forecast of future drilling rates.  You have to look at supply versus demand.  The supply side is easier to figure out because there are many places to get information on new supply and expected scrapping.  The demand side depends on the economics of using these rigs.
Title: Re: AWLCF - Awilco Drilling
Post by: Radio Free Cash Flow on May 14, 2013, 01:29:25 PM
Earnings just reported. $0.82 cents per share for the quarter. Up 7.9% from Q4.

And the board declared a $1.00 dividend to be paid in June!
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 14, 2013, 01:41:11 PM
Wow:

Looks like I was wrong.  Looks like $1/share dividend PER QUARTER?

Earnings were just a bit better than I was expecting...

Looks like money does grow on trees, or maybe on drill ships.  HAHA
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on May 14, 2013, 03:25:42 PM
Sweet!

Quote
The board approved a dividend distribution payable in Q2 of USD 1.0 per share.

Quote
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 will commence in Q2 2013. In the case of attractive growth opportunities the company will endeavor to maintain a meaningful dividend distribution.


Efficiency was down slightly due to a repair on WilHunter:

Quote
Revenue efficiency for the quarter was 85.1%. This was due to an extended period of waiting on weather whilst conducting a small repair.

I guess this does somewhat highlight the main risk here - one of the rigs going offline for whatever reason.  This was just a small repair.
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on May 14, 2013, 03:34:01 PM
Yes thats the major risk I see. With 2 assets, there is not alot of wiggle room
Title: Re: AWLCF - Awilco Drilling
Post by: matjone on May 14, 2013, 04:27:06 PM
 Maybe you could just make it a smaller position if you think it's cheap but are worried about the size?
Title: Re: AWLCF - Awilco Drilling
Post by: SharperDingaan on May 14, 2013, 05:54:11 PM
With earnings beating estimates, most of the FCF being distributed, & very little wiggle room - what do you think is going to happen the first time the yield hogs experience either an earnings miss, or a distribution cutback.

Enjoy the ride, but be prepared for some wild swings.

SD
 
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 15, 2013, 06:29:47 AM
I joined the party today, but with an (imo) prudently small sized position given the risks involved.
Title: Re: AWLCF - Awilco Drilling
Post by: matts on May 15, 2013, 07:55:27 AM
What's going on with the ADR today? Down 30+% on big volume while the local in Oslo is up 3.5%.

Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on May 15, 2013, 07:56:50 AM
Looks a bit like flash crash to me, volume was only 1,000 shares.  Someone got a lucky fill
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 15, 2013, 08:01:35 AM
Market order + illiquid stock => this. Wonder if the lucky buyer is a forum member.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on May 15, 2013, 08:09:32 AM
As soon as I saw that I put in a bid at 11 to see if the price was real or whether it was a fat-finger.  The bid has not been filled.
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on May 16, 2013, 06:05:47 AM
Thanks for the idea.

Ended up buying ORIG with a similar thesis.

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/95109

If they convert to an MLP we have a similar yield convergence play.
Title: Re: AWLCF - Awilco Drilling
Post by: tytthus on May 20, 2013, 03:07:22 PM
i also picked up some of this based on otcadventures blog.  thanks...and the discussion here finally motivated me to get registered....not sure why it took so long....other than the impossibility of keeping up to date on all the discussions going on....

anyway, does anyone have further understanding of the relationship between Awilco and Awilhemsen?  from what i can tell, Awilhemsen formed Awilco & brought it public and provide management services?  now that Awilco is paying out a dividend, Awilhemsen is getting their payout from the risk of stealing buying the drill ships from RIG.

is there any indication that Awilhemsen will look to sell down their stake?  if the market reprices the 25% dividend to something in the teens, they will have a pretty nice profit on their hands.

thanks again!
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on June 04, 2013, 04:00:26 AM
Saw that someone wrote a piece on Awilco @ Seeking Alpha: http://seekingalpha.com/article/1476181-awilco-drilling-high-seas-dividends-make-this-driller-a-long?source=google_news
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on June 04, 2013, 11:12:59 AM
Hey all!

I was just thinking today about risk on Awilco.  Specifically, the risk of them only have two rigs.  Yes, it is a risk, no doubt.

HOWEVER, just how big a risk is it? 

Could it possibly be that it is LOWER risk?

As an example, after the BP & RIG explosion the Gulf of Mexico, RIG's stock went down by approximately 2/3.  RIG has a much larger fleet of rigs than Awilco.  Thus, you could make an argument that RIG is a bigger risk than Awilco.  They numerically have more rigs, and thus more chances of catastrophe.

Any thoughts about this?
Title: Re: AWLCF - Awilco Drilling
Post by: Mephistopheles on June 04, 2013, 11:38:13 AM
Hey all!

I was just thinking today about risk on Awilco.  Specifically, the risk of them only have two rigs.  Yes, it is a risk, no doubt.

HOWEVER, just how big a risk is it? 

Could it possibly be that it is LOWER risk?

As an example, after the BP & RIG explosion the Gulf of Mexico, RIG's stock went down by approximately 2/3.  RIG has a much larger fleet of rigs than Awilco.  Thus, you could make an argument that RIG is a bigger risk than Awilco.  They numerically have more rigs, and thus more chances of catastrophe.

Any thoughts about this?

The stock went down 2/3 due to the negative headlines; it was panic selling. Having more rigs reduces the impact that any one single rig problem will have on the entire company. If the Macondo explosion happened to AWLCF instead of Transocean, the impact would have been far more devastating for shareholders.
Title: Re: AWLCF - Awilco Drilling
Post by: 17thstcapital on June 04, 2013, 12:42:21 PM
Hey all!

I was just thinking today about risk on Awilco.  Specifically, the risk of them only have two rigs.  Yes, it is a risk, no doubt.

HOWEVER, just how big a risk is it? 

Could it possibly be that it is LOWER risk?

As an example, after the BP & RIG explosion the Gulf of Mexico, RIG's stock went down by approximately 2/3.  RIG has a much larger fleet of rigs than Awilco.  Thus, you could make an argument that RIG is a bigger risk than Awilco.  They numerically have more rigs, and thus more chances of catastrophe.

Any thoughts about this?

No reason to overthink this.  The stock would be toast if there was such an incident.  Let's hope it doesn't happen.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on June 04, 2013, 01:48:42 PM
No, I don't think I'm over thinking this.  I am trying to point out that people are mistaken thinking a fleet of 10,15, 20+ rigs will protect them if there is a catastrophe.  RIG has a huge fleet, and the sinking of their one ship sent the stock down approximately 65% in less than a week.

If that happens here, it will be terrible.  God forbid that this ever happens TO ANY COMPANY. 

However, I think the risk is similar if you have 2 rigs or 20 rigs.

That is my point.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on June 04, 2013, 02:09:25 PM
I think you are partly right. If there is a catastrophe the stock can't go below zero even if it would be a billion dollar disaster. But it only works for disasters bigger than the current intrinsic value. Don't think those are very probable at all, and this property does not impact the value of the company in any significant way.

I actually think the focus of investors no the possibility of disasters with drilling rigs is a nice example of recency and availability bias. Just because deepwater horizon exploded a few years ago, and everybody can still remember that, doesn't mean that the probability of drilling rigs exploding is particularly high.
Title: Re: AWLCF - Awilco Drilling
Post by: HJ on June 04, 2013, 07:12:01 PM
If you read the 10-K's of the larger drillers, they pretty much all mention that in GOM, they have all become self insured with regard to physical damages caused by a named windstorm, even before Macondo post Katrina and Ike, some of them were able to recover something from the insurers for damaged or lost rigs back then.  While I don't know for sure, but the lack of such mention with regard to the North Sea market leads me to believe that physical damage insurance can still be sourced at a reasonable cost within that market.  However those are just for the value of the rig, not earnings, and they may be insured just for the book value of the rigs, which could be lower than replacement value or market value.  Within this context, I have to imagine that diversification probably leads to marginally lower premiums.  Operational risk is an entirely different discussion.  One can argue pros and cons on both sides.  But the bigger issue with a 2 rig company is that the cash flow would be perceived as highly volatile.  One rig go into regulatory inspection, or is out of commission for a month or two in between jobs, cash flow could drop dramatically.  The good news is that they are not that levered, so the cash flow volatility can be reasonably managed.  But you really ought to pay a lower multiple for what is arguably peak cash flows.

Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on June 04, 2013, 07:29:31 PM
Hey all!

I was just thinking today about risk on Awilco.  Specifically, the risk of them only have two rigs.  Yes, it is a risk, no doubt.

HOWEVER, just how big a risk is it? 

Could it possibly be that it is LOWER risk?

As an example, after the BP & RIG explosion the Gulf of Mexico, RIG's stock went down by approximately 2/3.  RIG has a much larger fleet of rigs than Awilco.  Thus, you could make an argument that RIG is a bigger risk than Awilco.  They numerically have more rigs, and thus more chances of catastrophe.

Any thoughts about this?

This is a really great point.  There are a couple layers here: 1) if investors panic if one rig explodes and sell the stock down 2/3 regardless of the company's size, then there is definitely lower risk of such a drawdown in Awilco. The difference would be that BP would eventually claw back, whereas Awilco wouldn't.  2) Regulators/lawsuits/etc. would go after the whole company if there were a large disaster. Smaller company = less assets to go after.  In that sense it would be way better to hold 100 separate Awilcos than one BP.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on June 04, 2013, 07:32:15 PM
So is anyone else just really puzzled that the share price has not reacted more to this dividend?  I mean, it's very publicly yielding 25% - that's not supposed to happen.  Are we all missing something, or is the explanation as simple as, it's just really under-the-radar and unknown?
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on June 04, 2013, 07:50:50 PM
Olmstead:

Yes, I am rather puzzled by the dividend too!

My borker called up and suggested that if I want nice dividends, I should get into the liquidating Iron Ore Trusts! (haha).

But seriously, so many of my stocks act goofy, I guess I'm not that surprised.

I think there are several things happening:

A). Small cap, hardly nobody is paying attention
B). People may think the $1/share dividend is YEARLY
C). The stock's dividend is NOT showing up on hardly any screens.  Yahoo! shows no dividend yield.  My broker shows a yield of about 6%, which I guess is accurate, as the dividend is decided on a quarterly basis.
D). I suspect after the next dividend, the stock might show up as a 12% yield.
E). After a year, it should show up as correctly on all screens as a 24% yield.

I don't doubt that Awilco should trade at a discount.  but trade at 24% yield, a P/E of 4?  solid bookings for about the next 20 months? 

It is trading "too low".  In time it should trade "correctly".  I believe markets only weakly efficient.  There is  window of opportunity now, but for how much longer?

We will see...
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on June 04, 2013, 08:14:29 PM
I think you have to ask yourself what the useful life is for the rigs, and how long rates hold up.

As of now you get your money back in 4 years. If rates cant cover operational costs in 4 years, you havent made any real money, but instead have lost.
If they break even then you havent made any real money, if they are where you are now then you start to make money.

Right now its a liquidating play, though 25% each year is nice. Without some sort of growth plan you only have a return of capital situation.
If the yield trading down to 10%, would you really expect to get a 10% yield for 10 years, and still have a similar asset value left.

It probably hasnt moved due to it being a a small undiscovered name, but you have to ask yourself whats the long term play here.
Title: Re: AWLCF - Awilco Drilling
Post by: oddballstocks on June 04, 2013, 08:43:14 PM
I think you have to ask yourself what the useful life is for the rigs, and how long rates hold up.

As of now you get your money back in 4 years. If rates cant cover operational costs in 4 years, you havent made any real money, but instead have lost.
If they break even then you havent made any real money, if they are where you are now then you start to make money.

Right now its a liquidating play, though 25% each year is nice. Without some sort of growth plan you only have a return of capital situation.
If the yield trading down to 10%, would you really expect to get a 10% yield for 10 years, and still have a similar asset value left.

It probably hasnt moved due to it being a a small undiscovered name, but you have to ask yourself whats the long term play here.

Useful life is 18 more years per rig according to the company.  I'm still looking at this, someone sent me their thoughts today on it, very compelling.

Here's how I'm thinking about it right now.  The contracts are guaranteed through 2014, although there is a very strong chance they're renewed.  So 1.5 years of dividend payments, about $6 p/s.  The calculation then is are the two rigs worth more than $10 p/s on a stand alone basis?

Granted if both rigs renew then none of this matters, but the renewal is the key pivotal point.
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on June 04, 2013, 09:43:48 PM
Useful life is one thing, but if there is overbuilding in off shore assets I am guessing these rigs will be scrapped / cold stacked before the newer assets will.
Especially considering the day rates they are getting.

I would guess its probably undervalued due to the company being small, but alot can happen in 4 years.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on June 04, 2013, 09:56:33 PM
Seems like there's been a lot of discussion on what's the true CapEx and useful life of these assets.  I actually had a convo with the CFO and he told me that these rigs were built in the 80s before manufacturers start to "optimize designs (make the hulls thinner)".  Hence, he fully expect these rigs to last 20 years from the date when they refurbish them.  Maintenance CapEx is expected to be about $15mm per year, with an additional $20mm needed in 2016.  In terms of private market value, the CFO told me that Transocean was marketing these rigs at $750mm at one point.  The company got them for $200mm and added an additional $100mm in cap ex to get them ready.  Another point that distinguishes Awilco from other rig owner/operators is that they elect to pay out all FCF as dividend.  Munger once said something along the line that the worst business is one where at the end of the year you ask where's my profit and all you can point to is the construction equipment in the yard.  Rigs, Telco, etc are in this line of business and tend to trade perpetually at a 5x EBITDA multiple because we all know that cashflow will simply be plowed back into more rigs.  When I spoke with the CFO and I asked him about his willingness to buy rigs at today's price, he mentioned that these two rigs were acquired under opportunistic conditions and he's not inclined to buy more rigs at today's price because it will inevitably lead to low rate of return.  The company's decision to return capital to shareholders via dividends makes rig ownership a lot more attractive than owning Ensco, Transocean, Noble Corp, or Diamond offshore.  This should be taken into consideration. 

I think that tail risk comes from explosions/storms etc.  But a repeat of the great recession will hurt the value as well.  Dayrates will drop and utilization rates will drop as well.   However, at 25% dividend rate (I think sustainable dividend rate is probably 22-24%), the cash inflow helps to de-risk the investment.  With 45% of the capital returned (pre-tax) in the next two years and still another 16-17 of useful life left, I'm confident that we can at least recover our upfront investment. 

One can check rigzone.com for rig dayrates etc.  Another data point that could be helpful is that in 2008/2009, the dayrates for similar assets were charging $250/day. Of course utilization won't be 90%. 

Per my convo with the CFO, one can expect:

90% utilization of the assets at the day rates per the corp presentation 
$85k/day of operating expense (365 days/year)

The cashflow and EBITDA figures are actually fairly easy to figure out
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on June 04, 2013, 11:34:16 PM
BG2008 - You really are selling it, very encouraged by what the CFO said. Makes one think they will buy when its worth buying which is what you want.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on June 04, 2013, 11:52:06 PM
BG2008, thanks for sharing your conversation with us!

We tend to think about downside risk, but uncertainty can be positive too.  What I mean is, once current contracts run out, what is the midpoint of a probability distribution of dayrates for the next contract?  A naive estimator would be, just use today's prevailing dayrate as the median.  This is your best guess barring some mental model that incorporates other info (like newbuild pipeline, macro conditions, etc.).  Using today's rate as your median implies equal weight both above and below.  We worry about the next contract coming in below today's, but with our naive estimate it is equally likely that it comes in higher - i.e. upside "risk."
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on June 05, 2013, 12:36:34 AM
I think that the naive estimator could get you into a lot of trouble (um... look at the history of drybulk shipping stocks).

It seems to me that there should be a relationship between the cost of a newbuild and future day rates.  You could buy a newbuild and it will come in 1-2 years.  (Anybody know how long it takes to build these ships and what the backlog at shipbuilders is?)  Of course you have to wait 1-2 years, and a newbuild will have cashflows that last for ~20 years (maybe much longer than that, and maybe less).

2- The pricing of ships versus current dayrates suggests that market participants think that rates will drop in the future.  If rates were to stay flat, then it definitely makes sense to buy Awilco (or to buy drillships on the private market).

3- Historically, the way to make money in commodity markets has been to buy at the bottom (e.g. when ships are being scrapped) or to buy when there is extreme fear.  You need to be careful and/or to stay away from these markets when the industry is crazy profitable and overbuilding is imminent.
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on June 05, 2013, 01:39:35 AM
New builds have a 2 year lead time, and you cant get any ships built until 2014 (maybe 15) and this relates to the UDW assets. I think the market is a bit frothy right now which is why I am concerned, I also think these rigs will be the first ones cold stacked when things get dicey and there are too many ships / rigs. BG2008 has bought in some good points though from the CFO and I like the way he is looking at things.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on June 05, 2013, 03:14:43 AM
Seems like there's been a lot of discussion on what's the true CapEx and useful life of these assets.  I actually had a convo with the CFO and he told me that these rigs were built in the 80s before manufacturers start to "optimize designs (make the hulls thinner)".

It seems this is the case for most mid-water rigs. Almost all rigs that are in use today were build in the same period as the two rigs that Awilco owns:

(http://tweakers.net/ext/f/FfwPgku7U7VCJy5vowqiv6Eh/full.png)
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on June 08, 2013, 01:53:31 PM
Hence, he fully expect these rigs to last 20 years from the date when they refurbish them.  Maintenance CapEx is expected to be about $15mm per year, with an additional $20mm needed in 2016.

Is the additional $20mm for the rigs being sent to the 'yard'? I wonder how they are going to manage their dividend when one of the rigs are offline?
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on June 08, 2013, 02:01:42 PM
They have to make repairs to the ship and to do a survey on it to make sure that the ship is safe.

Regulations in some countries may be stricter than others.

Countries may not want drillships sinking due to corrosion, age-related problems, etc. leading to an environmental disaster.  They might also impose regulations to make sure that they are up to date in terms of safety.  So every once in a while I might expect Awilco to have to spend some capital to upgrade/maintain its ships.

I don't see it as being a big deal.  What I'd be most worried about is fluctuations in dayrates and in the private market value of these ships.
Title: Re: AWLCF - Awilco Drilling
Post by: HJ on June 08, 2013, 04:38:07 PM
New builds have a 2 year lead time, and you cant get any ships built until 2014 (maybe 15) and this relates to the UDW assets. I think the market is a bit frothy right now which is why I am concerned, I also think these rigs will be the first ones cold stacked when things get dicey and there are too many ships / rigs. BG2008 has bought in some good points though from the CFO and I like the way he is looking at things.

But new builds are all for deep and ultradeep water assets.  Nobody is really building the rigs of the class that Awilco owns anymore.  There are plenty of those cold stacked elsewhere in the world already.  I don't have particular insights as to whether these 2 rigs will continue to get used after 2016, but the way people used to rationalize owning this class of assets is that there are still plenty of mid water shore lines in the world that hasn't been explored yet, and nobody is building this class of asset anymore.  Diamond Offshore is retrofitting one of their rigs to move into the North Sea for $120MM, and selling another one, because at a certain point, you might as well order a new build rather than retrofitting an old one.  But now you are competing for space in the shipyard with the ultradeep water stuff, which is certainly not not built to compete for $200k-$300k day rates.


Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on June 10, 2013, 04:34:51 PM
I was doing some due diligence on Awilco and stumbled upon this from Friday:

(TDN Finans) Awilco Drilling is close contract for the construction of up to three semis of CS50-design or similar. writes the Upstream Friday, referring to unnamed sources. This comes after the company for months has been working with new construction financing and available yard capacity, according to the newspaper. Also Seadrill, according to Upstream be interested in building a medium-deepwater semi. Upstream, the interest is generally on the rise, and writes that Stena Drilling should be close orders his first semi for several years. Upstream writes that this could be the start of a new cycle in the construction of this type rigs.

Awilco has came out and flatly denied the report. But it makes you wonder...
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on June 10, 2013, 10:05:20 PM
Hmmm:

I am rather unsure about this rumor...

Awilco has stated several times that they are not going to buy or build.

Awilco has specifically denied this rumor.

If the rumor was that they would build ONE, that would be totally plausible.  Building THREE?  They only have two rigs now.  Who would loan them the money to build THREE more?

They would presumably have to suspend or cut the dividend to fund these....how would it look that paid 1-2 quarters of dividends?

I am going to go with Awilco on this one.  They say NO, and it makes little sense that they would engage in this type of behavior.
Title: Re: AWLCF - Awilco Drilling
Post by: SharperDingaan on June 11, 2013, 06:28:45 AM
We have no dog in this .... but it would be a very good time to begin progressive hedging.

2 opportunistic rigs spinning off a flood of cash, & a management with 'baggage' that wants to stay in the business? Now why wouldn't they use that cash to prime the pump via big dividends, get some nice appreciation, & then use a rosy forecast to do a few equity issues to all those happy shareholders? $120M in dividend payout discounted at maybe 15%? to raise $800M in equity?

Build, vs buy, new rigs & you are going to be offered very attractive terms by the yards. That $800M as a 15% DP will buy you $5.3B of new rigs; then cut the dividend to preserve CF, to clear out the yield hogs? Fortunately, you cant negotiate for new-builds without tipping off the market ....   

It is straightforward to coin it on the upside (Nortel, RIM, etc); but the real minting is done, & very quickly, on the down-side. The 18-30 month ramp up that crashes to the basement in under 3-6 months.

The dance is changing, the girls are being liquored up, & the stakes are rising. It's always entertaining if at least one of them has a Deringer in her handbag!
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on June 11, 2013, 07:33:20 AM
Now why wouldn't they use that cash to prime the pump via big dividends, get some nice appreciation, & then use a rosy forecast to do a few equity issues to all those happy shareholders?

Yes this is standard practice with many dividend stocks, but with Awilco the share price hasn't really responded yet.  So even if that is the game plan we're in the early phases.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on June 13, 2013, 09:48:07 AM
Might be old news but I hadn't seen it in this thread: Via Awilco's Q1 conference call they mentioned that two comparable rigs in the north sea were awarded extensions:

Quote
Transocean John Shaw - Awarded a one-year contract extension for work in the U.K. sector of the North Sea at a dayrate of $415,000 ($151 million estimated contract backlog).  The rig's prior dayrate was $360,000.

Shaw can drill down to 1,800 ft. versus the 1,500 ft. that the Awilco's can do but still shows the market is strong.

The other rig mentioned was Diamond Offshore's Ocean Princess (1,500 ft.) which received a six month extension, but I can't seem to find anything outlining the dayrate besides what Awilco's CEO mentioned.
Title: Re: AWLCF - Awilco Drilling
Post by: matts on June 23, 2013, 11:29:59 AM
Letter of Intent signed with Apache and Taqa

http://www.awilcodrilling.com/4142-Financial-News-Message?msg=http://cws.huginonline.com/A/147077/PR/201306/1711242.xml
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on June 23, 2013, 01:27:10 PM
Matts:

WOW!  That is incredibly good news!  WillPhoenix is locked up until 2017!

I wonder what the day rate is for it?

I wonder if AWLCF will go up when trading opens?

We will see.
Title: Re: AWLCF - Awilco Drilling
Post by: LongTerm on June 23, 2013, 01:57:51 PM
It looks like the day rate is about $387,000 from the press release, but this is only a letter of intent. I'm not sure how binding this LOI is. Usually an LOI provides price protection for the buyer of services but not security for the seller. So I view this as a limit on the upside of the day rate which the WilPhoenix can command as of mid 2014, not a guarantee of future income. Perhaps someone with more industry experience can correct me.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on July 08, 2013, 09:00:02 AM
Seems like prices are starting to creep up.  I checked a Norwegian website for rumors of the acquisition, some posters stated that they have spoken with management and they were merely checking prices.  I guess once the LOI becomes a firm contract, the investment thesis becomes a lot more compelling. 

http://forum.hegnar.no/thread.asp?id=2180106

Has anyone figured out why we only received $0.95 instead of the $1 in dividends?  The company does operate in dollars and they declared their dividends in dollars.  The dividend came from GB and should have zero foreign tax withholding.

Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on July 08, 2013, 09:50:20 AM
Any news out there today? The stock went gangbuster at the close in Oslo today. Up almost 4% in the last 10 minutes of trading. AWLCF is up 7% today.
Title: Re: AWLCF - Awilco Drilling
Post by: tytthus on July 08, 2013, 11:49:47 AM
Quote
Has anyone figured out why we only received $0.95 instead of the $1 in dividends?

the way i understand things, some market maker sponsors AWDR.os allowing us to buy AWLCF.  they may charge a fee...i got dinged $15 at TDA.  AWDR.os probably has a currency translation from US$ to Kroners, then there is probably another translating from Kroners to US$ for the AWLCF payment.  these currency translations never work out in your favor.  the market maker undoubtedly skims a portion for themselves....

in this case, it wound up dinging us about 4.5%, and is roughly in line with other otc situations i've been involved with, like NATDF.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on July 08, 2013, 01:46:59 PM
Thanks, very helpful. I guess it's the cost of doing business. 
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on August 13, 2013, 12:03:26 PM
67k shares traded today.  This is the most shares traded in any given day for the ADRs since they were listed.  Perhaps a yield oriented fund got involved today?
Title: Re: AWLCF - Awilco Drilling
Post by: roughlyright on August 13, 2013, 12:14:01 PM
I am already long on this stock. I am trying to get a handle on the risk in this stock. Does anyone know any statistics on the probability of a rig blowing up in a given year? Is this risk 1 in 10 or is it 1 in 1000? I could not come up see any ballpark numbers by searching on the web. Any inputs are greatly appreciated.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on August 13, 2013, 12:55:25 PM
No specific stats, but I can vouch that the catastrophic risk (Transocean/BP) type disaster is closer to 1 in 1,000 than 1 in 10.  Most of the larger owners like RIG, Ensco, Noble Corporation, Hercules, Diamond, own fleets of dozens of rigs.  Aside from Transocean, I don't (personally) recall the last time that a rig experienced a catastrophic failure of some sort aside from Transocean.  I think risk tend to come in clusters.  For example there was a shallow water driller called Seahawk drilling which went bankrupt which was subsequently bought by Hercules following the Transocean/BP disaster.  (I believe equity  In short, the ban in GOM drilling put them out of business.  Overall, I say Awilco is not an investment that you size at 30%, but it's certainly worthy of a mid single digit allocation in your portfolio.         
Title: Re: AWLCF - Awilco Drilling
Post by: roughlyright on August 13, 2013, 01:23:03 PM
Thank you BG for your insights. very helpful.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on August 13, 2013, 02:04:25 PM
Imo the catastrophe risk gets way more attention than is deserved. It's low enough that it doesn't significantly impact the value of the business. There are hunderds of drilling rigs operating around the world right now, and even if one would explode every single year it's still not that risky (and historical average is better than that). Just because Deepwater horizon was such a big event it's on the front of everybody thoughts. The average investor probably owns multiple stocks with a higher catastrophic risk probability without even worrying about it.
Title: Re: AWLCF - Awilco Drilling
Post by: tytthus on August 13, 2013, 02:24:55 PM
I'd agree catastrophic risk is low, yet it would still be a huge financial burden if there was significant down time for one of the rigs....
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on August 13, 2013, 05:30:02 PM


Nice to see the firm contract news released before tomorrow's quarterly announcement.  It will be interesting to see if the divie is held at $1.0 or if it fluctuates a few pennies to reflect the stated position to distribute all cash over the 35M buffer.


AWDR - Contract signed with Apache and Taqa
With reference to our press release of 23 June 2013, Awilco Drilling PLC is pleased to confirm that the contract 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 27 months of options has been signed. The contract is expected to commence in the second half of 2014.

WilPhoenix is one of Awilco Drilling's two Enhanced Pacesetter semi-submersibles and is equipped for drilling in water depths up to 1,200 ft.

Aberdeen, 13 August 2013


Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on August 13, 2013, 05:30:40 PM
Hey all:

The catastrophic risk level is probably lower than ANY mentioned here.

Think of this...these rigs have been in use since the early 80's.  That is about 25 years or so. 
So in terms of days, that would be about 10,000 days.  Neither rig has blown up, after at least 20,000 days of operation.

Of course, anything can happen.

It was interesting that well over 60,000 shares traded today in the USA.  One contract for the WilPhoenix has been firmed up with Apache today and that it is starting in the 2nd half of 2014.  The contract will run for 3 years, with a 27 month option.

Earnings should be coming out tomorrow (8.14.13) after the market in Oslo closes.

This is going to be an EXTREMELY important quarter.  We will see what earnings are, but perhaps even more important is the dividend announcement.  If it is $1/share, AWLCF should start showing up on some income screens, and we should see the stock rate higher.

We will see.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on August 14, 2013, 10:22:21 PM
This is pretty darn good news.   http://hugin.info/147077/R/1723147/574226.pdf

Awilco Drilling PLC reported contract revenue of USD 59.5 million in Q2 2013 (USD 53.4 million in Q1), EBITDA of USD 38.6 million (USD 33.9 million in Q1) and net profit of USD 29.4 million (USD 24.7 million in Q1).

Revenue efficiency was 97.3% during the second quarter (91.2% in Q1).

Contract backlog at the end of Q2 was approximately USD 860 million (approximately USD 466 million Q1).

The Board approved a dividend distribution payable in Q3 of USD 1.00 per share.

Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on August 15, 2013, 04:05:37 AM
They pretty much hit it out of the park. Though 97% efficiency is pretty unsustainable. Hopefully someone asks about the new rig rumor during the conference call.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on August 15, 2013, 05:41:01 AM
http://hugin.info/147077/R/1723212/574265.pdf

Link to presentation
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on August 15, 2013, 08:26:43 AM
Yet another good quarter...

Net earnings of almost $1/share. 

Cash flow of about $1.30/share.

Debt paid down a bit, balance sheet is improving.

DIVIDEND OF $1/SHARE!

Uptime of about 97% for the quarter.  This is good, very good, and probably can't be kept at this level...but I could see them doing mid 90's with just a LITTLE bit of good luck.

Future contracts look good, extending time & raising rates.  This is much more solid investment than it was 7 months ago.

Stock is up, which is especially nice on a heavy down day.  However, I just can't understand why this is moving quicker/further.

I would think AWLCF should be trading for about $30/share, EASILY.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on August 15, 2013, 10:06:36 AM
Lets hope it stays at the current levels, want to reinvest those dividends  :)
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on August 16, 2013, 01:13:23 PM
This is from my broker - Technically, the stock is really trading at $20.40 today if you include the $1ish dividend shareholders are entitled to receive as of yesterday. 

"On 8/15/13, AWLCF announced a regular quarterly cash dividend of $1.00 per share, payable on 9/20/13 to shareholders, with an ex-dividend date of 8/16/13."

This is different than the company's presentation "Share will trade ex-dividend on 21st August 2013, the record date will be 23rd August"

Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on August 17, 2013, 10:42:18 AM
Took the time to listen to the conference call.  Got some minor additional details here and there.  As we already knew, the 98% rig uptime is not repeatable.  Apparently it was actually due to a shortage of helicopter lift - which meant they had to delay maintenance projects.  So I'd think we should not be surprised at a much lower uptime next quarter when they catch up on those.  Management's "steady-state" target is the low 90s.

Management sounded pretty disciplined when talking about "growth opportunities."  Said they "will evaluate growth opportunities on a case-by-case basis."  Until such an opportunity presents itself, the focus is on operating efficiency and free cash flow.  Any growth opportunities would be assessed on its ability to create value for shareholders.  They gave the impression that they would use a high bar when judging this.

They gave some updates on the UK rig market.  It sounds tight, with only two rigs up for charter after 2014.  One of those is theirs.  They talked about how the UK's regulatory regime, and said it is strict enough and expensive enough to get certified, to discourage relocating rigs from elsewhere in the world. 

In response to an analyst question, management reiterated that they had no pre-commitment to a dividend.  As we all know, the formula is basically all free cash above a $35m buffer.  (Still, they have to smooth the results of this calculation somewhat, since $1/shr is just a bit too round of a number to be coincidental.)

This still seems cheap, especially now that we have more clarity on future revenue with the Apache contract signed. 
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on August 17, 2013, 12:57:21 PM
For those wanting to buy Awilco in Oslo Stock Exchange:

Fidelity International Investments allows trading in Norway stock exchange. The cost is 160 NOK (~$27) each way to trade plus 1% to convert currency each way from USD to NOK and NOK to USD.

So basically $54 + 2% in total.

Regarding dividend, their brochure says 1% of principal but their rep said they don't charge anything. I messaged them and I'm waiting to get the final answer.


EDIT: I confirmed - Fidelity doesn't charge any fees for receiving dividends.

So OTC has cheaper trading but less liquidity and Oslo is more expensive but has more liquidity. Ultimately depends on how much you're looking to invest.

https://www.fidelity.com/stock-trading/international-stock-trading (https://www.fidelity.com/stock-trading/international-stock-trading)
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on August 19, 2013, 08:22:14 AM
Reference is made to the second quarter 2013 report released on 15 August 2013. Awilco Drilling PLC will be trading ex-dividend of a cash dividend of US$1.00 per share on 21 August 2013. The record date is 23 August 2013 and the dividend will be paid on or about 20 September 2013.

Aberdeen, 19 August 2013

For further information please contact:


Jon Oliver Bryce, CEO

Phone: +44 1224 737900

Cathrine Haavind, IR Manager

Phone: +47 93 42 84 64
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on August 19, 2013, 12:23:54 PM
Reference is made to the second quarter 2013 report released on 15 August 2013. Awilco Drilling PLC will be trading ex-dividend of a cash dividend of US$1.00 per share on 21 August 2013. The record date is 23 August 2013 and the dividend will be paid on or about 20 September 2013.

Aberdeen, 19 August 2013

For further information please contact:


Jon Oliver Bryce, CEO

Phone: +44 1224 737900

Cathrine Haavind, IR Manager

Phone: +47 93 42 84 64

My broker says:

On 8/15/13, AWLCF announced a regular quarterly cash dividend of $1.00 per share, payable on 9/20/13 to shareholders, with an ex-dividend date of 8/16/13
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on August 21, 2013, 06:51:44 AM
My first attempt at speaking to scottrade about the dividend resulted in getting completely blown off. But reading about it in other areas, it looks like Schwab has been receptive and shows today as the ex-dividend date.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on August 21, 2013, 07:33:35 AM
It certainly trades like today's the Ex-Date
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on August 21, 2013, 10:01:41 AM
Well according to the company, today IS the ex-dividend date.

Quote
The shares in Awilco Drilling PLC will be traded ex dividend USD 1.00 as from today, 21 August 2013.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on August 21, 2013, 05:26:10 PM
I'm thinking its a safe guess that we all belong to the 17% :)


Awilco Drilling PLC's 20 largest shareholders as of 1 August 2013:


Name                                                     Shares                                                Percentage                                            
Awilco Drilling AS                                  14 633 100                                                        48,73                                           
Euroclear Bank SA                                  2 512 425                                                          8,37                                           
Deutsche Bank AG                                  1 165 668                                                          3,88                                           
Goldman Sachs & Co                                 957 990                                                          3,19                                           
QVT fund V LP                                            851 898                                                          2,84                                           
Bank of New York                                      813 940                                                          2,71                                           
Odin Offshore                                            584 884                                                          1,95                                           
Stenshagen Invest AS                               407 905                                                          1,36                                           
VPF Nordea Kapital                                    371 944                                                          1,24                                           
Arctic Funds PLC                                        318 760                                                          1,06                                           
Storebrand Verdi                                       310 310                                                          1,03                                           
JP Morgan Chase Bank                              280 458                                                          0,93                                           
MP Pensjon                                               236 000                                                          0,79                                           
VPF Nordea Norge                                     232 749                                                          0,78                                           
Goldman Sachs Intern                               227 940                                                          0,76                                           
Alcides Holding AS                                      209 000                                                          0,70                                           
VPF Nordea Avkastning                               189 174                                                          0,63                                           
Citibank                                                    185 607                                                          0,62                                           
KLP Aksje Norge VPF                                    172 132                                                          0,57                                           
Skandinaviska Enskilda Banken                  168 808                                                          0,56                                           
Other                                                        5 200 808                                                        17,32                                           
Total                                               30 031 500                                                      100,00         


http://www.awilcodrilling.com/6667-Shareholders               
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on August 21, 2013, 10:42:14 PM
Not a safe guess: it could easily be that your stock is owned through euroclear bank, deutsche bank or one of the other financial institutions in that list.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on August 22, 2013, 06:22:49 AM
Actually, behind my avatar, I am actually Skandinaviska Enskilda Thor Kickass Banken.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on August 26, 2013, 05:53:10 AM
http://online.wsj.com/article/SB10001424127887323407104579034763362659316.html

Crash Grounds Oil Helicopters in North Sea



Looks like those maintenance projects might be delayed further...
Title: Re: AWLCF - Awilco Drilling
Post by: tytthus on August 26, 2013, 06:59:21 AM
http://www.rigzone.com/news/oil_gas/a/128662/North_Sea_Crash_CHC_Resumes_Super_Puma_Flights

not all helicopters are grounded....
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on August 29, 2013, 08:56:53 AM
Here we go again...


http://www.upstreamonline.com/hardcopy/news/article1334573.ece

http://www.tradewindsnews.com/offshore/322729/awilcoeyes-newbuilds (have to login to access)


Oslo-listed Awilco Drilling is in talks with three Asian rig builders for the construction of up to three North Sea-class semi-submersible drilling units valued at more than $1.8 billion in total.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on August 29, 2013, 12:23:34 PM
This is concerning. Has anyone here spoken to management about these rumors?  An interesting tidbit here.  China Oilfield Services (COSL) bought Awilco Offshore back in 2008 for $2.5 billion.  I wonder if COSL is still operating under Awilco Offshore.  I wonder how much of this is Upstream confusing Awilco Offshore, a subsidiary of COSL, versus Awilco Drilling.  Nonetheless, we need to roll up our sleeves get to the bottom of this.     
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 01, 2013, 07:26:23 AM
Here are the articles:

Quote


Three in race for Awilco newbuild semisub rigs


By TAN HWEE HWEE and XU YIHE Singapore  16 August 2013 00:00 GMT
Oslo-listed Awilco Drilling is in talks with three Asian rig builders for the construction of up to three North Sea-class semi-submersible drilling units valued at more than $1.8 billion in total.
The drilling contractor is understood to have sounded out the market for a Moss Maritime CS50 design semi-submersible drilling unit capable of operating in the North Sea.

Awilco is looking for up to three DP3 semisubs capable of drilling wells to 30,000 feet and operating in 5000 feet of water. They will also be equipped with variable deck load of 5000 tonnes and accommodation for 130 people.

Delivery of the three semisubs is targeted from the end of 2016.

Awilco currently operates two 1980s-built Pacesetter design semi­subs, which are on charters off the UK.

The newbuild order, if confirmed, will signal an extension of its presence off Norway.

Awilco chief executive Jon Oliver Bryce downplayed any newbuild possibilities, but said the contractor is concentrating on its two existing semisubs and “evaluating growth opportunities”.

However, the company is understood to have shortlisted China’s Cosco Shipyard, South Korea’s Daewoo Shipbuilding & Marine Engineering and possibly Singapore-based Jurong Shipyard for further price talks following an enquiry earlier this year.

The trio may have pulled ahead of other competing yards because of their track records in semi­sub construction.

Cosco emerged as the strongest Chinese contender, drawing on the delivery of the Island Innovator, whereas its compatriot CIMC Raffles was said to have dropped out due to the multiple delays in delivering three semisubs originally placed by Awilco Offshore.

Awilco Offshore subsequently sold out the three CIMC semisubs to China Oilfield Service Ltd, but several members of its management team are now sitting on the Awilco Drilling board.

The shortlisted contenders were challenged to matching an asking price of under $600 million apiece for a potential newbuild order on one firm semisub plus options for up to two further rigs.

It is unclear if the set budget excludes any owner furnished equipment, but some industry estimates for the high specification CS50 design unit have come in at about $700 million.

The newbuild contract is also expected to be premised on 20:80 payment terms or better.
Quote

Awilco eyes newbuilds

Awilco Drilling is reportedly looking to order up to three North Sea capable semi-submersible drilling rigs.


Awilco Drilling's WilPhoenix

The Oslo-listed company is said to be in discussions with three Asian shipbuilders, reports TradeWinds’ sister publication Upstream.
The drilling contractor is understood to said to have sounded out the market for a Moss Maritime CS50 design unit.
Cosco Shipyard, Daewoo Shipbuilding & Marine Engineering and possibly Singapore’s Jurong Shipyard are said to be in the running for the $1.8bn deal.
Upstream says the trio have pulled ahead of their competing yards because of their track records in semi-sub construction.
The deal, if it proceeds, is said to be for one firm order plus two options with deliveries set for the end of 2016.
Awilco chief executive Jon Oliver Bryce downplays any talk of newbuildings, but is quoted as saying that the company was “evaluating growth opportunites”.
Awilco currently operates two 1980s-built Pacesetter design semisubs, which are fixed on charters for work off the UK.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on September 05, 2013, 08:34:00 PM
Though AWILCO's July rebuttal was a strong no, I agree that the continued raising of the new rig construction issue is unsettling.

In the process of looking for more info I stumbled across the following article about a successful Norwegian investment manager courtesy of Google Translate.

http://www.hegnar.no/analyser/aksjetips/article740373.ece
Ex-analyst Aasulv Tveitereid and Jørgen Stenshagen the last three years earned 300 million for Sten Egil Hagen investment company. Tveitereid argue that much of the success has been to stay away from oil, with the exception of Awilco Drilling, Finance writes newspaper.

article contines at:
http://www.dn.no/forsiden/borsMarked/article2539845.ece



Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 05, 2013, 09:20:03 PM
Though AWILCO's July rebuttal was a strong no, I agree that the continued raising of the new rig construction issue is unsettling.

In the process of looking for more info I stumbled across the following article about a successful Norwegian investment manager courtesy of Google Translate.


Good catch, very interesting!  I've personally done well with Awilco and it has grown to be my second largest holding.

I am somewhat skeptical of the reports of them negotiating to get THREE new rigs.  Well, technically I guess it is ONE rig and options for two more builds.

My preference would be for Awilco simply to manage the two existing rigs and maximize the cash flow....

HOWEVER, let us think about this possible scenario:

Management probably knows many things that we don't know as investors...Perhaps it is almost certain that the option will be extended for WilPhoenix?  If so, cash flow is going to be EXTREMELY strong.

Further, cash flow is going to be going up for sure about $150k a day in late 2014.  That will translate into about an extra $50MM per year in additional cash flow.  That would go nicely towards paying down debt on an additional rig.  The additional incremental cash flow might support purchase of a new rig.

Presumably a new rig is going to be cash flow positive on it's own.

Could it be that Awilco is likely to have it already placed?

What if Awilco can get EXTREMELY advantageous financing?  What if a Chinese yard will build for only 10% down (or even 5%) and carry most of the rest? 

There have been rumors the Chinese government is running shipyards at a LOSS in order to maintain employment...Could that be the case here?

So far management has been very adept at purchasing the rigs, refurbishing them, placing them, and distributing cash flow.  I just can't see management losing their minds and blowing it all on a foolish building program.

If Awilco can get a good price on a new rig, get it financed right, and get it placed, AND MAINTAIN THE CURRENT DISTRIBUTION, why not?

Management has a good track record...I just can't see them blowing it all.

We will see.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on September 06, 2013, 11:57:33 AM
Good points DTEJD.  From my own perspective, I can see what the business case may be to lead them to pick up another rig.  My own personal preference is just for thesis simplicity: wait for the yield to compress, then move on.

I know this is completely qualitative, but the tone and language they used on the conference call, when they described how they would approach growth opportunities from a shareholder value point of view, give me some confidence that they will be good stewards of shareholder capital.  They expressed the thoughts in a way that those who "get" capital allocation usually do.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on September 12, 2013, 08:55:16 AM
Just got off the phone with CFO

1. He stated that there is no truth of the Upstream rumor that they are close to acquiring rigs.  He says that Awilcos look at acquisitions, but they are nowhere near signing a contract with the Chinese yards.  He expressed concerns of the Chinese yard's equipment from a liability perspective.  They prefer South Korean and Singapore rigs.  I pressed him and asked him what would get them to pull the trigger, is it a certain IRR, having a contract in place, cheap financing, etc.  He said that there is a matrix of factors, but the best way to describe everything would be "opportunistic".  From the tone of voice, does not seem like they are interested in buying new builds. 
2. Dividend continuity - He views dividend continuity as very important.  In case they do make an acquisition, they will still want to continue paying a dividend.  Although, he can't guarantee they can maintain 100% of the current amount.
3. Hand off of WilPheonix from Premier to Apache/Tataq - There will be no gap from May to Nov 2014.  If Premier does not exercise its option, they will hand off the rig to Apache/Tataq creating no gap in between.  Premier is subletting the rig and Awilco gets to participate in the delta of the dayrates during the sublease. 
4. Insurance - Each rig is insured for $260mm for catastrophic loss.  There is also insurance in place against (I guess) mechanical downtime with 45 day deductible and up to 120 days reimbursement. 
5. Barriers to Entry - It could cost 120-150mm per rig for existing rigs outside of the UK market to be modified and moved to the UK market.  There will also be a cost of mobilizing the rigs.  Companies need a huge contract in place in order to pay for this upgrade and the mobilization cost. 
6. 2015 Inspection and Cap Ex - Each rig needs about 60 days off time and $20mm (TBD when in yard) of inspection/cap ex cost
7. Competitiveness Vs other equipment in UK market - Believes that their rigs are more competitive than others given their recent upgrades and the contract wins. 
8. Arrival of new equipment/higher specs - At least 3 years out, definitely by the next 10 years.  Will add dayrate pressure on Awilco's existing equipment.
9. What keeps him up at night - Not market outlook but personnel and employee turnovers. 
10. Ability of customers to break contract - He stated that these contracts are firm and the customer cannot back out of them in case of a softer market. 

Overall summary - Seems like the Upstream rumors are false (especially given the liability comments regarding Chinese rigs).  Dividends should be safe for the next 2 years unless they make an acquisition.  Also, catastrophe is not as bad as we thought it will be.         
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on September 12, 2013, 09:03:28 AM
Thanks for the update :)
Title: Re: AWLCF - Awilco Drilling
Post by: matts on September 12, 2013, 11:07:51 AM
Thanks BG2008. I really appreciate you taking the initiative and sharing this kind of information and I'm sure others keeping up with the company/thread do as well.

Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 12, 2013, 11:28:26 AM
BG2008:

Excellent work!  This is EXACTLY what makes this board so good.  I thank you and wish I could give you a "thumbs up".

What you found out confirms most of what I have heard/concluded.

These guys are sharp operators and are not going to do anything foolish.

Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on September 12, 2013, 11:39:33 AM
Just want to add color to Point 5 regarding Barrier To Entry - In short, barrier to entry relates to entry of existing rigs outside of the UK market.  There is no barrier of entry to new rigs as New builds will build them to UK specs.   
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on September 12, 2013, 06:53:21 PM
MVP--> BG2008
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 13, 2013, 12:43:44 PM
Wow! Excellent post BG2008!

So much of the uncertainty regarding the future (within Awilco's control) has been dissipated.

FYI for those who didn't read the thesis from an analyst who covers this industry - http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/92071 (http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/92071) (comments too).
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 16, 2013, 08:32:54 PM
I would be VERY surprised if there was any substantial short volume in Awilco.

It could be that there is some type of arbitrage going on between Oslo and the shares traded in USA.

Perhaps somebody is shorting it as part of a tax strategy.

You would have to have a death wish to short a stock with a 20%+ yield that is earning $4/share and has cash flow of $5+ share that is trading for under $20.  A substantial short interest just does not make any sense.  You want to short fraud companies with weak financials.

Or maybe they are speculating that is has run up quite a bit and a pullback is immanent, or maybe the yield is not sustainable.  If I were going to short, Awilco would be one of the last ones on my list!
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on September 17, 2013, 02:07:31 AM
My guess would be that the short volume is created when people buy Awilco in the US from a market maker. He will buy shares, or already own shares, in Oslo to create the ADR's.
Title: Re: AWLCF - Awilco Drilling
Post by: matts on September 17, 2013, 05:10:12 AM
Yeah, it's almost certainly "listing" arbitrage. The big players do it all day long (via HFT algos). That is why something like Blackberry is the same value in both the US and Canada.

Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on September 19, 2013, 11:51:48 AM
I’m new to this site and this is my first post.  I follow AWILCO and have read all the posts.

Most of what was stated from a management contact in a recent post was also stated to me in my recent conversation with management.  The comment about their dividend policy was identical.  However there are some differences and additional color which may interest some that like to get deep in the weeds.

I was told their 5 year survey costs would be $25mm as opposed to a previous post where it was reported as $20mm/rig.  Have no idea which is correct, but in the absence of clarification it seems safer to go with the higher number. 

I also got some additional color on how they might use a $600mm new build rig, if something like this were ever to materialize.  Normally I would think of a $600mm rig as used in deep water.  However they have no plans at all to go beyond mid depth as deep water exceeds their expertise.  There are however harsher mid depth conditions west of the Shetland islands that would need the capabilities of a rig that would cost ~$600mm.  Such a rig would have a day rate of $425-450,000.  Doing some rough calculation the addition of one such rig would bring DCFPU to around $5.00/share.

If they were to buy such a rig they believe, with the backing their company has, they would be able to accomplish the necessary financing that would consist of favorable terms from the yard including back loaded payment terms, as well as both equity and debt financing.  They would reduce, but still maintain the dividend.  It was clearly emphasized there are no plans in place for this and that entering the new harsher environment represented additional risk for the company and they are very risk averse by nature.

My take is they evaluated such a situation, but there are no plans at this time to proceed with such a plan.

Based on what I see, AWILCO offers an opportunity to earn 17-18% yield over the long term with the current two rigs, as well as some appreciation potential, and a free option for additional growth in rigs that would bring a higher normalized long term yield.

Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on September 20, 2013, 07:12:10 AM
Management told me that the true cost will be determined once the rig is in the yard.  I think 20 vs 25 are all reasonable figures. 

Can you go into the specifics of the financing of a $600mm newbuild?  How much down? what's the lead time? Cost of debt?  I'm surprised that the dayrates are 425-450k.  Given that the existing two rigs are in the high 300s. 

Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on September 20, 2013, 04:00:59 PM
According to management each yard has different terms which run the gamut.  Their goal would be to pay as little as they could up front and pay as much as they could on delivery within the parameters of a good price.

The $600mm rig would be designed for the harsher conditions west of the Shetlands and that would have the $425-450k dayrates.  The current day rates of ~$385,000 are not for a rig designed for those harsher conditions.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on September 23, 2013, 04:17:15 PM
The dividend just appeared now at Fido. Still no sign at TD Ameritrade.

Currency/Market Maker slippage was 1.1%.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 23, 2013, 06:21:27 PM
The dividend just appeared now at Fido. Still no sign at TD Ameritrade.

Currency/Market Maker slippage was 1.1%.

Fidelity shows two dividends so far this year for yield of ~11%

By slippage you mean the difference between the OsloBors price (converted to USD) and OTC price?

Thanks for posting.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on September 23, 2013, 08:15:45 PM
Frictional costs is probably a better term than slippage, but yes it is the difference between the $1USD dividend that was declared and the amount you receive.   If you own the stock direct in Oslo, you get the $1USD worth of Krone per share at the exchange rate on the day it was paid.  If you own the pink sheet, awlcf, the bank that creates the ADR charges a little and also takes a bite out of exchanging the krone for USD.

Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on September 24, 2013, 09:49:38 AM
I'm baffled by the difference between this distribution and the previous distribution. I got about $0.99437 this time in my Scottrade and $0.9961 in my etrade.  The last dividend was about $0.95

Thoughts?
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on September 24, 2013, 09:55:49 AM
I guess that ADR fees got deducted from the first dividend, but not from the second, but since I own the stock in Oslo I haven't looked into this.
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on September 26, 2013, 01:12:32 PM
I just bought a starter position.  Thanks for all for bringing up this name.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: matjone on September 26, 2013, 01:36:41 PM
I am wondering if this dividend is sustainable.  Do you guys think they can keep earning such a high operating margin?  When I was looking at this they were  more expensive on an EV/sales than more established companies like noble and transocean.  But it is tempting to jump in - if they keep up this dividend it's like a 20% yield.

I think there must be something I am missing because people a lot smarter than I am are in this.  I guess I am a scaredy cat.
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on September 26, 2013, 01:44:51 PM
I think it is sustainable until at least 2018.  There is another offshore leasing firm (Northern Offshore) that appers to have a similar strategy in terms of distributions which is not fully leased and it has a dividend yield of 12.6%.  Given the lease rates and types of equipment (Jackups versus platforms) it looks like older equpment than AWLCF.  If AWLCF had the same yield, it would be up by 71%.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 26, 2013, 02:20:03 PM
I am wondering if this dividend is sustainable.  Do you guys think they can keep earning such a high operating margin? 

Under normal operating conditions, I don't think there is any question that the dividend is sustainable...There is a strong likelihood that it will be RAISED at some point in the near future.  Daily rates on their rigs will be going up next year.

They have long term, signed contracts with major companies.

You can also check rig availability in the North Sea, and it is very tight for the next few years. There is very little spare capacity, almost all rigs are under contract.

Could new rigs be built and brought in?  Yes, absolutely!  However, that will almost certainly not happen in the next year or so, as it takes a long time to build rigs.  Three years from now?  Who is to say?  Another factor is that most NEW rig construction is for ultra-deep water rigs.  These rigs are so expensive, they ONLY make sense to deploy in the deepest waters where they can earn the highest rates.  They will most likely NOT be moved into this market, thus we've got a somewhat protected niche.

There are some risks however:

A). Management could go crazy and order a fleet of new rigs to be built.  I think this is VERY low probability.  These guys are sharp, disciplined operators.  I think there is a chance they might order a new rig at some point in the future.  These guys have made the right decisions in the past, and I trust them to make the right decisions in the future.

B). There could be a catastrophic loss.  Possible, but low likelihood.

C). There could be unforeseen mechanical breakdown or problems, OR maintenance and retrofitting could cost significantly more than is expected.

D). There could be an economic collapse, or oil price collapse.

So there are some risks, but I think they are small.  The dividend, of which I've collected two, is rapidly providing a HUGE margin of safety.

As some many other capable commenters have pointed out, once it becomes more commonly known that Awilco is paying out such a high dividend, it will re-rate higher.  We've seen this happen since I started this thread.  I believe it has a LONG way to go, especially when higher day rates kick in/and/or the dividend is raised to $1.20/share per quarter.

What will Awilco be paying out in 2018?  I don't think anybody can make anything but an educated guess, but I am going to guess that it will be something.  I also think it will be at least 50/50 chance to be the same or higher than what it is now.

As time has progressed, I have become more comfortable with my position.  If the price goes down, I'll be adding to my position.
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on September 26, 2013, 02:25:47 PM
I agree the dividend has some upside by my calc it is close to $1.17 per quarter based upon FCF estimate of $141.4 million with a $385,000/day rate.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 26, 2013, 04:53:05 PM

Excellent post as usual, DTEJD1997. Obviously the company, being in the business of drilling rigs, will have operational risks (catastrophe, downtime, oil price volatility, etc). However, the performance risk has been drastically reduced due to signed contracts and the management's assurance to pay out cash flow as dividend.

If you look at the activity in OsloBors (http://oslobors.no/ob_eng/markedsaktivitet/stockOverview?newt__ticker=AWDR (http://oslobors.no/ob_eng/markedsaktivitet/stockOverview?newt__ticker=AWDR)), there has been quite a bit of, consistent selling around 110-112 NOK. I wonder who it is and why they'd want to part with this company at such a price.

Comparing the shareholder data (http://www.awilcodrilling.com/6667-Shareholders (http://www.awilcodrilling.com/6667-Shareholders)) to the last quarterly report reveals that Stenshagen Invest AS, Odin Offshore, Storebrand Verdi, Varma Mutual Pension Insurance and KLP Aksje Norge have reduced their holdings.


I think we can draw SOME conclusion from the fact management is very experienced in this line of business and the fact that they bought these rigs in a distressed situation . Also that their parent firm owns almost 50% of the common so I'd assume a big decision like committing to buy a new rig would have to be approved by their parent (?)
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on September 26, 2013, 05:35:06 PM
I think it's a safe bet that a big decision like a new rig isn't going to be made without an ok from the parent (the CEO and COO of the parent are on the Awilco Drilling board)
Title: Re: AWLCF - Awilco Drilling
Post by: CanadianMunger on September 26, 2013, 05:43:06 PM
I'm trying to understand how management interests are aligned with shareholders here. 

Why would they essentially put the business into runoff for the next x years and pay out practically everything?  At the end of the day, doesn't that leave them with 2 scrapped rigs and put them out of a job?  What am I missing here? :)

-CM
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 26, 2013, 07:26:44 PM
I'm trying to understand how management interests are aligned with shareholders here. 

Why would they essentially put the business into runoff for the next x years and pay out practically everything?  At the end of the day, doesn't that leave them with 2 scrapped rigs and put them out of a job?  What am I missing here? :)

-CM

Well yes, I suppose if they never buy another rig, these two will eventually wear out, and they will be out of a job.  HOWEVER, there is some amount of debate about how long that will take.  However long it will take, will be a long time, a very long time.  There have been some estimates that the rigs will last another 20 years, perhaps more.

So these guys may be in business for another 20 years or so.  I imagine that would probably take them into retirement, or close to it.

That is also assuming that there will never be another purchase of a rig...
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on September 26, 2013, 07:33:10 PM
Maybe they are opportunistic buyers and when the price of rigs is high they collect cash flows and when it is low they buy rigs.  This was also a one-off situation where Transocean was forced to divest rigs and management may be viewing this as one-time good deal and using the cash flows to build new rigs may not provide as good a return as collecting the cash flows from the existing rigs.  I think the alignment comes in from the parent owning 50% of the equity and the CEO of the parent is CoB of Awilco.  If you look at the parent (Awilhelmsen Group) it has an interesting history and looks like they focus on shipping, real estate and other investments.  This is their first entrance into drilling.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: plato1976 on September 26, 2013, 10:45:13 PM
The only concern is this is basically a liquidating case (although in a really long period):

I think in 4-5 years we will get back our investment from dividend;
and then we may have another 10 years as "bonus"
In overall, the discounted cash flow value should be higher than the current share price -
but if there is any chance these rigs will be discarded earlier than expected - the value will be much smaller. I will feel more comfortable if this business is more durable ..., or if we can buy it at below 3 FCF... Still not cheap enough for me

Maybe they are opportunistic buyers and when the price of rigs is high they collect cash flows and when it is low they buy rigs.  This was also a one-off situation where Transocean was forced to divest rigs and management may be viewing this as one-time good deal and using the cash flows to build new rigs may not provide as good a return as collecting the cash flows from the existing rigs.  I think the alignment comes in from the parent owning 50% of the equity and the CEO of the parent is CoB of Awilco.  If you look at the parent (Awilhelmsen Group) it has an interesting history and looks like they focus on shipping, real estate and other investments.  This is their first entrance into drilling.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on September 27, 2013, 04:02:49 AM
Where else are you going to find an investment that is selling for 3x FCF and has a recurring revenue stream for more than 10 years?   I think the liquidation case is the worst case and has a remote possibility of occurring (only if oil prices decline alot like below $60/barrel).  What factors do you see that could cause a liquidation?

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on September 27, 2013, 11:03:23 PM
So if the dividends are so good why doesn't the parent company just keep it - rather than let it go public???? 

Where else are you going to find an investment that is selling for 3x FCF and has a recurring revenue stream for more than 10 years?   I think the liquidation case is the worst case and has a remote possibility of occurring (only if oil prices decline alot like below $60/barrel).  What factors do you see that could cause a liquidation?

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 27, 2013, 11:22:30 PM
So if the dividends are so good why doesn't the parent company just keep it - rather than let it go public???? 

A very good question!

I imagine that if Awilco ALWAYS trades for a 22% yield and a 4.5 P/E, the parent company has probably made a mistake...

If Awilco drilling is eventually rerated for an 11% yield (or even lower) and a 10,11, 12 P/E, it might make sense to issue more equity to buy another rig(s).  Issuing more equity would be a good thing for us shareholders who got in at $15/share or even lower ;D

issuing more shares at $40/share would be great.  Management may want to tap into the equity markets in the future.


Title: Re: AWLCF - Awilco Drilling
Post by: plato1976 on September 28, 2013, 04:40:15 AM
sure I agree it 's a pretty good opp from the perspective of discounted cash flow - maybe a double
just some concern:

1. their rigs seem old (just "renovated"). So if the rig supply is not tight ppl may prefer using brand new rigs in the future. However the supply is tight at this time. And seems it will continue for a few years at least

2. Sth like ALSK also has an expected FCF around 3x or less multiple in a few years, and it has a more stable recurring revenue down the road ?


Where else are you going to find an investment that is selling for 3x FCF and has a recurring revenue stream for more than 10 years?   I think the liquidation case is the worst case and has a remote possibility of occurring (only if oil prices decline alot like below $60/barrel).  What factors do you see that could cause a liquidation?

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on September 28, 2013, 07:44:09 AM
I think the issue is there are no new rigs for rent at the same cost as these.  New rigs cost $500k per day versus these at $385k/day. 

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 28, 2013, 10:29:37 AM
What I want to know is why isn't management BUYING BACK SHARES at these prices?
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on September 29, 2013, 06:18:37 AM
One observation I had is thing has huge operational leverage.  This may explain why it is trading at a cheap valuation based upon current pricing.  I ran a case where the rig renewal price was $275,000 per day (the non North Atlantic average - see referenced slide presentation pg 15).  If that is the case, the FCF goes to $2.30 per share per year (or a 12.4% on current price).  The market appears to be pricing this firm on that basis.  Does anyone have a reason to why the North Atlantic pricing should not revert to the current non-NA mean?  At the WW price, this is priced cheaply but not the steal it is at the current North Atlantic pricing.

Packer

http://hugin.info/136777/R/1724769/574992.pdf
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on September 29, 2013, 07:09:58 AM
Does this explain it?

http://247wallst.com/energy-business/2012/10/02/demand-for-midwater-rigs-to-rise-rig-do-esv-ne/


http://gcaptain.com/north-rates-push-higher-midwater/
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on September 29, 2013, 08:59:07 AM
The market appears to be pricing this firm on that basis.  Does anyone have a reason to why the North Atlantic pricing should not revert to the current non-NA mean?
I think it's just a coincidence that the current market price matches that assumption. It wouldn't make sense if that is indeed the reason; 1. the company has locked in high rates for the next couple of years 2. this also implies that the market doesn't expect that rates go down anytime soon otherwise you wouldn't lock in high rates as a buyer.

What will happen to rates in the (far) future is anybodies guess. There is no easy arbitrage to profit from higher rates in the north sea because moving a rig from the other side of the world and upgrading it to the north sea specific regulations is a very expensive job. But if rates stay high relative to other area's I'm sure it's going to happen and if supply increases it would be logical to see rates go down.
Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on September 29, 2013, 11:47:44 AM
In response to the question about why this is a public company - it is the only way management and its principal shareholder can grow the company and pay a current distribution without their funding future growth themselves.

The biggest threat to the mid depth North Sea market is if there is any real weakness in the deep water market which would create a surfeit of rigs looking for a home.  These would naturally step down to the mid depth market creating pressure on dayrates in the North Sea.  That's the market risk for AWLCF imo.
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on September 30, 2013, 04:46:51 PM
I have a couple of questions - I was wondering if someone following the thread knows the answer:

1 -- How much oil (barrels?) are they producing per day?  I don't see this being discussed anywhere in the reports; just like to get a sense of the economics here.

2 -- Why is the company incorporated in the UK instead of Norway ? 

3 -- I noticed the Wilphoenix rig has a 180 day options contract starting May 2013   and Wilhunter has 275 day option starting Dec 2015 -  does anyone know if those options have been firmed up or still options at this point?  Assuming the market is not strong next year, there would be quite a bit of un-utilized time for the rigs.  Is this reflected in the share price or is the market thinking this will get exercised with high degree of certainty.

thanks
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 30, 2013, 06:44:32 PM
I have a couple of questions - I was wondering if someone following the thread knows the answer:

1 -- How much oil (barrels?) are they producing per day?  I don't see this being discussed anywhere in the reports; just like to get a sense of the economics here.

2 -- Why is the company incorporated in the UK instead of Norway ? 

3 -- I noticed in the Wilphoenix rig has a 180 day options contract starting May 2013   and Wilhunter has 275 day option starting Dec 2015 -  does anyone know if those options have been firmed up or still options at this point?  Assuming the market is not strong next year, there would be quite a bit of utilized time for the rigs.  Is this reflected in the share price or is the market thinking this will get exercised with high degree of certainty.

thanks
Regarding #3:

"Hand off of WilPheonix from Premier to Apache/Tataq - There will be no gap from May to Nov 2014.  If Premier does not exercise its option, they will hand off the rig to Apache/Tataq creating no gap in between.  Premier is subletting the rig and Awilco gets to participate in the delta of the dayrates during the sublease. " Source (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/awilco-drilling-(awlcf)/msg131784/#msg131784)
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 30, 2013, 06:51:19 PM
I have a couple of questions - I was wondering if someone following the thread knows the answer:

1 -- How much oil (barrels?) are they producing per day?  I don't see this being discussed anywhere in the reports; just like to get a sense of the economics here.

2 -- Why is the company incorporated in the UK instead of Norway ? 

To my knowledge, AWILCO produces NO barrels of oil.  They are simply a leasing company.  They have no interest in oil production or leases.  They lease their rigs to oil companies who produce the oil.  I further believe that one of the rigs is not actually drilling or producing oil, it is capping off wells that are no longer economically viable.  I believe it is also involved in maintenance on well heads & such.

I also believe that AWILCO is incorporated in the UK for tax purposes.  They have tax incentives for oil production.  I would also suspect that being incorporated in Britain my help with licensing & such?
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on September 30, 2013, 06:54:04 PM
Thanks - I had suspected they were probably just renting the rigs out but wasn't sure - 

I mean 'contract drilling' implies they are hired to drill and have a day rate of x.....

I have a couple of questions - I was wondering if someone following the thread knows the answer:

1 -- How much oil (barrels?) are they producing per day?  I don't see this being discussed anywhere in the reports; just like to get a sense of the economics here.

2 -- Why is the company incorporated in the UK instead of Norway ? 

To my knowledge, AWILCO produces NO barrels of oil.  They are simply a leasing company.  They have no interest in oil production or leases.  They lease their rigs to oil companies who produce the oil.  I further believe that one of the rigs is not actually drilling or producing oil, it is capping off wells that are no longer economically viable.  I believe it is also involved in maintenance on well heads & such.

I also believe that AWILCO is incorporated in the UK for tax purposes.  They have tax incentives for oil production.  I would also suspect that being incorporated in Britain my help with licensing & such?
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 30, 2013, 10:52:39 PM
I have a couple of questions - I was wondering if someone following the thread knows the answer:

1 -- How much oil (barrels?) are they producing per day?  I don't see this being discussed anywhere in the reports; just like to get a sense of the economics here.

2 -- Why is the company incorporated in the UK instead of Norway ? 

To my knowledge, AWILCO produces NO barrels of oil.  They are simply a leasing company.  They have no interest in oil production or leases.  They lease their rigs to oil companies who produce the oil.  I further believe that one of the rigs is not actually drilling or producing oil, it is capping off wells that are no longer economically viable.  I believe it is also involved in maintenance on well heads & such.

I also believe that AWILCO is incorporated in the UK for tax purposes.  They have tax incentives for oil production.  I would also suspect that being incorporated in Britain my help with licensing & such?

Just to be clear, that while it's incorporated in UK, Awilco's effective tax rate is nowhere near UK's statutory corporate tax rate. I assume that any/all assets of Awilco (such as the rigs themselves) that could been domiciled offshore have been. And they ought to...their parent company which is proficient in shipping and cruise business is no stranger to tax avoidance!
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on October 01, 2013, 05:07:27 AM
I have a couple of questions - I was wondering if someone following the thread knows the answer:

1 -- How much oil (barrels?) are they producing per day?  I don't see this being discussed anywhere in the reports; just like to get a sense of the economics here.

2 -- Why is the company incorporated in the UK instead of Norway ? 

To my knowledge, AWILCO produces NO barrels of oil.  They are simply a leasing company.  They have no interest in oil production or leases.  They lease their rigs to oil companies who produce the oil.  I further believe that one of the rigs is not actually drilling or producing oil, it is capping off wells that are no longer economically viable.  I believe it is also involved in maintenance on well heads & such.

I also believe that AWILCO is incorporated in the UK for tax purposes.  They have tax incentives for oil production.  I would also suspect that being incorporated in Britain my help with licensing & such?

Just to be clear, that while it's incorporated in UK, Awilco's effective tax rate is nowhere near UK's statutory corporate tax rate. I assume that any/all assets of Awilco (such as the rigs themselves) that could been domiciled offshore have been. And they ought to...their parent company which is proficient in shipping and cruise business is no stranger to tax avoidance!
Correct. The two rigs are owned by subsidiaries in Malta, and the effective tax rate of the company is around 6~8% or so.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 07, 2013, 12:44:11 AM
Like an automatic DRIP set up through a broker? Because I don't believe it'd be possible since it's a foreign listed, illiquid or trades on a major US exchange.

Of course each brokerage sets its own rules so you'll just have to double check with your broker. In the meanwhile, where's a chart I found:


(http://i.imgur.com/Gx4Og0y.png)




BTW - has anyone spoken to management about if they would engage in share buybacks at some price/time?


TIA.
Title: Re: AWLCF - Awilco Drilling
Post by: roughlyright on October 07, 2013, 12:17:11 PM
Hello all,

  I am trying to read this article about Awilco at Seeking Alpha. IF any one has access to the SA Pro can you post it here or atleast PM this to me?

  http://seekingalpha.com/article/1656072-awilco-drilling-a-sustainable-22-dividend

  Greatly appreciate your help

 Rouglyright
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 09, 2013, 11:55:49 AM
Heavy buying/volume in Oslo (14M Krone) with fewer sellers. We may be setting up for a run:

(http://i.imgur.com/eImN5yF.png)
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on October 18, 2013, 12:33:17 PM
I'm wondering if anyone has thought about the replacement cost of Awilco ... How much would it cost someone to come up with two old rigs and get to the same earnings level at less than 500M? Tia
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 18, 2013, 12:37:07 PM
I'm wondering if anyone has thought about the replacement cost of Awilco ... How much would it cost someone to come up with two old rigs and get to the same earnings level at less than 500M? Tia

I think the question is who'd want to sell for economical reasons? If the day rates are high and increasing, they'd rather keep it for themselves unless forced by Government/regulator to divest (which is what happened with Transocean).

One would just have to buy a new rig, then?
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on October 18, 2013, 12:42:53 PM
So two new rigs cost more than 500M ? (Awilcos MC)
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on October 18, 2013, 04:10:44 PM
I'm wondering if anyone has thought about the replacement cost of Awilco ... How much would it cost someone to come up with two old rigs and get to the same earnings level at less than 500M? Tia

The replacement cost is quite high...but there are several factors in addition to that:

A). It is not quite as simple as pulling rigs from other parts of the world.  It is possible to do that, but you would have to bring it into the yard for maintenance, retrofitting and strengthening.  The North Sea is a harsh environment and rigs have to be upgraded to work there.  That costs money, but it also costs TIME.

B). Moving the rig costs a substantial amount for the tugboat rental and also 2-3 months of time.

C). You have to have certifications & permits to work the North Sea.  Not impossible to get, but Tom, Dick, & Harry aren't just going to sail into the North Sea and start drilling.  This is also take some amount of time & money.

D). New rigs cost $500MM+  The highest best use of them is to be put into the extremely deep waters that they are designed to work in, not the North Sea area that Awilco is working in.

So the end result is that you have somewhat of a protected market in the North Sea.  Awilco management got LUCKY, but they also had the foresight and patience to target this market.

The end result is that there could be competition brought in, but it might take competition a year to get ready and get into the market.  What competitor is going to spend the money and a year's time to get in the market?  A limited amount...
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 20, 2013, 11:33:02 PM
AWDR - Letter of Award accepted from Premier Oil
Awilco Drilling PLC has accepted a Letter of Award (LOA) from Premier Oil UK Limited relating to the 250 days of options in the contract announced on 7th May 2012. The total exercised option period will now extend until completion of the 2014 drilling program or 31st October 2014, whichever comes earlier, but will be not less than 140 days. The previously declared 70 days of this option has been extended to 80 days. The additional term of the option period will have a minimum value based on a 60 day duration of USD 26.6 million and a maximum value of USD 73.0 million. The exercised option period is expected to commence early March 2014. There are no further options under this contract.

WilPhoenix is one of Awilco Drilling's two Enhanced Pacesetter semi-submersibles and is equipped for drilling in water depths up to 1,200 ft.

Aberdeen, 21 October 2013

For further information please contact:

Jon Oliver Bryce, CEO
Phone: +44 1224 737900

Cathrine Haavind, IR Manager
Phone: +47 93 42 84 64

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

Source: http://www.awilcodrilling.com/4142-Financial-News-Message?msg=http://cws.huginonline.com/A/147077/PR/201310/1736804.xml (http://www.awilcodrilling.com/4142-Financial-News-Message?msg=http://cws.huginonline.com/A/147077/PR/201310/1736804.xml)
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 21, 2013, 12:24:35 PM
Double average volume in the US, huge divergence between oslo and the adr.  Stock finally getting attention from retail or institutions?

Yeah I noticed. Maybe. There was huge volume in oslo too. What I want to know is who the hell is selling at these prices, and why?
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on October 22, 2013, 06:00:20 PM
Who is selling is a good question,

People who bought to hold for the dividend wouldn't sell unless the dividend is at risk.
People who bought for the stock to reprice to account for the  new dividend would stay until the yield drops some more.
People who thought something bad was in the works wouldn't wait until a new high to sell.

This leaves

People who bought really low and just want to lower their weightings of AWILCO in their portfolio.
People  who are hedging and not really selling AWILCO by itself but as part of a package of stocks.
Firms which have a really small percentage investment in AWILCO and just want to clear the position from their portfolio.
And other reasons I am sure,

but none of them strike me as based on the economics of AWILCO itself.











Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on October 22, 2013, 06:22:47 PM
How about just the concern of a correction of the market in general and any economic turn will likely have an impact

Who is selling is a good question,

People who bought to hold for the dividend wouldn't sell unless the dividend is at risk.
People who bought for the stock to reprice to account for the  new dividend would stay until the yield drops some more.
People who thought something bad was in the works wouldn't wait until a new high to sell.

This leaves

People who bought really low and just want to lower their weightings of AWILCO in their portfolio.
People  who are hedging and not really selling AWILCO by itself but as part of a package of stocks.
Firms which have a really small percentage investment in AWILCO and just want to clear the position from their portfolio.
And other reasons I am sure,

but none of them strike me as based on the economics of AWILCO itself.
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on October 22, 2013, 06:52:42 PM
Given the nature of the contracts, I don't think a slowing economy will have an impact until contract renewal in 2018.  These guys do have a different model than others in the industry and plan on maximizing distributable cash flow without buying new rigs.  Similar to a royalty trust versus an operating E&P company.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 22, 2013, 07:17:17 PM
Just in general, based on my observations, I think most investors first consider selling stocks in their portfolio that are above fair value or close to fair value.

I think Awilco is one of the most attractive stocks I can find in the market today and I think a lot of holders would agree with me. For this reason, I don't believe it's at a risk of a nasty selloff like some other stocks.

That said, obviously there are no guarantees. Oil could tank to $50/barrel causing lessee to flee. And speaking of a breach, what is usually the outcome of such breaches? Since rigs are normally leased to the big boys of E&P, would Awilco be able to recoup their contractual revenues? Or just a fraction of it, in a settlement?
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on October 22, 2013, 09:56:38 PM
I would not be worried about breaches under most reasonable economic circumstances, even if oil went to $50/barrel.  If oil went to $10 or $20 barrel, we are going to have problems...

The companies Awilco is working with have assets that can attached in case of lawsuit.  The only problem would be if the go bankrupt, or almost so...So even if oil went down $20 or $30 a barrel I don't think there is an immediate problem.

Some of the work the Awilco rigs are doing is maintenance that has to be done no matter what.  For example, capping off old/shutdown wells.

I don't see the price of oil going down too substantially in the next few years.  Big demand from India and China...weakening of the USD...all the "easy & cheap" oil has largely been extracted...

As to people selling...there are probably 1,000 different reasons.  One of the big ones would be that certain funds can't have than a certain percentage in any one position.  Awilco has gone up quite a bit, thus they may HAVE to sell to maintain a position.

Perhaps they are nervous, and book a 75% gain is not a bad thing for them...

I would not be too worried about sellers.

I've been wrong before, but Awilco looks like a pretty good risk/return, even at these elevated levels.

Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 22, 2013, 11:12:33 PM
For those that bought before 2012, they indeed have been sitting on a lot of gains...



(http://i.imgur.com/5rSwpst.png)
Title: Re: AWLCF - Awilco Drilling
Post by: Phaceliacapital on October 24, 2013, 08:31:04 AM
This might explain some part of recent price movement:

http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on October 24, 2013, 08:48:53 AM
This might explain some part of recent price movement:

http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company
Another fine example of how the most promotional and crappy articles make it to alpha-rich on SA...
Title: Re: AWLCF - Awilco Drilling
Post by: klarmanite on October 24, 2013, 09:19:06 AM
Stenshagen Invest (I saw Tveitereid was mentioned earlier on the thread) is out. They bought in at an avg around 30 NOK in late 2011 and exited, included dividends, at 120 recently. Now that's a good investment.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on October 24, 2013, 09:23:09 AM
This might explain some part of recent price movement:

http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company
Another fine example of how the most promotional and crappy articles make it to alpha-rich on SA...

Yeah, pretty random how the guy comes up with $57 p/s. I expected him to underline and bold it given how he wrote the rest of the article.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on October 24, 2013, 10:37:41 AM
Harry Long wrote up Awilco on Sumzero and cited a 7% dividend yield.  While I believe there's still legs for Awilco from current price, a 7% dividend yield on an asset with 18 year life just isn't right.  I was literally on the floor laughing last night when I saw his write up.  I think a price closer to high 20s to $30 is probably fair value when you factor in current dividend yield, expected asset life, future expected dayrate, a healthy discount rate that you feel comfortable with.  Sanity check, 18 year useful life and 13.3% dividend yield.  It implies 7.5 years to get all your money back.  I think that's fair to price in all the potential unexpected unpleasant events.     

If the retail guys want to drive this down to a 7% yield, I'm not gonna wait around to see that happen.  Implicitly, you would be holding a very overvalued security in your portfolio when the stock trades at a 13.3% yield to 7% yield. 

Regarding why people sell in a situation like this.  I would beg to disagree with Buffet and Munger on this a bit.  They tend to stress that trimming position size is downright stupid sometimes if you still believe in lots of upside.  Let's say you had a 5% position that grew to a 20% position or even better a 10% position that grew to a 40% position, you're not sleeping very well knowing that a low probability and high impact event like an explosion can wipe out your entire gain.  Better to trim some and move on.  It's a bit different when you're buying a "good jockey" on a "good horse".  It's hard to sell in that situation as growth and value creation will take care of itself.  Round Tripping is a very painful experience from my personal experience. 

This might explain some part of recent price movement:

http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company
Another fine example of how the most promotional and crappy articles make it to alpha-rich on SA...
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 24, 2013, 10:39:36 AM
Wow nice pump, and agreed his target price is, for the lack of a better term, starry eyed.
Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on October 24, 2013, 06:59:04 PM
Harry Long wrote up Awilco on Sumzero and cited a 7% dividend yield.  While I believe there's still legs for Awilco from current price, a 7% dividend yield on an asset with 18 year life just isn't right.  I was literally on the floor laughing last night when I saw his write up.  I think a price closer to high 20s to $30 is probably fair value when you factor in current dividend yield, expected asset life, future expected dayrate, a healthy discount rate that you feel comfortable with.  Sanity check, 18 year useful life and 13.3% dividend yield.  It implies 7.5 years to get all your money back.  I think that's fair to price in all the potential unexpected unpleasant events.     

If the retail guys want to drive this down to a 7% yield, I'm not gonna wait around to see that happen.  Implicitly, you would be holding a very overvalued security in your portfolio when the stock trades at a 13.3% yield to 7% yield. 

Regarding why people sell in a situation like this.  I would beg to disagree with Buffet and Munger on this a bit.  They tend to stress that trimming position size is downright stupid sometimes if you still believe in lots of upside.  Let's say you had a 5% position that grew to a 20% position or even better a 10% position that grew to a 40% position, you're not sleeping very well knowing that a low probability and high impact event like an explosion can wipe out your entire gain.  Better to trim some and move on.  It's a bit different when you're buying a "good jockey" on a "good horse".  It's hard to sell in that situation as growth and value creation will take care of itself.  Round Tripping is a very painful experience from my personal experience. 

This might explain some part of recent price movement:

http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company
Another fine example of how the most promotional and crappy articles make it to alpha-rich on SA...

Ya I dont think people realize that these are depreciating assets which are being used up. I would buy at 4x CF, but dont think it should sale for 10x cash flow.
None of the drillers trade a significantly high cash flow #s.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on October 25, 2013, 07:14:10 AM
Holy Mother of Jesus!  Awilco traded up to a 52 week high of $25.65! 
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on October 25, 2013, 07:19:58 AM
So people do believe stuff on SA??????
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on October 25, 2013, 07:38:37 AM
There was a 10% rally in the Oslo Exchange at the end of trading in that market today.  Not sure whether the ADR was leading or lagging that. 
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on October 25, 2013, 09:55:31 AM
So people do believe stuff on SA??????

Just hit $26.20. Ridiculous. Up over 20% on the day. I don't know whether to laugh or cry.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 25, 2013, 10:31:25 AM
Wow:

(http://i.imgur.com/4jDSSE0.png)


And why were the shares halted?


http://globenewswire.com/news-release/2013/10/25/583771/0/en/Trading-halt-in-AWILCO-DRILLING-PLC.html (http://globenewswire.com/news-release/2013/10/25/583771/0/en/Trading-halt-in-AWILCO-DRILLING-PLC.html)
http://www.dgap.de/dgap/News/corporate/trading-halt-awilco-drilling-plc/?companyID=10072&newsID=774764 (http://www.dgap.de/dgap/News/corporate/trading-halt-awilco-drilling-plc/?companyID=10072&newsID=774764)
Title: Re: AWLCF - Awilco Drilling
Post by: tombgrt on October 25, 2013, 11:25:42 AM
Lol at Harry Long...

He had some good luck regarding timing with ALSK, VIFL, etc. and now he has enough followers to pump a stock in a matter of hours. He is following CoB&F or Packer like a hawk (or it's all serious coincidence of course!). I thought the forum wasn't worthy of his knowledge but clearly the same isn't true the other way around!

I decided to pass on this one some weeks ago but gratz to those that didn't. One should have known when Packer takes a position in a stock. Her is a little bet: Packer's portfolio return YTD: 100%+, if not double that.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on October 25, 2013, 12:47:15 PM
Hey all:

What a nice day I'm having!

Awilco is of course responsible for most of that!

Certainly Mr. Long's article is responsible for part of that.  While it is a bit simplistic, and somewhat promotional, I am not sure I would categorize it as "pumping scheme" or some other type of fraud.

Awilco is a real, solid company.  It has solid prospects.  It is earning good money and paying a good dividend, unlike some USA megacaps (AMZN I'm looking at you!).  It is funny that AMZN, which is still LOSING MONEY, goes up 10%+ on the same day...

One of the investment thesis for Awilco was that as people learned it's story of earnings, dividends, and future earnings potential, the price would spike.  Mr. Long has most likely piggybacked on some of us here at "The Corner".

I still think Awilco is undervalued, and will eventually trade in the 30's.  I am just surprised it moved this quickly.
Title: Re: AWLCF - Awilco Drilling
Post by: tombgrt on October 27, 2013, 10:56:12 AM
I'm not the one to point fingers (given that I have for example taken a call position before and during the SHLD short squeeze/run up) but is such a thing as "1 year high in google search trends" a relevant metric nowadays? It doesn't even say anything about general bullishness on the stock, just increased interest? Not to mention cause and effect in this instance where the 1 year high is simply set by increased interest exactly because of the rise in the stock price.
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on October 27, 2013, 12:01:39 PM
The author of the SA article brings up some pretty good points but doesn't quantify the probability of it occurring but says if does occur the dividend will decline.  I have tried quantify it a little bit below: 

Although this is a possibility, the bear thesis is dependent upon a rig breaking down so the real question is what is that probability or the implied probability from the current pricing. If we assume a 15-yr life of the remaining rigs, the implied dividend yield at today's price is 16.4% - 6.6% (15 yr amortization) = 9.8%. This is slightly higher than a CCC bond yield. CCCs bond have a cumulative 46% to 50% probability of default over 5 and 10 years. Therefore at current prices, the implied probability of failure is about 50%. To get to a 6 to 7% probability you have to have a BBB rating or a 3.8% yield. This would imply a fair value at 10.4% yield (3.8% + 6.6%) or a price of $38.

I don't know the probability of failure but maybe some here can help with that.  TIA.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on October 27, 2013, 12:37:32 PM
I'm not a rig engineer but could probably ask around. Give me some time.

But as a start. Failure rate will likely has to do with weather and the mechanical equipment on the rig. If the parent company has years of experience in the ocean related industries I think we can expect mechanical failure to be low.

Rig failure due to weather would probably be looking at the probability of 50 year and 100 year storms. I'm not sure what those are at this point, but I'm sure that number can be found after some digging.

One thing for sure. - No engineer in his right mind would let something with a 50% failure rate be out there....

If I have to guess I'd say the acceptable failure rate is in the range of 5% or less




The author of the SA article brings up some pretty good points but doesn't quantify the probability of it occurring but says if does occur the dividend will decline.  I have tried quantify it a little bit below: 

Although this is a possibility, the bear thesis is dependent upon a rig breaking down so the real question is what is that probability or the implied probability from the current pricing. If we assume a 15-yr life of the remaining rigs, the implied dividend yield at today's price is 16.4% - 6.6% (15 yr amortization) = 9.8%. This is slightly higher than a CCC bond yield. CCCs bond have a cumulative 46% to 50% probability of default over 5 and 10 years. Therefore at current prices, the implied probability of failure is about 50%. To get to a 6 to 7% probability you have to have a BBB rating or a 3.8% yield. This would imply a fair value at 10.4% yield (3.8% + 6.6%) or a price of $38.

I don't know the probability of failure but maybe some here can help with that.  TIA.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 27, 2013, 12:44:44 PM
The author of the SA article brings up some pretty good points but doesn't quantify the probability of it occurring but says if does occur the dividend will decline.  I have tried quantify it a little bit below: 

Although this is a possibility, the bear thesis is dependent upon a rig breaking down so the real question is what is that probability or the implied probability from the current pricing. If we assume a 15-yr life of the remaining rigs, the implied dividend yield at today's price is 16.4% - 6.6% (15 yr amortization) = 9.8%. This is slightly higher than a CCC bond yield. CCCs bond have a cumulative 46% to 50% probability of default over 5 and 10 years. Therefore at current prices, the implied probability of failure is about 50%. To get to a 6 to 7% probability you have to have a BBB rating or a 3.8% yield. This would imply a fair value at 10.4% yield (3.8% + 6.6%) or a price of $38.

I don't know the probability of failure but maybe some here can help with that.  TIA.

Packer

I'm not an expert on how bonds are priced, so I'm unable to vet your assumptions, and to that extent - your conclusion, but it does seem logical that if the current price implies 46%-50% of a rig blowup, then we're far from "fair value" yet, because half the rigs in the world simply don't blow up!
Title: Re: AWLCF - Awilco Drilling
Post by: writser on October 27, 2013, 01:15:09 PM
I think that the risk of a platform failing 'completely' is very small and imho I'm not sure it should be the focus of our attention. These things were built to last. I'm willing to accept that in a small percentage of future outcomes a terrible accident will happen and I will lose my principal. But for valuation purposes, is it that relevant?

What I perceive as having a bigger impact on valuation is that, just as with old cars, what will cost you the most in the end is usually not a big crash but all the minor hiccups / parts that have to be replaced every once in a while. If you have to tug your rig back to the 'garage' a few times while it should be generating cashflow it will depress your returns quite a bit. Not sure how to quantify this because I have no clue how robust these platforms are. What is the (un)expected downtime? Maintenance CapEx?
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on October 27, 2013, 01:47:12 PM
All these are risks just like any investment. But the parent company is clearly comfortable with it.

What I am still skeptical of why if this is such a wonderful business why isn't it privately held? Especially when it was a third of the price
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on November 13, 2013, 10:17:53 PM
Here we go...

(http://i.imgur.com/8bTF0Vx.png)



WilPhoenix: Revenue efficiency for the quarter was 97.9%.

WilHunter: Revenue efficiency for the quarter was 99.8%.


In November, Awilco Drilling committed to order a new BOP and associated long lead items for each rig to be integrated at the respective times of the next 5-year SPS’s. The additional cost for the new BOPs and related equipment, including installation and integration, is estimated to be USD 22.5 million per rig. As the Company believes the remaining fatigue life of each rig to be 18 years, he additional investment should maximise the potential service life of the rigs while reducing operational risk and maximising the potential customer base.


More: http://hugin.info/147077/R/1743098/586237.pdf (http://hugin.info/147077/R/1743098/586237.pdf)
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on November 13, 2013, 11:30:48 PM
Well I am glad I'm not the only one who stayed up late to see the report.

Looks like they are RAISING the dividend! ;D

Next dividend is $1.10/share.  Very good to see management is keeping their word and dividending out all the cash flow.

Tremendous earnings for the quarter...probably not going to be able to maintain these utilization rates.

Now, the question is whether Awilco will go UP or do they go DOWN on this report?  Guess we will see!
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on November 13, 2013, 11:56:34 PM
Well I am glad I'm not the only one who stayed up late to see the report.

Looks like they are RAISING the dividend! ;D

Next dividend is $1.10/share.  Very good to see management is keeping their word and dividending out all the cash flow.

Tremendous earnings for the quarter...probably not going to be able to maintain these utilization rates.

Now, the question is whether Awilco will go UP or do they go DOWN on this report?  Guess we will see!

They just continue to deliver...remember how last time people thought that their utilization rate was unsustainable and this quarter they beat that. Reversion to mean is something to keep in mind and I agree that it probably won't much get better than THIS.

What do you make of their decision to order a new BOP? Was it something that was necessary? Or are they forward-looking and trying to proactively keep the quality/condition of the rigs in pristine condition?
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on November 14, 2013, 02:09:25 AM
From the presentation that was just put online:

Quote
In November, Awilco Drilling committed to acquire new premium BOP systems for
each rigs, so as to:
• Ensure continued compliance with regulatory and customer requirements and
address potential strengthening of standards
• Mitigating operational risks
– BOPs are typically the #1 source of semi-sub rig downtime
• Mitigating project risks
– Refurbishing existing BOPs increases yard stay duration risk
• Maximising potential customer base
– Certain supermajors may otherwise be excluded
• Maximising rig lifetime
– Rig remaining fatigue life = 18 years; market expected to remain in balance
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on November 28, 2013, 04:19:30 AM
Pretty substantial decline in Oslo today ... But the US market closed ...
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on November 28, 2013, 04:58:38 AM
I wonder if it is trading ex-dividend today in Norway.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: zippy1 on November 28, 2013, 05:35:53 AM
I wonder if it is trading ex-dividend today in Norway.

Packer
http://www.awilcodrilling.com/4142-Financial-News-Message?msg=http://cws.huginonline.com/A/147077/PR/201311/1743211.xml
Quote
Reference is made to the third quarter 2013 report released on 14 November 2013. Awilco Drilling PLC will be trading ex-dividend of a cash dividend of US$1.10 per share on 20 November 2013. The record date is 22 November 2013 and the dividend will be paid on or about 20 December 2013.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on November 28, 2013, 06:16:26 AM
I wonder if it is trading ex-dividend today in Norway.

Packer
Ex-div date was indeed a week ago, but it's apparently down because a fund sold a big block of shares at a discount. From twitter:
Quote
QVT fund sold over 1.7 m shares at bookbuilding process with price 127 NOK.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on November 28, 2013, 06:26:04 AM
More info from http://www.newsweb.no/newsweb/search.do?messageId=340979

Quote
QVT has retained Arctic Securities ASA ("Arctic") and
Fearnley Securities AS ("Fearnley") as joint
bookrunners to explore the sale of up to 1,172,300
shares of AWDR through an accelerated bookbuilding
process.  The shares to be sold are held by two
liquidating funds (due for wind-up by December 31,
2013) managed by QVT.
 

The shares to be sold are 100% of the holdings in
AWDR of those two liquidating funds and are their
last remaining substantial holding. Additionally,
there are no other funds managed by QVT seeking to
sell shares of AWDR in this placement, and there are
no other liquidating funds managed by QVT (and
consequently there are no shares in AWDR held by any
other liquidating funds managed by QVT).
Best reason possible for a drop imo
Title: Re: AWLCF - Awilco Drilling
Post by: abyli on December 05, 2013, 08:04:08 AM
Did anyone receive November dividend? I am using Scottrade and I have not received dividend yet. Thanks.
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on December 05, 2013, 08:13:13 AM
i believe they said around dec 20th - just in time for xmas =)

AWDR - Dividend Information
Reference is made to the third quarter 2013 report released on 14 November 2013. Awilco Drilling PLC will be trading ex-dividend of a cash dividend of US$1.10 per share on 20 November 2013. The record date is 22 November 2013 and the dividend will be paid on or about 20 December 2013.
Title: Re: AWLCF - Awilco Drilling
Post by: roughlyright on December 10, 2013, 09:17:42 AM
I thought Awilco will fall once this funds managed by QVT start selling. I am so disappointed that there was no drop in the price at all  >:(   

anybody has insights into why there is no drop in price at all despite selling off so many shares from this QVT fund?
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on December 10, 2013, 11:53:16 AM
I thought Awilco will fall once this funds managed by QVT start selling. I am so disappointed that there was no drop in the price at all  >:(   

anybody has insights into why there is no drop in price at all despite selling off so many shares from this QVT fund?
They sold all the shares that needed to be sold on a single day, placing them directly with other investors. There hasn't been any selling since 28 November.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on December 10, 2013, 12:31:00 PM
Pretty sure they dumped them all on the Oslo exchange on Thanksgiving Day (US). Lots of reference to the stock price dropping 8-10% that day. From the filing's I've read it looks like they sold everything they needed to sell. But I am liking the little sell off we've had this week, I've bought in on some more shares.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on December 11, 2013, 05:39:54 AM
Anyone have any insight into the Awilco move this morning? All I can find is a Finnish tweet about a market rumor about higher UK taxes.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 11, 2013, 07:15:51 AM
Anyone have any insight into the Awilco move this morning? All I can find is a Finnish tweet about a market rumor about higher UK taxes.

The payroll tax that increase that's going to affect all UK based companies?
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on December 11, 2013, 08:27:49 AM
Anyone have any insight into the Awilco move this morning? All I can find is a Finnish tweet about a market rumor about higher UK taxes.

That's my guess as well, and there's no guarantee that the tax passes. O&G companies are lobbying hard to fight it. Hopefully price stays low so we can re-invest the dividends.
Title: Re: AWLCF - Awilco Drilling
Post by: no_thanks on December 11, 2013, 08:38:26 AM
Anyone have any insight into the Awilco move this morning? All I can find is a Finnish tweet about a market rumor about higher UK taxes.

That's my guess as well, and there's no guarantee that the tax passes. O&G companies are lobbying hard to fight it. Hopefully price stays low so we can re-invest the dividends.

Do you have your broker automatically reinvest dividends from this?  How does that work on more illiquid stocks?  Thanks.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 11, 2013, 08:41:11 AM
From another message board:

Quote

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


Does anyone an idea about what's the likelihood of this proposal passing? And if it does pass, what's the likely hit to the bottom line for Awilco?
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on December 11, 2013, 08:49:53 AM
Anyone have any insight into the Awilco move this morning? All I can find is a Finnish tweet about a market rumor about higher UK taxes.

That's my guess as well, and there's no guarantee that the tax passes. O&G companies are lobbying hard to fight it. Hopefully price stays low so we can re-invest the dividends.

Do you have your broker automatically reinvest dividends from this?  How does that work on more illiquid stocks?  Thanks.

I don't, sorry.
Title: Re: AWLCF - Awilco Drilling
Post by: LongTerm on December 12, 2013, 06:55:05 AM
I thought Awilco will fall once this funds managed by QVT start selling. I am so disappointed that there was no drop in the price at all  >:(   

anybody has insights into why there is no drop in price at all despite selling off so many shares from this QVT fund?

Well, here you go. You've got your wish. Are you buying?

Personally not sure that this selloff is totally the impact of the potential UK tax hike. Maybe some of the QVT shares were sold to intermediaries? Heilko, what's your source that the block was sold to individual investors on Nov. 28?
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 12, 2013, 10:18:30 AM
I'd like to know what everyone's thoughts are on the potential impact in case the tax-hike passes. I have no idea how to put a probability on this passing so I'm just going to assume that it will pass, but that it won't be retroactive.

Here's how I look at this: Before the tax hike fears, the market price per share was around $21-$22 and after the fears, it hit a low of $19.55. But, the intrinsic value of Awilco wasn't $21-22 to begin with. If we're going to take a haircut of 10%-15% off the intrinsic value, it still isn't close to $20. Right now the market is already assuming the worst (with respect to the tax hike) and the buyer at this price won't have much to lose in case the tax hike passes, but will have much to gain if it doesn't

Thoughts?
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on December 12, 2013, 11:04:29 AM
Hey all:

Here we go!  The government is not getting enough tax money, they need MORE!

Just goes to show that very few jurisdictions are "safe" from negative government interference (taxes, regulations, environmental, re-rating contracts, etc).  I think 1st world locations risk level is going to go UP in the future.

So just how much riskier are 3rd world locations vs. "safe" locations?  Obviously 3rd world locations are more risky, but I would argue the difference is smaller than most people perceive it to be.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on December 13, 2013, 12:08:06 PM
Some quick calculations based on last quarter alone: let's say the tax rate jumps to 20% from its current ~7.5%.  Instead of paying $3m in taxes, they would pay about $8m.  Which leaves $5m less to pay as a dividend.  So your dividend goes from $1.1 to $.935.  A 15% reduction.

Given that we are (1) unsure that the new tax regime will ever take effect, and (2) if they do, it will not be until 2015, in my opinion the selloff has probably priced this in adequately, if not overdone it a bit.

I emailed IR to see if they have any estimates of what the new rate might be.  20% was just an arbitrary number that sounded about right.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 13, 2013, 06:28:04 PM
Some quick calculations based on last quarter alone: let's say the tax rate jumps to 20% from its current ~7.5%.  Instead of paying $3m in taxes, they would pay about $8m.  Which leaves $5m less to pay as a dividend.  So your dividend goes from $1.1 to $.935.  A 15% reduction.

Given that we are (1) unsure that the new tax regime will ever take effect, and (2) if they do, it will not be until 2015, in my opinion the selloff has probably priced this in adequately, if not overdone it a bit.

I emailed IR to see if they have any estimates of what the new rate might be.  20% was just an arbitrary number that sounded about right.

Echoes my thoughts as well Olmsted.

Goes to show you how fickle the stock holders are and what their overall conviction is. Every time the weak hands sell off into the strong hands (for a stock I own) - I like!
Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on December 20, 2013, 10:18:51 AM
I’ve been quite bullish on AWLCF, having taken a position in June. However like any investment, things change. That is of course true in the case of AWLCF. It has from the very beginning been a source of consternation to some. How can a company pay a distribution of almost 25% and be safe? Maybe its not so safe and maybe we are missing something, has been a common reaction, yet nowhere in print has a reason been advanced that explains why its not safe, except for the obvious 2 rigs. But that never seemed to me to account for such an unusually high yield. The passage of time has seemed to bless the relationship between the high distribution and the price of the stock.

What we do know is that one Norwegian brokerage firm went from a buy to a sell. Few investors here including me have access to the number of Norwegian firms that follow the company. What they are saying about the company is a black box to most.

Fundamentally this is a very sound company. It has a management that is very careful and deliberate. Their integrity is very high. So this is not about the company. It is about market perception and the lack of sell side research in the US. In cases like this the buy side is on their own.

There have been several developments that have occurred since many of the current US holders first took a position.

Starting with the most recent. There has been an idea floated in the UK that there should be a tax increase on companies in the oil and gas industry that would include companies like AWLCF. Not sure how much of that has been discounted and how much has bounced back, but in the end it seems likely it won’t happen. Just because, when you’re running short of oil and gas in your own backyard, the remedy is not to increase the cost of capital to those who can at least slow down the trend.

Secondly there has been a recent decline in deepwater rig utilization and rates, with SDRL reporting decreases in both. Market rates are now reported to be below $500,000 from $550,000 previously. This followed a prior report by SDRL that they had leased a rig for a one well stint rather than long term, an early signal of market weakness. That followed on the heels of the Transocean report of the general market weakness they were experiencing.

The first question one might ask is what does this have to do with AWLCF? Their rigs are both leased through 2016. The first thing that will happen with a weak deepwater market is that deepwater rigs will find a way back to mid depth. While this does not impact AWLCF’s current rigs, it sharply reduces their opportunity to bring on any additional rigs. Even one additional rig could have added significant dividend safety and stability, not to mention a substantial increase in eqarnings. Now that possibility is gone. That was an embedded free option in the price of AWLCF that is no longer there.

Finally the market, in the US at least and the US has a significant share of the trading volume, seems to expect AWLCF to be producing about or almost $1.00/share each quarter through 2016. However this is not the case. Looking at all the statements the company has made publicly it is clear that capex will be subtracted from the distributions. These are not dividends paid from net income. The market doesn’t seem to realize this. Nor does the market here in the US fully understand that each rig will not be earning its day rate for a period of ~60 days during the SPS in the first half of 2016 and in fact the first rig may begin the SPS as early as December 2015 and overlap into Jan 2016.

My forecasts for their distribution are: 2014 - $3.40, 2015 - $2.96, 2016 - $2.25, and 2017 - $4.40. The 2017 forecast assumes current rates hold. The granularity of the analysis is based on annual rates, though I did look at each quarter for 2014. The dist. estimates for each year are +/- $0.25. The numbers are based on capex requirements for each year over the next 3 years and the guidance given by the company.

I don’t know what stock price discounts these new estimates? I do believe though the market in the US is expecting numbers a lot higher than these.
Title: Re: AWLCF - Awilco Drilling
Post by: 17thstcapital on December 20, 2013, 10:47:54 AM
I’ve been quite bullish on AWLCF, having taken a position in June. However like any investment, things change. That is of course true in the case of AWLCF. It has from the very beginning been a source of consternation to some. How can a company pay a distribution of almost 25% and be safe? Maybe its not so safe and maybe we are missing something, has been a common reaction, yet nowhere in print has a reason been advanced that explains why its not safe, except for the obvious 2 rigs. But that never seemed to me to account for such an unusually high yield. The passage of time has seemed to bless the relationship between the high distribution and the price of the stock.

What we do know is that one Norwegian brokerage firm went from a buy to a sell. Few investors here including me have access to the number of Norwegian firms that follow the company. What they are saying about the company is a black box to most.

Fundamentally this is a very sound company. It has a management that is very careful and deliberate. Their integrity is very high. So this is not about the company. It is about market perception and the lack of sell side research in the US. In cases like this the buy side is on their own.

There have been several developments that have occurred since many of the current US holders first took a position.

Starting with the most recent. There has been an idea floated in the UK that there should be a tax increase on companies in the oil and gas industry that would include companies like AWLCF. Not sure how much of that has been discounted and how much has bounced back, but in the end it seems likely it won’t happen. Just because, when you’re running short of oil and gas in your own backyard, the remedy is not to increase the cost of capital to those who can at least slow down the trend.

Secondly there has been a recent decline in deepwater rig utilization and rates, with SDRL reporting decreases in both. Market rates are now reported to be below $500,000 from $550,000 previously. This followed a prior report by SDRL that they had leased a rig for a one well stint rather than long term, an early signal of market weakness. That followed on the heels of the Transocean report of the general market weakness they were experiencing.

The first question one might ask is what does this have to do with AWLCF? Their rigs are both leased through 2016. The first thing that will happen with a weak deepwater market is that deepwater rigs will find a way back to mid depth. While this does not impact AWLCF’s current rigs, it sharply reduces their opportunity to bring on any additional rigs. Even one additional rig could have added significant dividend safety and stability, not to mention a substantial increase in eqarnings. Now that possibility is gone. That was an embedded free option in the price of AWLCF that is no longer there.

Finally the market, in the US at least and the US has a significant share of the trading volume, seems to expect AWLCF to be producing about or almost $1.00/share each quarter through 2016. However this is not the case. Looking at all the statements the company has made publicly it is clear that capex will be subtracted from the distributions. These are not dividends paid from net income. The market doesn’t seem to realize this. Nor does the market here in the US fully understand that each rig will not be earning its day rate for a period of ~60 days during the SPS in the first half of 2016 and in fact the first rig may begin the SPS as early as December 2015 and overlap into Jan 2016.

My forecasts for their distribution are: 2014 - $3.40, 2015 - $2.96, 2016 - $2.25, and 2017 - $4.40. The 2017 forecast assumes current rates hold. The granularity of the analysis is based on annual rates, though I did look at each quarter for 2014. The dist. estimates for each year are +/- $0.25. The numbers are based on capex requirements for each year over the next 3 years and the guidance given by the company.

I don’t know what stock price discounts these new estimates? I do believe though the market in the US is expecting numbers a lot higher than these.

Thanks for sharing - all good points. 

You've spend a lot of time on distributions - any thoughts on valuation?  Is the valuation out of hand given what we know now - even if you assume distribution was cut to say zero?  I certainly don't make a habit of making investments based solely on distributions/dividends with a disregard for valuation. 
Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on December 20, 2013, 02:16:49 PM
"You've spend a lot of time on distributions - any thoughts on valuation?  Is the valuation out of hand given what we know now - even if you assume distribution was cut to say zero?  I certainly don't make a habit of making investments based solely on distributions/dividends with a disregard for valuation."

This is a stock that seeks to pay out all of their FCF after capex and a strategic reserve, so dividends are pretty much the entire return.  Barring an unusual opportunity, which current market conditions have rendered less likely at least for now, there are few opportunities for appreciation except for increases in day rates.

I really don't think I have much to add to valuing the income stream, except to say the market in the US which is substantial doesn't seem to be aware of the reduced distributions over the next three years.
Title: Re: AWLCF - Awilco Drilling
Post by: 17thstcapital on December 20, 2013, 04:16:00 PM

I really don't think I have much to add to valuing the income stream, except to say the market in the US which is substantial doesn't seem to be aware of the reduced distributions over the next three years.

You don't want to value the income stream but haven an opinion on the stock price - interesting.....
Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on December 20, 2013, 06:32:33 PM
The purpose of the post was to bring information on fundamentals to the board which is different than many in the market expect.  I didn't express an opinion on the stock price in either post.
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on December 20, 2013, 07:19:12 PM
I think the market price reflect more of your expectations.  Given that a normal yield would probably be in the low teens (6.7% return of capital (15 year life) and 6% return on capital) call it 13%, the implied distribution with today's prices is $2.60 ($20 *13%).  BTW a comp that is in worse shape thane Awilco (Northern Offshore) has a dividend yield of 13% also.

This is below your average expected range.  If we assume a $4 dividend we get $31.  If we use your average rate we get a value of around $25.  Also, using a 7x multiple of EBITDA (a discount from the comp average of 8x) results in a value in the low $30s.  From my calcs, I can still get to over $4.00 distribution with expected cap-ex.  Our Norwegian analysts friends also project on average $4.38 free cash flow over the next 2 years 2014/2015.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on December 20, 2013, 09:19:10 PM
Packer, I think the only way you and the Norwegian analysts can be getting such high numbers for distributions over the next two years while I'm getting such low numbers is we are using different capex numbers.  Hard to believe all those Norwegian analysts can be wrong? :)  What numbers are you using?

Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 20, 2013, 10:29:37 PM
Here is my "rough order of magnitude" calculation:

Maximum possible revenue based on contractual dayrates (assuming premier opts for smallest option) = $277M, but revenue assuming 93% Utilization = $257M

OpEx = 69M
SG&A = 19M (12M expected + 7M stock options)
Interest = 10M
Depreciation = 18M

NOPAT (at 10% tax rate) = (257-69-18-10-18) x 0.90 = 141M

Operating cash flow = $125m + $18m = $159M
Total CapEx = $30M

FCF = $159 - $30 = $129M or $4.29/share

What did I miss?  :-\
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on December 21, 2013, 04:00:54 AM
You are missing the debt repayments. This is how I calculated FCF for 2014:

Quote
Max revenue: 273.4 million
Revenue efficiency: 95%
Revenue: 260 million
- Operating expenses: 70 million
- G&A expenses: 12 million
- Interest expense: 8.8 million
- Taxes: 12 million
Cash from operations: 157 million
- debt repayment 11 million
- capex 30 million (includes 15 million prepayment for new BOPs)
FCFE: 116 million
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on December 21, 2013, 04:08:01 AM
So why are they paying out $4.4/share dividend?
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on December 21, 2013, 04:16:27 AM
So why are they paying out $4.4/share dividend?
Because they are simply paying out all FCF? Not sure what your point is...
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on December 21, 2013, 04:18:03 AM
If 129M is $4.29, then  isn't 116M like $3.85/sh? So they are paying out more than fcf per your calcs.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on December 21, 2013, 05:28:39 AM
The current FCF is simply a bit higher than it probably will be next year because of the capex requirements in 2014, so the current dividend is higher too.
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on December 21, 2013, 05:31:31 AM
I see, thanks....
So the market price is probably trending down in anticipation of smaller dividends going forward then.... 
Title: Re: AWLCF - Awilco Drilling
Post by: rayfinkle on December 21, 2013, 12:30:33 PM
packer--sorry if I missed this, but you own this?
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on December 21, 2013, 12:55:14 PM
Yes I do.

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 22, 2013, 09:12:22 AM
You are missing the debt repayments. This is how I calculated FCF for 2014:

Quote
Max revenue: 273.4 million
Revenue efficiency: 95%
Revenue: 260 million
- Operating expenses: 70 million
- G&A expenses: 12 million
- Interest expense: 8.8 million
- Taxes: 12 million
Cash from operations: 157 million
- debt repayment 11 million
- capex 30 million (includes 15 million prepayment for new BOPs)
FCFE: 116 million

Just a bit confused here. They mentioned here (http://i.imgur.com/wvs0ZJE.png) that TOTAL cap-ex for 2014 is US$30Million. They break it out - $15M for "routine" capex and $15M for BOP commitments. This makes sense because last year they said (http://i.imgur.com/mzU94Re.png) they were targeting $15M Capex for 2013 (all of it "routine" since there were no BOP commitments).

Finally, it seems they are quite conservative in their estimates as the YTD capex hasn't even been HALF (http://i.imgur.com/hYZoAZH.png) of $15M.

Any thoughts?

Yes I do.


Packer
Wondering if Awilco is in your "top 5" positions & did you buy it in Norway or US?

I've received dividend on shares I bought in Norway but still waiting for US bought shares...
Title: Re: AWLCF - Awilco Drilling
Post by: marcosc on December 23, 2013, 12:47:32 PM
Dividend just hit my account on the US ADRs (Ameritrade)
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on December 23, 2013, 01:12:10 PM
Just a bit confused here. They mentioned here (http://i.imgur.com/wvs0ZJE.png) that TOTAL cap-ex for 2014 is US$30Million. They break it out - $15M for "routine" capex and $15M for BOP commitments. This makes sense because last year they said (http://i.imgur.com/mzU94Re.png) they were targeting $15M Capex for 2013 (all of it "routine" since there were no BOP commitments).
What exactly are you confused about? Seems like you understand the situation perfectly fine :).

Quote
Finally, it seems they are quite conservative in their estimates as the YTD capex hasn't even been HALF (http://i.imgur.com/hYZoAZH.png) of $15M.
In earlier quarters the company made some comments about delaying capex because of the unavailability of the required helicopters or something along those lines. I think that's part of the explanation of the low capex YTD.
Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on December 23, 2013, 08:16:33 PM
I think its important to look at projections for the next three years.  Capex is where there is the most uncertainty in the market.

Here are their capex numbers for 2014 - $30mm,  2015 -  $51mm, and 2016 - $49mm.

The question is how generally known are these numbers?  Every indication is the effects of these numbers on DCFPU is not generally known to the market.  There effect is another matter.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 24, 2013, 03:59:17 PM
What would the residual value of the rigs be in 2017? Say the management wants to sell the 2 rigs: What price per rig would they be able to sell it for?
Title: Re: AWLCF - Awilco Drilling
Post by: zippy1 on December 27, 2013, 02:28:49 PM
Bull case by Geppe on seekingalpha.
http://seekingalpha.com/article/1918681-awilco-drilling-sell-scrap-analysis-and-worries-gives-huge-opportunity?source=yahoo
Quote
I am happy because A) they do not think beyond a couple of months and thus created an opportunity, B) They do not understand who runs the business nor the obvious long term perspective undervaluation case C) Dividend will increase yet again, which I will explain later.
Title: Re: AWLCF - Awilco Drilling
Post by: xxx1313 on December 28, 2013, 04:54:42 PM
I owned some Awilco Drilling stocks for about half a year and made about 50 % with it, but I sold a few months ago. Drillers with old rigs are discounted by Mr. Market because in a weaker environment many old rigs may need to be cold stacked or even scrapped. Mr. Market may be right or not - who knows. Awilco Drilling is still rather inexpensive, but it is not the no-brainer it once was. For example, Fred Olsen Energy is already cheaper on some metrics. It is comparable to Awilco Drilling, because it also owns many very old rigs, but also two new UDW drillships (the second one will be delivered in Q1 2014). Moreover, most of Fred Olsen Energy's rigs operate in UK waters (such as Awilco's) and in Norway, a market with similarly strong demand for the foreseeable future.

Here some metrics for both stocks.

Awilco Drilling (in USD):
Market Cap: 611 million (at 125 NOK)
Enterprise Value: 668 million   
Book Value: 209 million
Equity Ratio: 57 %
EBITDA (2013e): 145 million   
EBITDA-Margin: 64 % (very high - sustainable??)
Fleet: 2 old midwater semis
Average fleet age: 32 years
Backlog: 0.8 billion incl. options
Price/Book: 2.9
EV/EBITDA: 4.6

Fred Olsen Energy (in USD):
Market Cap: 2655 million (at 245 NOK)
Enterprise Value: 3483 million   
Book Value: 1363 million
Equity Ratio: 48 %
EBITDA (2013e): 928 million   
EBITDA-Margin: 51 %
Fleet: 7 old midwater semis, 1 old deepwater semi, 1 new UDW drillship (2nd UDW drillship delivered in Q1 2014)
Average fleet age: 29 years (26 years after the delivery of the new UDW drillship)
Backlog: 4.5 billion incl. options
Price/Book: 1.95
EV/EBITDA: 3.75
One more (the third) UDW unit  is expected in Q1 2015 and is contracted with Chevron for over 5 years at a day rate of 560,000 USD (not bad for such a long contract!)

Fred Olsen Energy's dividend yield is "only" 8 %, but this is not bad for a conservatively mananged and growing company.

By the way, the cheapest companies with new rig fleets and at least ok balance sheets trade at about 6x EV/EBITDA (e.g. Atwood Oceanics with an average rig fleet age of about 8 years).
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 28, 2013, 10:17:35 PM
Thanks for the comment. Will look into the company.

One more (the third) UDW unit  is expected in Q1 2015 and is contracted with Chevron for over 5 years at a day rate of 560,000 USD (not bad for such a long contract!)

This should be better for Awilco in some sense right? If companies like Chevron are agreeing to pay $560K/day from 2015 to 2020, then that means mid-water semi-submersibles shouldn't face much competition? The market in Awilco's niche should seem tight - No one wants to build mid-water rigs anymore and UDW rig prices seem to be strong so far out. Thoughts?
Title: Re: AWLCF - Awilco Drilling
Post by: xxx1313 on December 29, 2013, 03:55:11 AM
Siddharth18, you are right. But the difference in pricing between new and old rigs is already rising (see attachment). My point is not that Awilco Drilling will necessarily be a bad investment (in most scenarios it will be a good one), but that in my opinion there is at least one other attractive opportunity in this sector, with maybe better risk/return characteristics.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 29, 2013, 12:39:56 PM
Siddharth18, you are right. But the difference in pricing between new and old rigs is already rising (see attachment). My point is not that Awilco Drilling will necessarily be a bad investment (in most scenarios it will be a good one), but that in my opinion there is at least one other attractive opportunity in this sector, with maybe better risk/return characteristics.

Duly noted and thanks for the dayrate PDF! I'd think that since Awilco's rigs are some of the better ones of all the rigs available among all the alternatives (since they were refurbished just a few years ago and it will undergo a BOP replacement in the near future) they should be able to command better day-rates in their cohort.

At today's enterprise value US$668M, you get two rigs that are old, but well maintained and can command decent day-rates.

Compare that to almost $700 million it costs to order a new rig: http://translate.googleusercontent.com/translate_c?depth=1&hl=en&ie=UTF8&prev=_t&rurl=translate.google.com&sandbox=0&sl=no&tl=en&u=http://www.offshore.no/sak/34174_odfjell_bygger_super-rigg_for_bp&usg=ALkJrhigmtaQN2Up3fD00jDIljYVKZPu4A (http://translate.googleusercontent.com/translate_c?depth=1&hl=en&ie=UTF8&prev=_t&rurl=translate.google.com&sandbox=0&sl=no&tl=en&u=http://www.offshore.no/sak/34174_odfjell_bygger_super-rigg_for_bp&usg=ALkJrhigmtaQN2Up3fD00jDIljYVKZPu4A)

This is the same rig that sank a few days ago in the shipyard: http://gcaptain.com/odfjell-drilling-rig-sinks-dsme/ (http://gcaptain.com/odfjell-drilling-rig-sinks-dsme/)

It was leased by BP (starting 2014) for 7 years (firm) + 3 years (of option). In a semi-rational world, the fact that oil companies (Chevron, BP, Apache, etc) are willing to commit to seemingly high day-rates should mean something.

http://translate.google.com/translate?hl=en&ie=UTF8&prev=_t&sl=no&tl=en&u=http://www.nrk.no/verden/norskbestilt-rigg-sank-i-sor-korea-1.11440292&sandbox=0&usg=ALkJrhjIup_S2RWvd1RfHdx9R1Wg854-Xg (http://translate.google.com/translate?hl=en&ie=UTF8&prev=_t&sl=no&tl=en&u=http://www.nrk.no/verden/norskbestilt-rigg-sank-i-sor-korea-1.11440292&sandbox=0&usg=ALkJrhjIup_S2RWvd1RfHdx9R1Wg854-Xg)


That said are you holding any Awilco in your portfolio at all?
Title: Re: AWLCF - Awilco Drilling
Post by: xxx1313 on December 29, 2013, 01:38:01 PM
Siddharth18, thank you  for the links, especially concerning Odfjell's new rig. Odfjell is also on my watch list.

From a balance sheet perspective, a new UDW rig with a life of 30-50 years is worth more than two >30 year old midwater rigs with useful lives of 15-20 years at best. On the other hand, the two old midwater rigs together (at least in UK or Norway) will probably generate higher EBITDA than the new UDW rig. This is what seems unsustainable and the big question is, how long this environment will persist. Awilco is a classic Graham-style cigar butt. It is still inexpensive (but not for free) on an EV/EBITDA basis, but with the real risk that the cigar goes out sooner than one can or will throw it away.

The day-rates for long contracts (for example the 7 year BP/Odfjell lease you mention) are lower than those of shorter contracts. So the forward curve of rig dayrates (I do not know if something like that officially exists) is certainly in backwardation. This means that oil companies expect lower dayrates in 2-4 years. Of course there is no guarantee that they are right.

I sold my Awilco shares a few months ago, but bought some Fred Olsen and Atwood shares recently. If Odfjell becomes cheaper, it is certainly interesting, too. The stocks of the market leaders, Transocean and even more Seadrill, are much more expensive.



Title: Re: AWLCF - Awilco Drilling
Post by: Myth465 on December 29, 2013, 05:23:13 PM
I plan on selling and adding to my ORIG position.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on January 23, 2014, 08:59:37 AM
For discussion.  A Norwegian analyst gives Awilco a sell and a NOK 117 price target.  Gist is that day-rates are too high and will go lower:

Quote
Nordea Markets regner med at overtilbud i flytermarkedet vil føre til fall i dagratene og utnyttelsesgraden for de fleste segmentene innenfor riggsektoren.
 
Meglerhuset nedjusterer sine EBITDA-estimater for industrien og reduserer kursmålene med 14 prosent i snitt.
 
Nordea anbefaler kjøp av Odfjell Drilling og har et kursmål på 55 kroner pr aksje.
 
«Selskapet har en relativt ung og moderne flåte med spesifikasjoner som gjør at riggene kan være på kontrakt i de mest utfordrende og krevende områdene i verden», heter det.
 
Awilco Drilling får derimot en salgsanbefaling og et kursmål på 117 kroner

Meglerhuset mener er perfekt timing for å ta gevinst i denne aksjen etter kraftig oppgang.
http://www.hegnar.no/analyser/article754271.ece

And in (sort-of) English, from Google Translate:

Quote
Nordea Markets expects that the offers in floating market will lead to a fall in day rates and utilization for most segments in the rig sector.
 
The brokerage lowered their EBITDA estimates for the industry and reduces price target by 14 percent on average.
 
Nordea recommends the purchase of Odfjell Drilling has a price target of NOK 55 per share.
 
"The company has a relatively young and modern fleet of specifications so that the rigs could be operating in the most challenging and demanding areas of the world," it says.
 
Awilco Drilling offers less a sales recommendation and a price target of 117 million

The brokerage believes is perfect timing to make gains in this stock after a sharp rise.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on January 23, 2014, 11:26:16 AM
http://seekingalpha.com/news/1523261-noble-corp-diamond-offshore-shares-down-big-on-slower-drilling-outlook (http://www.businessweek.com/news/2014-01-23/noble-leads-offshore-drillers-lower-on-slowdown-dallas-mover)


http://www.businessweek.com/news/2014-01-23/noble-leads-offshore-drillers-lower-on-slowdown-dallas-mover (http://www.businessweek.com/news/2014-01-23/noble-leads-offshore-drillers-lower-on-slowdown-dallas-mover)
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on January 27, 2014, 08:51:24 PM
http://www.hegnar.no/bors/article754599.ece (http://www.hegnar.no/bors/article754599.ece)


Rough Translation into English:


Quote
Pareto expecting tighter oil market: Pareto Securities expects the oil market will tighten up to from 2015 to 2018.

Fresh analysis shows that Pareto Securities expects the oil market will tighten up to from 2015 to 2018 is relatively well supplied market in 2014.

The driver for tightening should be a reduction in production outside OPEC growth from an estimated 1.5 million barrels per day in 2013 to 2014 to 0.8 million barrels per day in 2015 to 2018 due to lower growth in North America.

Also expected global demand growth to 1.2 million barrels per day, says the news agency.

Pareto assumes that current prices already reflect a well-supplied market in 2014 and estimates an average price of $ 108 a barrel this year.

In 2015, estimated according to TDN Finans an average price of $ 115 per barrel rising to $ 120 a barrel from 2016 onwards.

Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on January 30, 2014, 08:50:08 AM
Puzzled somewhat about the recent weakness (selloff in Norwegian markets on above-average volume offset by some buyers in US OTC Market). With the company doing business in US Dollars (which has appreciated vs NOK recently) how can the analyst firms concoct a target price in NOK?

Is the market expecting a glut in the UK market? Are day-rates (or oil) on the verge of falling off a cliff? Why does the market place a 20%+ yield on this?

I realize there is a weakness in the deep-water rig market "after years of growth fueled by oil and natural gas discoveries," but is this same for semi-submersibles in north sea market that are primarily used for "abandonment work"?
Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on January 30, 2014, 09:11:02 AM
Puzzled somewhat about the recent weakness (selloff in Norwegian markets on above-average volume offset by some buyers in US OTC Market). With the company doing business in US Dollars (which has appreciated vs NOK recently) how can the analyst firms concoct a target price in NOK?

Is the market expecting a glut in the UK market? Are day-rates (or oil) on the verge of falling off a cliff? Why does the market place a 20%+ yield on this?

I realize there is a weakness in the deep-water rig market "after years of growth fueled by oil and natural gas discoveries," but is this same for semi-submersibles in north sea market that are primarily used for "abandonment work"?

The stock has really only begrudgingly given up ground, given the weakness in the deep water market.  It does raise the question if the UK and deep water markets are that segmented? 

What really matters is what the price will be in 2016 when the contracts end.  If deepwater rig utilization is low then, why can't some deepwater rigs move back to the UK, just as they left when the deepwater market strengthened?

The other question is whether the stock is in fact yielding 20% at $20?  It looks to be yielding a lot less based on expected dividends in 2015 and 2016.  I think Norwegian investors are aware of that, but not so much investors here in the US.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on February 17, 2014, 06:24:54 PM
For US persons who received dividend from AWLCF and held it for 60 days of the 121-day period - How is the dividend classified? I think it would be "qualified."

Any thoughts on this? Thanks.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on February 19, 2014, 09:05:42 AM
The price action in Awilco doesn't really make sense to me. The company earns revenue in dollars but when the dollar appreciates, the share price goes DOWN! And when dollar depreciates the share price goes UP! How does this make any sense at all ?
Title: Re: AWLCF - Awilco Drilling
Post by: Packer16 on February 25, 2014, 05:16:20 AM
Our friend Harry L. has interesting piece on Awilco:

http://seekingalpha.com/article/2042373-awilco-drillings-big-undervaluation-makes-it-a-juicy-acquisition-target?source=yahoo

Packer
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on February 25, 2014, 05:37:58 AM
And some more analyst negativity:

Quote
Awilco Drilling has presented results for the fourth quarter, in line with both DNB Markets' estimates and consensus.

"The proposed dividend of $ 1.10 per share, in line with expectations and represents a continued high yield of annualized 22 percent. Next scheduled shipyard stay rig Wil Hunter is now expected in late 2015 with our earlier expectations in 2016. We expect thus pushing some of the estimated earnings for 2015 over 2016, "writes the brokerage.

DNB Markets has a sell recommendation with a price target of NOK 105 per share.

Latest listing is 119.50 million, down 1.2 percent.

http://www.hegnar.no/analyser/article757581.ece
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on February 28, 2014, 04:15:57 PM
Color me unimpressed with the analysis at DNB Markets...

Nobody knows what rig rates are going to be in 2016 & 2017, not even analysts...

Prices are going to be heavily dependent on the price of oil.  If oil is $40/barrel, then Awilco has a problem...If oil is $85+ Awilco is probably good.  If oil is $120/barrel, Awilco will be in excellent shape.

My guess is that oil will be about the same price ($100 barrel).  I see two bullish factors for oil.  First is increasing demand from emerging markets.  Second is the depreciation of the USD.

One bearish factor is the opening of the Mexican market.  PEMEX's monopoly is going to be curtailed.  A lot of oil could be coming out of Mexico in the upcoming years. 

We will see!
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on March 18, 2014, 07:26:31 PM
Fidelity is showing my Awilco dividends to be non-qualified, but TD Ameritrade is showing them as qualified.  I'm having trouble getting Fido to see the light that a UK company qualifies for qualified dividend treatment.  Is anybody else having trouble with the classification of their Awilco dividends?
Title: Re: AWLCF - Awilco Drilling
Post by: oddballstocks on March 18, 2014, 07:46:27 PM
22percent,

This isn't uncommon for Fidelity. I've had this in the past, it's as if they run a special re-classification program at tax time. One year I had many dividends reported as non-qualified changed to qualified (corrected) before the tax forms were submitted.

I wouldn't worry about it. If this is a true ADR that's sponsored then there should be no problem with the classification. If you purchased them directly on the foreign exchange you aren't going to get the tax treatment.

Nate
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 18, 2014, 09:28:35 PM
Fidelity is showing my Awilco dividends to be non-qualified, but TD Ameritrade is showing them as qualified.  I'm having trouble getting Fido to see the light that a UK company qualifies for qualified dividend treatment.  Is anybody else having trouble with the classification of their Awilco dividends?

Fidelity is insisting that this dividend is ordinary and so is Merrill. I have a tax-sheltered account with TD so I have no idea what they think.


I asked Fidelity how they can be so sure, and I got a response stating "After further research internally and verifying with our 3rd party vendor who compile the tests and determine the income classification, this company did not pass the U.S. treaty test to be eligible as qualified."


Also frustrating is that others are reporting that E*Trade and Vanguard report then as qualified too.

Here is the company's response (as expected) when I asked them their dividend status:

"Unfortunately, I am not in position to confirm the US legal/tax definition of our dividends so the only advise I can give you is to ask a US legal/tax adviser to help you determine whether the dividend should be classified as ‘ordinary’ or ‘qualified in the US. We are a UK company registered in England & Wales with headquarters in Aberdeen, Scotland, and stock exchange listing in Oslo, Norway (at the Oslo Axess list – Oslo Stock Exchange, ticker AWDR). There is no withholding tax on the paid dividend, i.e. the gross amount is paid out."

I'm really not sure what the recourse really is. I could report it on my return as qualified against my broker's recommendation and then risk an audit. Lose, lose either way...but still open to suggestions...
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 18, 2014, 09:41:51 PM
By the way - FVP Master Fund bought about 280k shares:

http://www.newsweb.no/newsweb/attachment.do?name=03%2017%202014%20form%20TR-1%20-%20FVP%20Master%20Fund%20L%20P%20%20(AWILCO%20Drilling%20PLC)%20for%20issuer.pdf&attId=120977 (http://www.newsweb.no/newsweb/attachment.do?name=03%2017%202014%20form%20TR-1%20-%20FVP%20Master%20Fund%20L%20P%20%20(AWILCO%20Drilling%20PLC)%20for%20issuer.pdf&attId=120977)


So you know what, at least, one of the big boys thinks about the recent weakness.
Title: Re: AWLCF - Awilco Drilling
Post by: Kiltacular on March 19, 2014, 12:36:17 PM
Fidelity is showing my Awilco dividends to be non-qualified, but TD Ameritrade is showing them as qualified.  I'm having trouble getting Fido to see the light that a UK company qualifies for qualified dividend treatment.  Is anybody else having trouble with the classification of their Awilco dividends?

Fidelity is insisting that this dividend is ordinary and so is Merrill. I have a tax-sheltered account with TD so I have no idea what they think.


I asked Fidelity how they can be so sure, and I got a response stating "After further research internally and verifying with our 3rd party vendor who compile the tests and determine the income classification, this company did not pass the U.S. treaty test to be eligible as qualified."


Also frustrating is that others are reporting that E*Trade and Vanguard report then as qualified too.

Here is the company's response (as expected) when I asked them their dividend status:

"Unfortunately, I am not in position to confirm the US legal/tax definition of our dividends so the only advise I can give you is to ask a US legal/tax adviser to help you determine whether the dividend should be classified as ‘ordinary’ or ‘qualified in the US. We are a UK company registered in England & Wales with headquarters in Aberdeen, Scotland, and stock exchange listing in Oslo, Norway (at the Oslo Axess list – Oslo Stock Exchange, ticker AWDR). There is no withholding tax on the paid dividend, i.e. the gross amount is paid out."

I'm really not sure what the recourse really is. I could report it on my return as qualified against my broker's recommendation and then risk an audit. Lose, lose either way...but still open to suggestions...


Have you tried the international desk?: 800.544.2976

If you feel confident you're entitled to this, they might be able to help you. 
Title: Re: AWLCF - Awilco Drilling
Post by: Josh4580 on March 20, 2014, 03:30:31 PM
Have you guys gotten your Awilco March dividend yet?

I dont see mine in transactions yet on Ameritrade.
Title: Re: AWLCF - Awilco Drilling
Post by: GregS on March 20, 2014, 03:34:55 PM
I don't have mine in Ameritrade either.  In my experience they usually take longer than others to post dividends.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 20, 2014, 08:55:06 PM
Have you guys gotten your Awilco March dividend yet?

I dont see mine in transactions yet on Ameritrade.
I don't have mine in Ameritrade either.  In my experience they usually take longer than others to post dividends.

Don't in Fidelity & Merrill either.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on March 21, 2014, 09:53:27 AM
Ameritrade just showed up at around $1.06. Still nothing for Scottrade. Hopefully they do like last time and give the full $1.10.
Title: Re: AWLCF - Awilco Drilling
Post by: phil_Buffett on March 21, 2014, 09:55:17 AM
i got mine today. 1,1$
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 21, 2014, 10:00:07 AM
i got mine today. 1,1$

Which broker is that, if I may ask?
Title: Re: AWLCF - Awilco Drilling
Post by: phil_Buffett on March 21, 2014, 10:27:27 AM
i got mine today. 1,1$

Which broker is that, if I may ask?

german ING  ;)
Title: Re: AWLCF - Awilco Drilling
Post by: roughlyright on March 21, 2014, 11:25:25 AM
i got mine today. 1,1$

I hold shares with TDAmeritrade. Today I got mine at $1.1/share.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on March 22, 2014, 09:33:09 AM
Scottrade also came in at $1.06762
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on March 24, 2014, 09:03:47 AM
Hey all:

Looks like Awilco is proposing a new bond offering, looking to push the maturity out till 2019.

I also wonder if it will be used to "smooth" the dividend out when the rigs go into the yard for maintenance/upgrade work?

Also wonder if there is possibility of a new acquisition?
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on March 24, 2014, 09:47:56 AM
You're right, probably will take the savings from refinance and smooth out the dividend payments. It looks like the current interest rate is 9%. I've seen some write-ups suggest 5% might be the new rate?
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 24, 2014, 12:09:32 PM
Nice to hear about the re-fi. Not the worst time to be doing it.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 25, 2014, 02:48:22 PM
Reports are floating around about TDAmeritrade pulling the dividend out of people's accounts due to a "technical error." Anyone privy to this ?
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on March 25, 2014, 02:58:49 PM
Looks like they did today for about an hour and half. Mine is back where it was at before.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on March 25, 2014, 03:09:43 PM
At IB it's still accrued. I don't own the ADR, the actual Norwegian share.
Title: Re: AWLCF - Awilco Drilling
Post by: roughlyright on March 25, 2014, 06:49:41 PM
At IB it's still accrued. I don't own the ADR, the actual Norwegian share.

Writser,

 That is interesting. In IB, it shows me the ticker as AWDR, but it does not let me buy it. How were you able to buy the norwegian stock directly in IB?
Title: Re: AWLCF - Awilco Drilling
Post by: bizaro86 on March 25, 2014, 07:32:32 PM
I own it at IB also, you can buy it directly under the norwegian symbol AWDR. Trades in norwegian currency with the norwegian commission scale. I had to fill out a form to have the norwegian market added to my permissions, only took 5 minutes.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 25, 2014, 08:09:31 PM
Reports are floating around about TDAmeritrade pulling the dividend out of people's accounts due to a "technical error." Anyone privy to this ?

I have a DRIP on Awilco at TD, and for some bizarre reason it shows up in transactions as having bought the shares through DRIP and then giving a second dividend which was then removed an hour or so later. I think that's what it was.

It didn't have anything to do with DRIP, as far as I know. I called TD customer service and they said the listing agent paid out the dividend in an incorrect amount.

But more to the point - Are brokers allowed to pull dividend amount from people's account willy-nilly, without notice? Who is responsible for losses if things go awry due to say...a margin call triggered as a result of a dividend reversal ?

-------

bizaro - That's news to lot of us! I wasn't aware IB allowed you to buy AWDR. At least that was the case late last year when I confirmed this with an IB rep. Thx for the info. Comparing it to Fidelity, it seems IB is obviously cheaper (Fido charges 1% for currency conversion alone! + 160 nok). But at this point I'll keep holding it in Fidelity because they allow you to sell it on the OTCMarket in USA and OsloAxess, and a lot of times the stock trades at a premium on OTC.
Title: Re: AWLCF - Awilco Drilling
Post by: bizaro86 on March 25, 2014, 08:56:33 PM
I think it must be new. I tried to buy it last spring using IB and couldn't then.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on March 26, 2014, 05:52:40 AM
At IB it's still accrued. I don't own the ADR, the actual Norwegian share.

Writser,

 That is interesting. In IB, it shows me the ticker as AWDR, but it does not let me buy it. How were you able to buy the norwegian stock directly in IB?

To trade, you have to request access to the Norwegian exchange in the IB backend. IB allowed trading on the Oslo Borse just a couple of months ago. Live support also told me they were working on other "obscure" European exchanges but didn't want to give a timetable. A couple of days ago they announced support for TOM (http://www.amsterdamtrader.com/2014/03/ib-joins-tom.html), a cheaper alternative for options on Euronext.

On a sidenote, I've looked a couple of times at buying IBKR. These guys are just crushing the competition in every way (except for userfriendlyness maybe) and Peterffy sounds like an extremely smart guy. Unfortunately it doesn't look extremely cheap and such a big company is way too complicated for me.

Title: Re: AWLCF - Awilco Drilling
Post by: bz1516 on March 26, 2014, 06:02:26 AM
A few weeks ago I signed up for Norwegian trading at IB.  I love IB but their Norwegian trading was a bust.  Its not really Norwegian, but a Nordic trading platform of Sweden and Norway combined originating in Sweden.  It is the pink sheet version of that market.  So the liquidity is zilch.  I don't recommend it.
Title: Re: AWLCF - Awilco Drilling
Post by: SpecOps on March 26, 2014, 07:19:48 AM
I only got a $1 dividend, $0.10 taken in tax  :o
(UK based)
Title: Re: AWLCF - Awilco Drilling
Post by: writser on March 26, 2014, 07:29:42 AM
A few weeks ago I signed up for Norwegian trading at IB.  I love IB but their Norwegian trading was a bust.  Its not really Norwegian, but a Nordic trading platform of Sweden and Norway combined originating in Sweden.  It is the pink sheet version of that market.  So the liquidity is zilch.  I don't recommend it.

You mean OMX nordic instead of the actual OBX? Agree it's not optimal, but better than nothing. Liquidity in the larger names is fine. And any bigger order you enter will probably be ARB-ed v.s. the real exchange anyway so you shouldn't be that worse off.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 26, 2014, 12:39:47 PM
Ah yea now it makes sense. They don't refer to it as OsloBors because...it's NOT OsloBors...what was I thinking?  :o

OMXNO = Nasdaq OMX Nordic...and bz1516 is right, it has zero liquidity.

http://www.nasdaqomxnordic.com/aktier/microsite?Instrument=SSE89393&name=Awilco%20Drilling (http://www.nasdaqomxnordic.com/aktier/microsite?Instrument=SSE89393&name=Awilco%20Drilling)
Title: Re: AWLCF - Awilco Drilling
Post by: writser on March 27, 2014, 02:31:24 AM
IB dividends also arrived. $1.10.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on March 31, 2014, 04:05:26 AM
Published: 08:00 CEST 31-03-2014 /GlobeNewswire /Source: Awilco Drilling Plc /XOSL: AWDR /ISIN: GB00B5LJSC86

AWDR - Successfully completed bond issue

Awilco Drilling PLC has successfully completed a USD 125 million secured bond loan in the Norwegian bond market with maturity in April 2019. The purpose of the bond loan is refinancing of existing debt and for general corporate purposes. Settlement date is expected to be 9 April 2014 and the bond loan will be issued with an interest rate of 7.00%. The bond issue was substantially oversubscribed. An application will be made for the bond is to be listed on Oslo Børs.

RS Platou Markets AS acted as sole manager and bookrunner.
 
Aberdeen, 31 March 2014
 
 
For further information, please contact:
Ian Wilson, CFO Awilco Drilling
Telephone: +44 7789 954569
 
Cathrine Haavind, IR Manager, Awilco Drilling
Telephone: +47 93 42 84 64
 
Simen Flaaten, RS Platou Markets
Telephone: +47 22 01 63 77
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on March 31, 2014, 06:07:37 AM
So they got the interest rate reduced by 200 basis points, so it reduces interest around $2.25 mm per year. It'll be interesting to see what they do with the extra $27 mm. My guess it goes to paying off part of the BOP.


Edit: Checking the AWDR stock, it's up almost 3% this morning, trading around $20.71 USD
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on March 31, 2014, 08:11:43 AM
So they got the interest rate reduced by 200 basis points, so it reduces interest around $2.25 mm per year. It'll be interesting to see what they do with the extra $27 mm. My guess it goes to paying off part of the BOP.

Hmmm....my guess is that it will be used to "smooth" out the dividend. 

$27MM is not enough to make another acquisition.  It is enough to pay a quarterly dividend, or to pay for the BOP.

I would rather have the company borrow money to keep the dividend steady for a quarter than drop it.  Dropping the dividend, if only for a quarter, would spook too many investors...
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 31, 2014, 09:10:22 AM
I'd love to pick up more shares when if/when they are dumped for a temporary dividend cut/pause! As for the interest rates, anyone know how the 7% is chosen? Is it company saying "we would like to issue 7% bonds" ? Or the underwriter suggesting they issue 7% bonds?

If the goal is to price the bonds at a price no higher than at which 100% of them would be sold, and if 7% caused it to be "substantially oversubscribed," why was the interest rate not lowered further? Any insight into the pricing appreciated. TIA.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on March 31, 2014, 09:33:43 AM
Hah, I was thinking in similar lines this morning. AFAIK the bookrunner assesses demand for the new issue (but they also have to keep their buyers happy). Price discovery happens 'off-market' so it is not terribly efficient. Looks like this one could (in hindsight) be priced a bit more competitively.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 31, 2014, 02:13:35 PM
So I'm reading this quarterly report from a Value Fund based in Australia and I stumble upon a discussion about global Oil demand/supply dynamics and his outlook for the future. A very rational discussion I believe. Then what follows is this:



"One obvious beneficiary of increased upstream, or exploration, activity is the offshore
drilling sector. Exploration and production companies will continue to drill as long as they
can earn attractive rates of return and, in the current environment, that makes for a busy
market. Rig utilisation is very high around the world, and contracted daily rates are healthy.
The Fund has invested in one stock in this sector paying a dividend yield in excess of 20%. The shares are very thinly traded which helps explain its discounted price. Positive
attributes include stable cash flow stemming from a contracted rig fleet, a low cost of
marginal production, which helps insulate it against movements in oil prices, and a savvy, opportunistic management team. It’s far from risk-free—there is no doubt returns like these
will lure new competition and drive returns down—but a healthy flow of cash back to
shareholders over the next few years will diminish much of the risk for today’s purchaser."


He never mentions the name under the guise of "reserving the option to purchase more stock in the near future," but what are the chances that he's talking about Awilco? It sure feels like it...  :D

Or maybe I'm suffering from confirmation bias...

Souce: http://www.iifunds.com.au/sites/default/files/report/IIF_QR_SEP_13_3.pdf (http://www.iifunds.com.au/sites/default/files/report/IIF_QR_SEP_13_3.pdf) [Page 6 & 7]
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on April 01, 2014, 05:20:21 PM
They put their bond presentation online as well:

http://www.awilcodrilling.com/document-file7967?pid=Native-ContentFile-File&attach=1
Title: Re: AWLCF - Awilco Drilling
Post by: writser on April 02, 2014, 02:41:53 AM
Thanks, nice find. Reading it reminded me how well-timed (lucky?) their acquisition was; they bought 2 rigs for $200m four years ago and in 2013 excess cash flow was already > $100m. Granted, no downtime / upgrades in 2013 but still impressive.

According to the presentation their backlog is now $712m with options outstanding for 275 days and 27 months (!) respectively.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on April 03, 2014, 09:39:33 AM
http://www.hegnar.no/personlig_okonomi/artikkel496591.ece


Quote
Extension golden bird in Awilco
The valuation of individual stocks trying Collett & co. to calculate the composition of a fair value for the company.

- We find out what we think the company will earn , compared to what it should be worth . There will also be a relative game compared to other stocks, and it is to erect companies against each other that we have the matrix continues Arctic director .

In February 2012, when the rig company Awilco Drilling accounted for 35 kroner, Collett & co. forward to a fair value of 130-150 per share.

Price target of 140 million was reached in November last year, when the stock was at all- time high of 142 million .

- When this happens , implies our strict discipline that we sell. So did we , and made ​​money in spades at the company, says Collett .

Strong upside rig
He shows us a matrix that tells us that managers see little upside in rig time.

Three out of five shares - Fred. Olsen Energy , Seadrill and Songa Offshore - is the Arctic's target price at current levels.

Odfjell Drilling and Awilco Drilling has upside , but limited .

Awilco get the best matrix score of 11, while Songa Offshore receive the lowest score ( 6).
Title: Re: AWLCF - Awilco Drilling
Post by: Blue Macaw on April 04, 2014, 12:57:38 AM
Interesting company. Have not entered yet but seems very promising to be honest. Good balance sheet and restructuring debts.

Seems to be a little undervalued at current prices. I get an up to date value of about 150 NOK.
However with time this company could increase revenue by adding another rig which would mean growth...
Title: Re: AWLCF - Awilco Drilling
Post by: phil_Buffett on April 05, 2014, 02:31:19 AM
from the value Investors conference

http://www.scribd.com/fullscreen/216397165?access_key=key-8ttbbfi8dnufna3cg82&allow_share=true&escape=false&view_mode=scroll
Title: Re: AWLCF - Awilco Drilling
Post by: Daytripper on April 13, 2014, 07:10:41 PM
Northern Offshore has been mentioned a couple of times in this topic.  I own some shares, any one else?
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on April 13, 2014, 09:32:06 PM
Northern Offshore has been mentioned a couple of times in this topic.  I own some shares, any one else?

I also own some shares of Northern Offshore...

Be aware this company's management is no where near as good Awilco's.

I think the whole key with Northern Offshore is the drillship off of Nigeria.  If that works out OK, AND we get more cashflow that is distributed to shareholders, the stock will pay some nice dividends and then pop up in price.  At that point, I would be tempted to sell.

The risk is higher, but so are potential capital gains.

Perhaps I should start a thread for this...
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on April 16, 2014, 05:19:48 AM
Fat finger or did someone make a huge buy?


http://www.netfonds.is/quotes/intradaymagnify.php?paper=AWDR.OAX

(http://www.netfonds.is/charts/tintraday.php?paper=AWDR.OAX&width=500&height=250&style=plain)



Edit: looks like the Bors is on a half-day schedule today. Thus no trading after 13:00
Title: Re: AWLCF - Awilco Drilling
Post by: Danger Zone on April 25, 2014, 12:39:29 AM
Annual Report is out :
http://hugin.info/147077/R/1779887/608354.pdf

No real surprises here imo.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on April 25, 2014, 11:05:41 AM
Hi everyone - I'm going to try writing up my portfolio for nocalledstirkes.com one investment at a time.  Today I am on AWILCO.  I doubt there is anything new on my post for those of you who are familiar with the company, but I wanted to revisit this profitable investment to help me with my portfolio weighting.




Awilco Drilling

Awilco drilling is seemingly every small cap value investor’s favorite North Sea driller; you’ll find it written up wherever value guys hang out.  Its high dividend is its primary attraction and the dividends sustainability, its primary question mark.

Usually high yields usually scream trouble to me, and I can identify several scenarios where Awilco’s dividend could be challenged, but I believe Awilco also holds a sustainable niche. I purchased it last year before the first dividend was paid and while it’s not the “load up the truck” buy of last year, it’s still attractive.

This post is my one year update. I wrote it to help me freshen up my valuation.  Your constructive criticisms will help me refine my analysis, so have at it, but please note I am using a yield based analysis to ballpark the value of the company. In the links to other sources at the bottom of this article, you can find a more traditional cash flow model if that’s your preference.

History of Awilco

Awilco Drilling PLC is a UK based drilling contractor. It owns and operates the two refurbished and enhanced mid-water semi-submersible drilling units, WilPhoenix and WilHunter, each rated to operate in 1200 and 1500 feet of water respectively.  In 2009, Transocean wanted to merge with GlobalSantaFe, but the combination would have created a total monopoly in the North Sea. To obtain UK approval, Transocean was required to sell off two ships to another operator. Transocean needed a buyer quickly, the Awilhelmsen group fit the bill, and thus began the current incarnation of Awilco Drilling.

Awilhelmsen group is a private Norwegian company with interests in shipping, oil field services, real estate and financial investments.  They owns 48.7% of Awilco Drilling and are the controlling investor. Awilco’s market cap is approximately 645 million with 125 million in 5 year debt. The stock was listed publically in 2011 on the Oslo Axess exchange as AWDR:NO and  is also available on the pink sheets as AWLCF. Not surprisingly, liquidity is significantly better on the Axess market than the pink sheets.

The WilPhoenix and the WilHunter rigs were almost 30 years old when they were purchased from Transocean in December 2009. Upon receipt, Awilco’s first action was to take the old rigs to dry dock and invest another 97 million to upgrade the rigs, enhance their capabilities and extend their life another 20 years.  The upgrades improved the rigs highly desirability and reliability. They have been under continual contract since released from the shipyard in 2011.

In January 2013 the company announced it would begin paying out all its available cash over a $40 million reserve as dividends.  Until then, the company was aggressively paying down debt. The first dividend payment began at $1/quarter in May 2013 and was raised to $1.10/quarter this past November.

On a $21.50 stock, a $4.40 per year dividend is a yield of 20.4%. Pretty good, eh? Well yes, but there are some gotchas. For starters, the rigs only have 18 years of fatigue life left in them.  This means (a) we only get the dividends for 18 years and then nothing, and (b) part of our dividend is really the depreciation of our rigs as they covert from productive equipment today to scrap in 18 years.  We should consider this portion of the dividend as a return of capital and definitely not earnings.

To model the depreciation in value, we can divide the share price of $21.50 by 18 years of remaining life or $1.20/year. Now the value of the rig probably only declines as a straight-line if you’re an accountant. In reality, the decline in the rigs useful value would be more back end weighted, but I’m being intentionally conservative. With this assumption, the $4.40 actual dividend, less this $1.20 adjustment equals a $3.20 normalized dividend.  At our $21.50 share price, we get a normalized yield of 14.9%.

But we still have some adjustments to make. We need to account for scheduled and unplanned maintenance. For instance, one ship is due to dry dock for two months in 2016.   While the cost of the maintenance is already accounted in the cash the company keeps in reserve for maintenance; there is no reserve for the loss of revenue while the rig is in dry dock.    So if both rigs are out of action two months every five years for scheduled maintenance and we have another two months of unplanned downtime per rig every five years as well, we need to reduce the normalized yield by 4/60 or 6.6%. This takes us down to a normalized yield of 13.9%.

While 14% is not as eye catching as 20%, it’s still a pretty impressive number in a low interest world. For comparison, Awilco’s 5 year bonds yields 7%.  If a normalized 12% would seem reasonable for a small cap with good management, then a little more capital appreciation would seem possible as well.  With a 16% bump in price to $25/share, Awilco would trade for a 12% normalized yield while still paying out $4.40 per share in dividends.

Currently, day rates in the North Sea are benefiting from a tight market.

Can this last? Normally, I would advocate for a quick revision to the mean, but Awilco is a little different situation that many rig operators.

Awilco management thinks day rates will soften in 2015 and firm back up in 2016.  The following two charts from their March presentation show the status of North Sea rig utilization and contracts.

AWDR_Mid-Water_Fixtures

 

AWDR_Floater_Availability

But aren’t day rates are notoriously volatile and what about all those new super rigs being built?

Yes, rates are volatile, but only where there is an active, changing market. For me, this is where the investment gets very interesting and Awilco picks up a little bit of a moat.

The North Sea is a mature oil province that was drilled up in the 1970’s and 80s. In its day its wells drilling in 1000 feet of water were considered deep, but that was 20 years ago.  Now, no one considers the North Sea to be deep water anymore. So while plenty of new rigs are being built, all of them are being built for much deeper water (5000-10,000 feet) where operators will pay much higher rates.

No one is building brand new rigs for the old mature fields and no one can afford to pay deep water rates for routine work in the North Sea. But the old mature fields aren’t dead just yet; there is still remedial work to be done and spot opportunities to apply new technology. If nothing else, the current rigs in the North Sea could stay busy plugging and abandoning the old wells for years to come.

What keeps competition from moving in and lowering day rates?

While rigs can be moved across the ocean from one basin to another that takes months during which time the rig is not earning money.  Furthermore, not just any rig can be certified for North Sea operations, so there is a regulatory hurdle to be overcome to operate in the UK during which time the rig would also be sitting around not earning any money.  Finally, but not insignificantly, the old rigs made for the North Sea were designed for the North Sea and deal with its notorious weather and rough seas better as well, but no one is building brand new, old rigs anymore.

The most likely competition would be someone doing what Awilco did.  Buy an old rig take it off the market for a year and retrofit it.  To make the economics work best, it would help to have a forced seller like Awilco had with Transocean.  It could happen, but it will not happen overnight.

The company's current contracts are with strong counter-parties, so we're covered through 2016, but long term this is probably the most significant risk.

Key Indicators to watch:

Day rates for Awilco’s drill semi-submersibles – Any changes on the contracts?

Day rates for North Sea drillers – Is anybody bring new rigs into the market?

Any significant change in the price of oil? – Obviously a long-term significant price drop would impact the day rates.

Additional Risks

Rig accident -   Every 10 years there is a catastrophic offshore drilling accident resulting in a huge fire, spill, destruction of the rig, and a tragic loss of life.  However, every year 600-700 offshore rigs across the globe operate safely without incident and news coverage.  Yes, a tragedy could strike Awilco, but this needs to be weighted as a 1 in 500 type event or even a 1 in 100 probability and can be accounted for by reducing the value of your investment by 1 per cent.

Unfavorable acquisition – Currently, Awilco is a cash generating dividend paying machine. What happens if Awilco purchases another rig or makes another large acquisition?  Will this dry up the dividends? Perhaps, but let’s don’t forget that the Wilhelmsen’s made a pretty good deal when they bought the two rigs from Transocean a few years ago. Maybe should want them to make another good acquisition and make us even more money.  This risk is probably a wash. They do seem like intelligent operators.

Extended drop in oil prices – Some North Sea work is mandatory for regulatory reasons and needs to be performed regardless of the current oil price, but the majority of well work is done for purely economic reasons which would obviously suffer with a 30% drop in oil prices.  Of course, a rise in oil prices is always possible too.  Shave a little more off fair value for this risk if you want, but wait until Mr. Putin is finished annexing the Ukraine first.

Regulatory Risk – There’s been chatter of a change in UK taxes, but nothing firm.

Other good sources of information:

To learn more about AWILCO, check out these links:

Company Presentation March 2014

2013 Annual Report

www.Valueinvestorsclub.com

http://otcadventures.com/?p=1066

http://alphavulture.com/2013/11/14/awilco-drilling-reports-q3-results/

Tim Eriksen’s Value Investing Congress Notes

 Disclaimer: I own AWLCF and AWDR:NO

 
Title: Re: AWLCF - Awilco Drilling
Post by: Daytripper on May 03, 2014, 01:32:34 PM
Just a short blurb on ValueWalk about Awilco

http://www.valuewalk.com/2014/04/awilco-vantage-and-opportunities-in-small-cap-offshore-drillers/ (http://www.valuewalk.com/2014/04/awilco-vantage-and-opportunities-in-small-cap-offshore-drillers/)
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on May 07, 2014, 04:00:31 PM
http://www.bidnessetc.com/21738-transocean-ltd-nyse-rig-news-analysis-plans-to-spin-off-part-of-its-north-sea-business/

I'm not sure if Transocean spinning off its UK rigs is a positive or negative for Awilco or just a confirmation that those rigs should just be run for cash.  On one hand, a smaller competitor might be more nimble and more competitive or it might be loaded down with debt and unable to compete. 

On the plus side, I'm pretty sure this means we don't have to worry about Transocean bringing in anymore rigs to the UK in the near term.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on May 07, 2014, 05:31:39 PM
http://www.bidnessetc.com/21738-transocean-ltd-nyse-rig-news-analysis-plans-to-spin-off-part-of-its-north-sea-business/

I'm not sure if Transocean spinning off its UK rigs is a positive or negative for Awilco or just a confirmation that those rigs should just be run for cash.  On one hand, a smaller competitor might be more nimble and more competitive or it might be loaded down with debt and unable to compete. 

On the plus side, I'm pretty sure this means we don't have to worry about Transocean bringing in anymore rigs to the UK in the near term.

It might also give us some publicity, and give the market a comp to help investors price Awilco.  I'd say positive.
Title: Re: AWLCF - Awilco Drilling
Post by: bizaro86 on May 08, 2014, 10:09:57 AM
I'd say a big positive. Transocean is saying they'll MLP their rigs. So they'll be run for cash, but will trade based on US MLP yields. The market will value those rigs much higher than the awilco rigs. Two ways for us to win: the market re-rates Awilco to the higher valuation of the MLP, or the MLP buys Awilco as an accretive acquisition to move its distribution up and get closer to IDRs.
Title: Re: AWLCF - Awilco Drilling
Post by: Olmsted on May 09, 2014, 09:23:33 AM
Hadn't thought about the second option.  Good point.  That would be a somewhat humorous full circle for those rigs.
Title: Re: AWLCF - Awilco Drilling
Post by: saltybit on May 13, 2014, 10:18:05 PM
q1 2014 results
http://www.awilcodrilling.com/4142-Financial-News-Message?msg=http://cws.huginonline.com/A/147077/PR/201405/1785208.xml

Title: Re: AWLCF - Awilco Drilling
Post by: phil_Buffett on May 14, 2014, 12:39:17 AM
q1 2014 results
http://www.awilcodrilling.com/4142-Financial-News-Message?msg=http://cws.huginonline.com/A/147077/PR/201405/1785208.xml



thank you :).  higher dividend. nice!
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 14, 2014, 01:28:09 AM
Nice that they raised the dividend for the SECOND time.

Looks like higher contract rates are starting to kick in.

Looks like they are executing well across the board.

I like it when a plan comes together!
Title: Re: AWLCF - Awilco Drilling
Post by: Josh4580 on May 14, 2014, 06:41:01 AM
Q1 Presentation Slides

http://hugin.info/147077/R/1785333/612118.pdf
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on May 14, 2014, 08:47:59 AM
As per conference call - two recent contracts point to a tight market: 1. Transocean's PBLJ extending with Total S.A. for 2 years @ 430k/day and 2. Diamond Offshore's Ocean Princess for a summer campaign @ 345k/day.

Current tax rate = 8-10%. Given the possibility of increased taxes, worst case tax rate scenario of 20%, but most appropriate to use "high teens" as the tax rate - so roughly double the current tax rate.
Title: Re: AWLCF - Awilco Drilling
Post by: GregS on May 14, 2014, 09:31:34 AM
Nice that they raised the dividend for the SECOND time.

Looks like higher contract rates are starting to kick in.

Looks like they are executing well across the board.

I like it when a plan comes together!

It's important to remember the dividend will likely go down if future results are weaker.

That said, this quarter shows great execution, and they have maintained their commitment to paying out their cash flow.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on May 14, 2014, 09:42:54 AM
Yes, but in the near future results are most likely only going to be better. The contracted day rates will increase significantly in June, and that's revenue that will flow straight to the bottom line.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 14, 2014, 11:15:41 AM

It's important to remember the dividend will likely go down if future results are weaker.

That said, this quarter shows great execution, and they have maintained their commitment to paying out their cash flow.

Yes, if cash flow goes down significantly, so will the dividend.

HOWEVER, day rates are set to SPIKE UP almost immediately.

For example, WilHunter goes from $360k to $385k a day for the next 18 months till it goes into the yard for maintenance & upgrades in Dec. 2015.  So that is an EXTRA $25k a day.

Further, WilPhoenix goes to $442.5k a day as soon as 1 week.  It will stay there for at least 2 months....maybe as long as 5.5 months.  THEN it goes to $387.500 a day.  That is a MINIMUM increase of $65k a day increase, perhaps more...

So anyway you slice it, we will be getting an additional $100k a day very soon.  That is going to be largely profit and will largely flow out as dividends.

So I think we shall see another increase soon.
Title: Re: AWLCF - Awilco Drilling
Post by: GregS on May 14, 2014, 11:32:06 AM
I agree and I'm long.

Just pointing out to anyone new to the story (not you guys) that this dividend is more variable than is typical.
Title: Re: AWLCF - Awilco Drilling
Post by: Danger Zone on June 20, 2014, 04:07:26 AM
Great performance on this stock the last couple of weeks, especially with the dividend coming next week. How do you guys think the current situation in Iraq will affect Awilco's chances of negotiate a good contract extension on Wilhunter for 2016?

My view as an amateur is that the situation in Iraq will continue to escalate, which will push oil prices higher. Wether or not this will persist long enough for Awilco to be affected through higher dayrates on future contracts remain to be seen though. It would be interesting to hear how others view the situation.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on June 20, 2014, 04:34:10 AM
I don't think I can outperform the market by predicting how the current situation in Iraq will affect dayrates for rigs in the North Sea in the next 10 years. If I had to guess one thing it would be that it doesn't affect Awilco in a meaningful negative way. I don't see the point in speculating about it - we are clueless about the future and at best we lull ourselves in a false sense of security. All I know is that given the current situation Awilco looks cheap and that's good enough for me. If you think oil prices will be pushed higher you could buy a couple of Brent futures instead. But this was probably not the answer you were looking for :) .
Title: Re: AWLCF - Awilco Drilling
Post by: Danger Zone on June 20, 2014, 04:48:35 AM
I don't think I can outperform the market by predicting how the current situation in Iraq will affect dayrates for rigs in the North Sea in the next 10 years. If I had to guess one thing it would be that it doesn't affect Awilco in a meaningful negative way. I don't see the point in speculating about it - we are clueless about the future and at best we lull ourselves in a false sense of security. All I know is that given the current situation Awilco looks cheap and that's good enough for me. If you think oil prices will be pushed higher you could buy a couple of Brent futures instead. But this was probably not the answer you were looking for :) .

Just to be clear, I bought my Awilco positon over a year ago and I am probably the last person to outperform the market through macro predictments. That being said, I find it interesting to consider how current events may affect the underlying businesses of the stocks I own. I would not change my perception of the intrinsic value of a holding based on a macro event though (unless it is something huge, like heavy regulations).
Title: Re: AWLCF - Awilco Drilling
Post by: Tim Eriksen on June 27, 2014, 02:07:38 PM
Was anybody in the US charged a withholding tax on their dividend?  If so, at what rate?
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on June 27, 2014, 03:29:32 PM
Tax withheld? No.

Exchange rate conversion fee? Yes.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on June 30, 2014, 11:24:34 PM
More debt:
Quote
The Financial Supervisory Authority of Norway has approved the prospectus dated 30 June 2014 that has been prepared in connection with listing of Bonds issued by Awilco Drilling PLC in a USD 125 million Senior Secured Callable Bond issue with maturity in 2019, ISIN: NO 001070928.0 on Oslo Børs.

Wondering what their plans are.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on July 01, 2014, 04:54:47 AM
With a bond offering of over $100MM, I think that can only mean one thing...they've got another rig in their sights.

IF that is the case, that will put to rest one of the criticisms that the company is going to have a limited life span with only two "old" rigs.

It will also make a dent in the criticism that the company is "too small".

Believe it or not, I had investor friends who turned down AWLCF at $15/share because "I can't be bothered with such a small company!".  Mind you, this is an individual investor, and not a fund manager.  Another investor I know absolutely REFUSED to believe they were paying a dividend.  If Yahoo! says they aren't paying a dividend, then I believe them. 

I've never seen such crazy thinking.  Then again, if investors were rational all the time, getting bargains would be much more difficult.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on July 01, 2014, 05:00:36 AM
These are simply the bonds that were issued earlier this year. The only news here is that these bonds will now be listed on the exchange to facilitate trading.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on July 01, 2014, 05:24:04 AM
My bad, that looks more likely.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on July 22, 2014, 01:27:41 PM
Ladies and gentlemen, I present to you, Harry Long:

http://seekingalpha.com/article/2330685-awilco-drilling-is-still-the-worlds-most-undervalued-company
Title: Re: AWLCF - Awilco Drilling
Post by: yadayada on July 22, 2014, 01:36:35 PM
oh well time to sell
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on July 22, 2014, 02:04:34 PM
He must have been the one pushing up the price the last few days. It ramped $5 last time he ran his seekingalpha piece.
Title: Re: AWLCF - Awilco Drilling
Post by: peter1234 on July 22, 2014, 08:59:58 PM
Why is he looking at individual stocks?

I thought he invented this magical money making machine?

 ;)
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on July 22, 2014, 09:01:56 PM
Why is he looking at individual stocks?

I thought he invented this magical money making machine?

 ;)

You mean this ? http://www.amazon.com/Youre-Welcome-Planet-Earth-Powerful-ebook/dp/B00DBT66MI (http://www.amazon.com/Youre-Welcome-Planet-Earth-Powerful-ebook/dp/B00DBT66MI)


 :D
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on July 24, 2014, 12:56:03 PM
http://www.proactiveinvestors.com.au/companies/news/56260/uk-government-launches-urgently-needed-north-sea-tax-consultation-56260.html (http://www.proactiveinvestors.com.au/companies/news/56260/uk-government-launches-urgently-needed-north-sea-tax-consultation-56260.html)

http://www.ft.com/cms/s/0/45e463d8-0b35-11e4-9e55-00144feabdc0.html (https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CCkQFjAD&url=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F45e463d8-0b35-11e4-9e55-00144feabdc0.html&ei=wmTRU_7WI4zKsQSfj4BQ&usg=AFQjCNELUkAZ3loAfaRyqeY0t2rq_UKnmw&sig2=m8fWEtHNH0w1OI_qqcTypQ&bvm=bv.71667212,d.cWc)

http://www.energyvoice.com/2014/07/game-changer-tax-break-boost-north-sea-exploration/ (http://www.energyvoice.com/2014/07/game-changer-tax-break-boost-north-sea-exploration/)
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on August 12, 2014, 10:06:30 PM
Published: 07:00 CEST 13-08-2014 /GlobeNewswire /Source: Awilco Drilling Plc / : AWDR /ISIN: GB00B5LJSC86
AWDR - Awilco Drilling Reports Q2 2014 Results


Awilco Drilling PLC reported contract revenue of USD 66.3 million (USD 62.7 million in Q1 2014), EBITDA of USD 42.4 million (USD 44.1 million in Q1 2014) and net profit of USD 25.9 million (USD 34.5 million in Q1 2014).

Revenue efficiency was 99.7% during the quarter (97.2% in Q1 2014).

Contract backlog at the end of Q2 was approximately USD 642 million (approximately USD 707 million Q1 2014).

The Board approved a dividend distribution payable in Q3 2014 of USD 1.15 per share.  The share will trade ex-dividend on 19 August 2014, the record date is 21 August 2014 and the payment date is on or around 19 September 2014.

Please see attached for the Q2 2014 report.

A quarterly presentation will be held on the 13th of August 2014 at 10:30 CET in Awilhelmsen's offices at Beddingen 8, Aker Brygge, Oslo, Norway.

A conference call will be held on the 13th of August 2014 at 13:30 UK time (14:30pm CET / 08:30 EST). The presentation will be available for download on the Investor Relations section (go to "Press Releases") at
www.awilcodrilling.com (http://www.awilcodrilling.com/?nid=39593&lcid=1044) prior to the call. There will be a Q&A session after the presentation.

Conference Call Dial-in details:
Standard International Access: +44 (0) 20 3003 2666 (http://www.cornerofberkshireandfairfax.ca/forum/tel:%2B44%20%280%29%2020%203003%202666)
UK Toll Free: 0808 109 0700
US Toll Free: 1 866 966 5335 (http://www.cornerofberkshireandfairfax.ca/forum/tel:1%20866%20966%205335)
Norway Toll Free: 800 19 457

Password: Awilco


Aberdeen, 13 August 2014



For further information please contact:

Jon Oliver Bryce, CEO
Phone: +44 1224 737900

Cathrine Haavind, IR Manager
Phone: +47 93 42 84 64


This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on August 13, 2014, 06:42:18 AM
$1.15/quarter... ah, Awilco, the gift that keeps on giving...

Reading the materials, but not hearing the presentation yet, I sense they are trying to prepare us for a relatively softer market in 2015.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on August 19, 2014, 12:20:27 AM
So today's the ex-div date yet the stock is trading at 153 NOK about US$24.82 (compared to previous close of 156 NOK or US$25.32), and adding the div of $1.15, that's almost $25.97

Shouldn't stock drop equivalent to the div value on the ex-date?
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on August 19, 2014, 06:53:00 AM
I just want to get this straight - even if drilling activity slows down during the term of the contract, they still pick up the contract revenue....and and hence the cash flow right? If that is the case, shouldn't we expect more cash flow due to lower OpX?
Title: Re: AWLCF - Awilco Drilling
Post by: yadayada on August 19, 2014, 06:57:53 AM
I don't get why this is still cheap. It seems these companies are at cyclical tops, and it is trading 5-6x FCF. How do you know they will still print money with these rigs 8-10 years from now? The rig business looks pretty volatile to me.
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on August 19, 2014, 07:10:50 AM
^Isn't that all the right reasons for making it cheap?
Title: Re: AWLCF - Awilco Drilling
Post by: CorpRaider on August 19, 2014, 07:14:22 AM
Contract offshore drilling is at a cyclical top?  That's news to me.  I thought it was in the crapper because of macando and the shale revolution, which timed up perfectly with lots of rigs ordered during that "peak oil" nonsense.  Anyone done much work on RIG or ESV?  RIG seems pretty interesting.
Title: Re: AWLCF - Awilco Drilling
Post by: yadayada on August 19, 2014, 07:23:14 AM
well rig supply is suposed to be tight, and when I search for dayrates, I see mostly up trending graphs. Day rates are almost twice as high as three years ago. What is stopping new supply coming in within the next 3-5 years? Also it seems this is not a very stable long term industry to be in. So if you are buying at current prices you are basicly saying this is not a concern, but I am not sure why? A cyclical seemingly at or near the top of a cycle at 6x earnings is not very cheap.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on August 19, 2014, 08:33:33 AM
I don't get why this is still cheap. It seems these companies are at cyclical tops, and it is trading 5-6x FCF. How do you know they will still print money with these rigs 8-10 years from now? The rig business looks pretty volatile to me.
How much they will earn 8-10 years from now is not extremely important. In my model the NPV of the first 8 years is roughly twice the NPV of the last 9 years at a 10% discount rate. At a 15% discount rate the NPV of the first 8 years is more than 3 times as big as the NPV of the last 9 years.
Title: Re: AWLCF - Awilco Drilling
Post by: yadayada on August 19, 2014, 09:05:18 AM
what is your calc npv of coming 8 years then? It seems the past 9 years is irrelevant, what is more relevant is how it compares to the current market cap?
Title: Re: AWLCF - Awilco Drilling
Post by: writser on August 19, 2014, 09:47:57 AM
Back of the envelope: if Awilco maintains the current dividend you run break-even in ~7 years. And that's ignoring the resale / scrap / take-over value of their rigs. They have 4 rig-years of backlog at nice rates and clients have options for 3 more rig-years so you're pretty much guaranteed to receive your dividend stream the first few years years. Everything after 8 years you basically get for free.

But granted, it is not the cheapest stock out there anymore after the run-up and if you have a very strong opinion about the future of the offshore business this is probably not for you.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on August 19, 2014, 10:00:44 AM
Also, I don't know what dayrates you are looking at (I suspect US stuff that plummeted after the Deepwater Horizon accident) but I don't see a 100% squeeze in UK dayrates in the Awilco presentations. I don't really have an opinion either way though.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on August 19, 2014, 10:02:49 AM
I don't think they will be able to maintain the dividend. They have to spend a significant amount of capital on the upgrades and yard stay in 2015 and 2016. They are only able to generate the current dividend with a high revenue efficiency and low capex.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on August 19, 2014, 10:17:43 AM
That's why I said back of the envelope. I agree the dividends will probably go down at some point but the blowout preventer upgrades should increase the future value of the rigs. Left pocket-> right pocket.
Title: Re: AWLCF - Awilco Drilling
Post by: yadayada on August 19, 2014, 10:18:24 AM
I like pabrai's principle of investing, finding investments with at least 100% upside in a reasonable case. Not sure I see that here. It looked v good at 14$ though. You have to make pretty aggressive assumptions now to get to a double. Allthough I agree that downside seems v limited too.
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on August 19, 2014, 11:57:17 AM
I just want to get this straight - even if drilling activity slows down during the term of the contract, they still pick up the contract revenue....and and hence the cash flow right? If that is the case, shouldn't we expect more cash flow due to lower OpX?

Bump...Anyone know the answer?
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on August 19, 2014, 12:07:29 PM
I just want to get this straight - even if drilling activity slows down during the term of the contract, they still pick up the contract revenue....and and hence the cash flow right? If that is the case, shouldn't we expect more cash flow due to lower OpX?

Bump...Anyone know the answer?
Yes, they will pick up the contract revenue but don't think you should really expect that operating expenses will be significantly lower in that scenario. The main issue is that when drilling activity slows down during the term of the contract that the extension options might not be exercised, or that they will be exercised at a significantly lower day rate. 
Title: Re: AWLCF - Awilco Drilling
Post by: bizaro86 on August 19, 2014, 01:24:43 PM
Hielko is correct. If an oil company has to pay for the rig, they'll find something to use it on, almost certainly, so you shouldn't model any opex savings. The real risk is if the pricing environment is bad when their contracts are up for renewal.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on August 19, 2014, 03:08:42 PM
The ENTIRE rig sector is experiencing weakness, and in my opinion there are some good values to be found. The weakness is caused by the fear that oil majors are cutting back on capex to return more capital to shareholders. On the other hand...reserves are harder to replace, and the companies are forced to drill in newer/exotic markets and at a higher depths.

At the same time, Macondo forced the oil majors to prefer newer, higher spec rigs over older, low spec rigs due to safety reasons. That is the reason why you see a lot of legacy rig companies (like transocean, Noble) seeing weakness. This is the reason why you see spinoffs and MLP creations from the older rig companies. In other words, there's a huge bifurcation going on in the rig market.

So the way I think it plays out is that companies like Seadrill - the ones that have the newest/best/most sophisticated fleet will see the least downside (in terms of rig utilization at least). Because companies like Transocean are stuck with old rigs they will bear the brunt of any cuts in drilling capex.

What makes it worse for old rig owners is that ever few years, time comes for SPS (periodic surveys) which cost a lot of money. And without SPS you can't lease the rig. So they must decide if they want to spend tens of millions of dollars on something that's is already unpopular and becoming less so going forward.

IMO, a company like SDRL that pays 11-12% div yield is a pretty good value as long as you aren't a huge bear on oil.

As for Awilco, I believe it has been rather insulated due to it being in North Sea. Regulations, harsh weather certification and the fact that they are among the best (or soon will be best with newer BOPs) among their cohort.

What I fear is that if the older rigs that don't get utilization in north america, africa, middle east, asia - start moving en masse to north sea and compete with WilHunter and WilPhoenix.

Also I think the risk reward at this price isn't that good. SDRL for example, is more diversified and has an attractive FCF yield, comparable to AWLCF, is more diversified, has newer fleet and has equally shrewd owner-operator (John Fredriksen).

Having said all this, I'd love to get into the mind of the CEO/CFO/Awilhelmsen and find out how they see it playing out. If we're near the peak, why aren't they looking to sell? Do they really want to run these rigs until 2030 ?
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on August 20, 2014, 07:28:26 PM
So I'm trying to model this firm....anyone know where they came up with the Change in Trade Accounts Receivable on the Group Cash Flow statement? Can't see how they derived that figure.
Title: Re: AWLCF - Awilco Drilling
Post by: SpecOps on August 21, 2014, 01:44:49 AM
I'm still long AWDR, but unsure what to make of their future. In terms of costs when they go into the yards in the next couple of years, last time they spent about $110m and that was with upgrades so I think the costs will be well below this.

In terms of the market, if you look at their results presentation p14 they show a chart of total market of rigs and number contracted. Utilization is high at the moment but has been that way since 2007. The number of rigs has stop decreasing after decade long falls.

(http://i.imgur.com/zrYKmSF.png)

But it shows huge drops in utilisation occurred starting in 1999 and then 2002. If that kind of thing happens again day rates will go much lower.

Part of me thinks that for this cyclical industry we are currently in a good period and have been since 2006.
Title: Re: AWLCF - Awilco Drilling
Post by: CorpRaider on August 27, 2014, 07:09:48 AM
Seadrill giving a pretty negative outlook for the industry today.  Plans to stop all new rig orders until market turns.  Too bad they already have 18 rigs en route.

http://finance.yahoo.com/news/rig-company-seadrill-hit-profit-081150044.html

I've been looking at this one and RIG.  Seems like RIG has the most exposure to the ultra deep water and maybe a bit better balance sheet now that they've done the MLP.  Also, have Icahn in that one.  Could be in for a really long and deep trough though, especially if fracking goes global.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on September 03, 2014, 01:48:44 AM
meh: http://www.newsweb.no/newsweb/search.do?messageId=360172

Quote
The Awilhelmsen Group (through Awilco Drilling AS)
has today sold 1,634,162 shares in Awilco Drilling
PLC ("AWDR" or the "Company") at a price of NOK 120
per share. After the transaction, the Awilhelmsen
Group (through Awilco Drilling AS) owns 12,998,938
shares, or 43.3% of the registered share capital in
the Company. The Awilhelmsen Group is committed to
continue to be a long-term industrial owner of AWDR.
and: http://www.newsweb.no/newsweb/search.do?messageId=360173
Quote
On 2 September 2014, funds managed by QVT Financial
LP ("QVT") sold an aggregate 365,838 shares in Awilco
Drilling Plc at a price of NOK 120 per share.
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on September 03, 2014, 06:56:09 AM
Steadily rising day rates, majors spinning off assets, and now management selling shares....hmmm.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 03, 2014, 11:23:36 AM
Not much discussion going on here....but the biggest shareholder has decreased their stake and so has one of their non-executive BoD...at ~$20/share - a price materially lower than just a few weeks ago. A narrative coming from the management of these rigs lasting until ~2030 is nice and so is the "yield" of around 20% in a zero interest environment ...


Where does that leave us as the uninformed, minority shareholders who are the last ones to know and the most likely to get screwed if/when things take a turn for the worse?
Title: Re: AWLCF - Awilco Drilling
Post by: Tim Eriksen on September 03, 2014, 11:48:18 AM
Not much discussion going on here....but the biggest shareholder has decreased their stake and so has one of their non-executive BoD...at ~$20/share - a price materially lower than just a few weeks ago. A narrative coming from the management of these rigs lasting until ~2030 is nice and so is the "yield" of around 20% in a zero interest environment ...


Where does that leave us as the uninformed, minority shareholders who are the last ones to know and the most likely to get screwed if/when things take a turn for the worse?

Great question.  I think management is very wise.  They made an excellent purchase in 2010, after shrewdly exiting the market a few years earlier.  On the other hand, they materially diluted their ownership in an IPO at $4 (late 2010) and then $5 (in 2011).  That was clearly unwise.  No one is going to have a perfect track record, not even insiders.  And we don't know why they trimmed their position. 

The challenge with the investment (and I am still long) is that every quarter things will appear to "get worse."  In other words for a few quarters we will get nearer the yard maintenance and a probable skipped or reduced dividend, and backlog will likely decrease.  The market likes positive news.  That is just the way it is.  So bumps like this will happen.  The investors expecting a home run, or $35 to $40 per share will probably sell.   

If we look long term, things are not getting worse.  Awilco will generate approximately $9 to $12 per share (or 45% to 60% of current share price) in free cash flow over the next three years (depending on whether WilHunter option is picked up).   How many businesses will do that??  Not many.  I am comfortable owning the assets for a net price of $10 per share ($350 million enterprise value, if for simplicity I assume stock price falls the same as dividend) three years out.   The investors expecting to have a real return near the dividend yield should be pleased.
Title: Re: AWLCF - Awilco Drilling
Post by: GregS on September 03, 2014, 12:00:00 PM
Not much discussion going on here....but the biggest shareholder has decreased their stake and so has one of their non-executive BoD...at ~$20/share - a price materially lower than just a few weeks ago. A narrative coming from the management of these rigs lasting until ~2030 is nice and so is the "yield" of around 20% in a zero interest environment ...


Where does that leave us as the uninformed, minority shareholders who are the last ones to know and the most likely to get screwed if/when things take a turn for the worse?

Hard to speculate as there are many possible reasons for the sale, but with Awilhelmsen Group retaining 43% ownership they still seem to believe in the company.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on September 04, 2014, 07:33:19 AM
If you are holding Awilco shares in a Fidelity taxable account, you may benefit from this dip in price.

This spring I learned that my Awilco dividends at Fidelity were going to be reported as "non-qualified" or ordinary dividends. No amount of arguing with Fidelity could change their minds since their auditor makes all their decisions for them.  At one point, I even had to explain to them that the reason the US doesn't have a tax treaty with England where Awilco is incorporated is because England is part of Great Britain!

As the gap between ordinary and qualified dividends is up to 18%, this cost me a meaningful chunk of change. Fortunately, TD Ameritrade considered my AWLCF dividends with them as qualified and even my Fidelity IRA does not require foreign taxes withheld on the dividends either (which means they are qualified by the definition of the tax treaty, right?), so my issue is only with Fidelity's taxable account.

The obvious thing to do is to move my shares from my Fidelity taxable account to a more favorable account, but there are tax consequences to selling and TDAmeritrade won't accept my AWDR:NO shares in a transfer as they only accept AWLCF and can't arrange for a non-taxable conversion of my Oslo and pink sheet shares.  Well courtesy of the dip in price this week, I sold my highest costs basis shares at Fido this morning for a negligible profit and purchased new shares in my Roth to offset.







Title: Re: AWLCF - Awilco Drilling
Post by: tytthus on September 04, 2014, 08:47:34 AM
You don't have to file exactly as fidelity presents your 1099.  File the dividends as qualified and include a note why.  You are right and fidelity is wrong.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on September 05, 2014, 04:57:31 AM
You don't have to file exactly as fidelity presents your 1099.  File the dividends as qualified and include a note why.  You are right and fidelity is wrong.

I considered that option, but life is short, and I didn't want to spend it answering a letter from the IRS asking me why I thought I knew more about taxes than Price Waterhouse.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 09, 2014, 03:50:30 PM
Much volatility and nervousness has accompanied the latest sale. Even assuming an average of $3 dividend going forward that's 16% yield at current prices. There's quite a lot of abandonment work that's needed to be done in the north-sea which is insensitive to oil prices. With new BOPs they'll be among the attractive ones that'll be the first to find work...What am I missing? Is it just that the market needs to vent out the frustration of the insider sale, by dropping the prices even more?
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on September 09, 2014, 04:03:38 PM
don't forget about the geopolitical risks of scotland independence :)   
Title: Re: AWLCF - Awilco Drilling
Post by: GregS on September 09, 2014, 06:05:20 PM
There's obviously been a lot of concern and speculation about the stock sale, but do we know anything about who purchased the shares?
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 09, 2014, 06:39:56 PM
don't forget about the geopolitical risks of scotland independence :)   

I have no idea what ramifications this will have but if I had to guess, I'd say higher tax rates? Can anyone share more color on this?

There's obviously been a lot of concern and speculation about the stock sale, but do we know anything about who purchased the shares?

There isn't much discussion about it, because everyone is assuming (for which I don't blame them) that the smarter/more well-informed party of this transaction is the seller, not the buyer, because the former is the insider, not the latter.


I guess we'll have to wait and see until the next quarterly report and try to find the recipient of the shares that changed hands, as there has been no disclosure so far from either Awilco or Oslo Bors.
Title: Re: AWLCF - Awilco Drilling
Post by: GregS on September 09, 2014, 07:31:43 PM
There's obviously been a lot of concern and speculation about the stock sale, but do we know anything about who purchased the shares?

There isn't much discussion about it, because everyone is assuming (for which I don't blame them) that the smarter/more well-informed party of this transaction is the seller, not the buyer, because the former is the insider, not the latter.


I guess we'll have to wait and see until the next quarterly report and try to find the recipient of the shares that changed hands, as there has been no disclosure so far from either Awilco or Oslo Bors.

That's the logical conclusion.  But it seems possible (likely?) that it was one buyer and they just bought a big chunk of the company.  It's not like Awilhelmsen were dumping shares on the open market.  Hopefully we will get some disclosure soon.
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on September 09, 2014, 07:37:18 PM
don't forget about the geopolitical risks of scotland independence :)   

I have no idea what ramifications this will have but if I had to guess, I'd say higher tax rates? Can anyone share more color on this?


While higher taxes is generally a good guess, it is not a certainty.  Since Scotland depends on the North Sea not just for revenue but for jobs, you might see more tax breaks for energy work that extends the life of old fields and keeps more people employed. For instance in the U.S., the call for higher energy taxes doesn't come from the politicians of oil producing states but from the politicians of the consuming states.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on September 15, 2014, 05:43:32 AM
Hit below 100 NOK in Oslo today.
Title: Re: AWLCF - Awilco Drilling
Post by: phil_Buffett on September 15, 2014, 05:53:49 AM
Hit below 100 NOK in Oslo today.

amazing Panic. very greedy to buy more


edit: i bought more today. absolutely stunning how the stock Drops in 1 month period. dividend is still there and for me there is to much Panic.
Title: Re: AWLCF - Awilco Drilling
Post by: scorpioncapital on September 15, 2014, 07:08:31 AM
Could there be a legitimate reason for the drop? Something the market knows that we don't such as a drop on profits or use of rigs?
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on September 15, 2014, 07:15:39 AM
Could there be a legitimate reason for the drop? Something the market knows that we don't such as a drop on profits or use of rigs?

We'll find out in October if Hess picks up the WilHunter's 275 day option, with the stipulation that the day rate can/will decrease should they decide to exercise to option. Other than that, day rates are locked in until the end of 2015.


Edit: This could be the short-term floor with dividends coming in at the end of the week and DRIPs becoming active.
Title: Re: AWLCF - Awilco Drilling
Post by: matjone on September 15, 2014, 08:01:29 AM
Where are you guys buying this, and what is the commission?
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on September 15, 2014, 08:36:28 AM
Scottrade $7, TDAmeritrade $10 + $15 foreign stock fee
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 15, 2014, 06:47:25 PM
http://fortune.com/2014/09/12/scotland-uk-energy-north-sea/
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on September 22, 2014, 08:44:40 PM
So I have been thinking about the recent weakness in Awilco, as well as the other contract drilling companies (i.e. Transocean, SeaDrill, Diamond Offshore).  There is nothing like a period of weakness to re-examine the thesis for holding a stake in a particular company.

When establishing my original position in Awilco, my thesis was based on two key points:

1. Operators are shrewd capital allocators committed to returning cash flow to investors.  Just as important, operators are unlikely to engage in activities that will destroy shareholder value (i.e. purchase of new builds at the top of the rig cycle).  I don't think anything has changed with this one.  The more I think about this company and the operators, the more I think that this transaction (purchasing two rigs from transocean) was a one-off transaction.  They have no intention of becoming a big player in contract drilling (or even a medium-sized player), the original transaction just happened to be such a good deal that there was no reason not to enter the business.  It reminds me a bit of Warren Buffet's purchase of a farm in the Midwest and a building in NYC...he has no desire to become an expert/large-scale farmer or property owner...these were such good deals that it didn't take an expert to realize the value from the purchase.   

2.  The harsh North Sea environment, coupled with stringent regulations in the UK, create a niche drilling market with high barriers to entry.  I think this part of the thesis is still intact, and is generally misunderstood by the market, hence the recent weakness in Awilco along with the rest of the contract drilling market.  In general, there are two types of rigs that can enter the UK's North Sea market: (1) New rigs built to UK North Sea specs; and (2) Existing rigs operating elsewhere in the world (jackups, mid-water, and deep water rigs). 

We know that there is reasonable equilibrium in the UK North Sea market, and although day rates might come under pressure as some of the new builds arrive in the UK North Sea market over the next three years, I have trouble imagining a scenario where this influx causes a collapse (or substantial decline in day rates).  Moreover, we are probably at the top of the rig cycle right now, so additional orders for new builds (beyond what is already under construction and/or scheduled for delivery) that are built to UK North Sea specs are likely to slow down or stop for a while. 

With respect to existing rigs operating outside of the UK North Sea area, I think the barriers to entry are higher than Awilco is given credit for by the market.  I think about it in this manner: 
A) A rig must relocate to the North Sea area.  This is a time-consuming process, an expensive process (fuel, tugs, personnel), and the rigs are obviously unpaid during that period.  Relocation is a substantial opportunity cost for a rig operator, especially one that must make debt service payments, and especially with a rig that might not be designed for the harsh sea environmental or able to be certified to the UK North Sea area.  Would a drilling rig owner be more likely to roll the dice on relocating to the North Sea area (with a rig that may never be certified to operate in the North Sea area), or take a substantial cut in day rates to continue operating in the same location?     
B) Once getting to the North Sea area, the rigs must be taken to the ship yard to be upgraded for the harsh sea environment.  This is also a time-consuming process, and an expensive process as evident by the cost to upgrade Awilco's rigs.  Again, substantial opportunity cost for a rig operator as the rig sits in the ship yard, along with substantial capex costs to upgrade the rig.  And in all likelihood, the oil majors and independents are not going to sign a contract with a company until a rig is upgraded AND certified to operate in the harsh environment.   
C) After being upgraded, the rigs must be certified by the UK government to operate in the North Sea.  Again, more opportunity cost here as the rig goes through the process of being certified to operate in the North Sea environment.  (Admittedly I know very little about this certification aspect other than what folks have written on the web).     

In light of A, B, and C, the question to ask is whether the higher day rates in the North Sea compensate a contract driller for the opportunity cost associated relocating a midwater rig to the North Sea area.  I do not think that the delta in day rates between North Sea and ex-North Sea is big enough to incentivize a migration of rigs to the North Sea area.   

In general, I view the bigger issue for Awilco to be oil prices rather than increased supply of midwater rigs in the UK North Sea Market.  Assuming oil prices do not crater, there is bound to be some level of continued oil drilling in the North Sea area.  More importantly, there is a substantial amount of decommissioning work to do in the UK North Sea area. Although I can not independently verify the numbers provided in the link (http://www.offshoreenergytoday.com/decommissioning-north-sea-platforms-to-cost-66-3-b/), the author suggests that there is $66 billion dollars of decommissioning work to be completed over the next 25 years (2.64 billion dollars per year).  Assuming that the primary cost of decommissioning is the rig's day rate, $2.64 billion dollars provides enough money to keep 20 rigs operating during the year at a $350,000 day rate.  Compare this with the fact that there are currently 22 rigs operating in the UK North Sea area, and another 2 that are cold-stacked.   

Thoughts?  Have I lost my mind?
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on September 23, 2014, 12:44:30 AM
@shhughes1116: Great first post! I don't have much to add, and at the risk of succumbing to confirmation bias, I have to say I agree with what you wrote. I still feel as though I'm not as informed on the fundamentals (macro-wise) as say, someone who has studied other drilling companies and been through multiple bull/bear cycles.

As I understand it, the decommissioning work will have to continue regardless of the oil prices going forward - is this correct? And with new BOPs these rigs will become even more competitive going forward, correct?

It's absurd to think how the sentiment was, when the PPS was 24-26 and how a "perfect-storm" of events (negative comments from seadrill, dollar strengthening/NOK weakening, soft oil prices, scotland vote, insider sell) yanked the price from $25 to $16 so quickly...


At this point, I'm guessing the weak hands have sold off and a lot of bargain buying has supported the PPS in the last few weeks.
Title: Re: AWLCF - Awilco Drilling
Post by: handycap5 on September 23, 2014, 05:54:37 AM
i have not found the drillers attractive, even though the prices of their common stock has dropped. i find these types of investments attractive when there is a clear asymmetry to it working out or not, which i do not find in this case. the softening of the day rates is driven by an onset of (long-lived) supply, of which the E&P companies are taking advantage by (rationally) delaying capex spending as prices soften. this will run its course. but what if the commodity price dropped in addition? there is still further to fall if the activity levels dropped.

do you really believe that a material price difference can be maintained between the UK North Sea and other basins? if i were contracting for drilling, simply the "sentiment" of getting deals in other basins would prevent me from signing a contract without similar price downs in the North Sea. "rationale" micro-economic analysis is one thing, but i would not be surprised if soft prices bled into UK north sea market on sentiment alone. remember, this is a high fixed cost, commodity product and you don't want to be left without a chair when the music stops if you are a rig owner. who will blink first at the negotiating table? decommissioning projects are not ones for which you feel you need to pay-up. prices in this market can swing wildly, i would not be surprised if the next swing is down for a while.

but i welcome comments from those who think i will be proven wrong with time...
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on September 23, 2014, 06:38:21 AM

In light of A, B, and C, the question to ask is whether the higher day rates in the North Sea compensate a contract driller for the opportunity cost associated relocating a midwater rig to the North Sea area.  I do not think that the delta in day rates between North Sea and ex-North Sea is big enough to incentivize a migration of rigs to the North Sea area.   


The barriers to the UK market can sometimes be a double edge sword.  Yes, moving a platform from one basin to another takes time, and the UK environment makes retrofitting/re-certification take longer too, but given the offer of a long enough contract by a North Sea operator, a drilling company will eat the cost and make the move and then once inside the basin, they are likely to stay for longer than we want them too:(


Drilling is a cyclical business. Always has been, always will be.  The question is where are we on the cycle.
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on September 23, 2014, 10:16:50 AM
Your post seems to imply that a major or independent oil company would be willing to sign a contract for an existing ex-North Sea rig before that rig has been certified to operate in the harsh environment of the UK North Sea. 

My second thesis point really boils down to this.  Major and independent oil companies operating in the North Sea are unlikely to sign a contract for an existing ex-North Sea rig that has not been certified to operate in the UK North Sea.  As such, the opportunity cost of moving an ex-North Sea rig to the UK North Sea, without a contract already in place, exceeds the marginal benefit derived from the delta in North Sea day rates versus ex-North Sea day rates.  Therefore the rig owner is more likely to settle for the certainty of a lower day rate in the ex-North Sea market than the uncertainty of moving to the UK North Sea market accompanied by the associated/required capex investment.

I realize that in practice, the rig operators do not always act rationally in the short-term, hence the deluge of new builds expected to arrive all around the world in the next couple of years.  However, if my rationale described in the second paragraph is incorrect, than we would have expected to see a substantial increase in operating rigs in the North Sea following the explosion in day rates in 2006.  However, based on Awilco's most recent quarterly report presentation (page 14), the number of operating rigs remained relatively stable even as day rates remained elevated, with a slight increase in 2010-2011.  if moving existing rigs between ex-North Sea and North Sea to arbitrage the difference in day rates was a feasible endeavor, then there should have been a more rapid increase in rigs operating in the North Sea area shortly after day rates exploded higher in 2006.  Instead, it took almost five years for the supply of rigs to change direction, which seems to indicate that the supply of North Sea rigs is constrained to existing rigs already operating in the UK North Sea and new builds that are constructed specifically for the UK North Sea area.           

 
 
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on September 24, 2014, 03:21:52 PM
I agree that its not an easy arbitrage, but it does happen.  In Awilco's Q3 2011 PDF, they show 19 rigs working in the UK sector of the North Sea, but in the Q2 2014 report, they show 24.   






Title: Re: AWLCF - Awilco Drilling
Post by: matts on October 01, 2014, 07:59:52 AM
http://seekingalpha.com/article/2531035-latest-rig-market-developments-bad-news-for-north-sea-drillers
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 10, 2014, 10:07:41 AM
Amazing how fast the pendulum swings from irrational exuberance to absolute pessimism.  With respect to Awilco, I'm a bit surprised by the dramatic drop, although I guess that is to be expected when there is an expected glut in the rig supply compounded with an irrational fear that offshore drilling is going to slow down considerably.   The market seems to be pricing in an absolute collapse in days rates, or that the Awilco rigs will not operate for the remainder of their useful life (i.e. Through 2031). 

Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 10, 2014, 12:47:54 PM
http://www.heraldscotland.com/business/markets-economy/oil-asset-decommissioning-worth-30bn.25551907
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on October 10, 2014, 12:53:00 PM
If you think the Wilhunter renewal rates will be close to current rates, then AWLCF is a bargain, and you need to be buying.

However, I think its important to remember that AWilco's cost are mostly fixed, so its dividends are highly leveraged to the day rates.  I worked out some really rough calculations a couple weeks ago http://nocalledstrikes.com/2014/09/23/all-models-are-wrong-but-some-are-useful-awlcf/  that highlight just how significant this leverage is.  A daily rate cut of 30% translates to about a 50% cut in dividends.

My best guess is that the most likely outcome is that rates only get cut slightly (10-15%) making today's prices attractive, but the other outcomes cannot be ignored. The oil business is cyclical, always has been, and always will be , so a return to pre-2010 rates cannot be excluded and that would just devastate the stock.  I used to think 15% yield was a fair price for Awilco to compensate for risk of extended rig downtime and to compensate for the fixed life of the asset.  But, now I think 18-20% is probably a better target to compensate for the inevitable down cycles in the business. 

I still own some Awilco, but I am no longer interested in being overweight Awilco. I am likely to defer new purchases until the rigs go in for maintenance in 2016 and some folks get surprised by the corresponding, but temporary, dividend cuts.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 10, 2014, 04:17:41 PM
If you think the Wilhunter renewal rates will be close to current rates, then AWLCF is a bargain, and you need to be buying.

However, I think its important to remember that AWilco's cost are mostly fixed, so its dividends are highly leveraged to the day rates.  I worked out some really rough calculations a couple weeks ago http://nocalledstrikes.com/2014/09/23/all-models-are-wrong-but-some-are-useful-awlcf/  that highlight just how significant this leverage is.  A daily rate cut of 30% translates to about a 50% cut in dividends.

My best guess is that the most likely outcome is that rates only get cut slightly (10-15%) making today's prices attractive, but the other outcomes cannot be ignored. The oil business is cyclical, always has been, and always will be , so a return to pre-2010 rates cannot be excluded and that would just devastate the stock.  I used to think 15% yield was a fair price for Awilco to compensate for risk of extended rig downtime and to compensate for the fixed life of the asset.  But, now I think 18-20% is probably a better target to compensate for the inevitable down cycles in the business. 

I still own some Awilco, but I am no longer interested in being overweight Awilco. I am likely to defer new purchases until the rigs go in for maintenance in 2016 and some folks get surprised by the corresponding, but temporary, dividend cuts.

Even though we shun models for the lack of their accuracy, I think it's a good way to think about future div yield and the implied stock prices going forward.

There are a lot of rigs entering in the next few years but not many in the North-Sea...so what are your thoughts on the day-rate cuts especially when they'll get new BOPs?
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 10, 2014, 05:31:15 PM
What I would say is this.  During the depths of the Great Recession, when the price of crude oil was scraping along the bottom of the barrel (no pun intended), when everything seemed like it was falling apart, day rates in the North Sea fell quite precipitously to $250,000k/day.  Day rates remained at that level for about 3.5 years before heading higher. 

Ultimately, day rates will be determined by the marginal operator in the North Sea area.  Whether they will settle again at $250,000k/day, or drop lower than that, I do not know.  Let's just hope that Awilco is not the marginal operator. 

I tried to model two scenarios in which day rates drop substantially in the UK North Sea.  In my worst case scenario (rigs operate for the remainder of their useful life, fixed costs don't decrease, interest expense remains the same, and rigs rolling off contract drop to $200,000k/day), the sum of dividends received is ~$18 (discount rate of 10%), so about a 1.25% return over the useful life of the rigs.  At $200,000/day in the UK North Sea, day rates elsewhere would probably be substantially lower and thus we would start to see some warm-stacking and cold-staking of rigs. 

In my not-quite-as-bad scenario, I make the same assumptions as noted above, but day-rates bottom out at the 2009 lows ($250,000/day) and remain at this level for the useful life of the rigs.  In this scenario, the sum of dividends is about $30 (discount rate of 10%), so about a 5.5% annual return over the life of the rigs. 
Title: Re: AWLCF - Awilco Drilling
Post by: 60°North Investments on October 10, 2014, 11:18:07 PM
I tried to model two scenarios in which day rates drop substantially in the UK North Sea.  In my worst case scenario (rigs operate for the remainder of their useful life, fixed costs don't decrease, interest expense remains the same, and rigs rolling off contract drop to $200,000k/day), the sum of dividends received is ~$18 (discount rate of 10%), so about a 1.25% return over the useful life of the rigs.

In my not-quite-as-bad scenario, I make the same assumptions as noted above, but day-rates bottom out at the 2009 lows ($250,000/day) and remain at this level for the useful life of the rigs.  In this scenario, the sum of dividends is about $30 (discount rate of 10%), so about a 5.5% annual return over the life of the rigs.

Good stuff and as has been said earlier in here, even though these modellings should always be taken as one possibility of the future instead of imagining they're +90% accurate it's still useful to see what the current price implies etc.

A question I often times wonder (might be a really stupid question as well) and thought I'd ask now when it came up again, is why do people discount the numbers in these cases (especially with something like 10%)? I mean, if you get $X of dividends per share excluding taxes for the lifetime of a company (say 15 years), why would you discount that number with something as high as 10%? I understand that you'd perhaps discount it because of inflation, but 10% doesn't really sound like inflation expectations. And if that 10% is your own hurdle rate, your target return, then why discount at all? Seems to me that it'd just be easier to take the number and see what CAGR you're looking to get. How are people thinking about this that I'm perhaps missing here?
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on October 11, 2014, 12:17:44 AM
Let's just hope that Awilco is not the marginal operator. 

The Awilco rigs are ancient.  Newer rigs should have newer technology that will make them slightly more efficient.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on October 11, 2014, 03:09:18 AM
A question I often times wonder (might be a really stupid question as well) and thought I'd ask now when it came up again, is why do people discount the numbers in these cases (especially with something like 10%)? I mean, if you get $X of dividends per share excluding taxes for the lifetime of a company (say 15 years), why would you discount that number with something as high as 10%? I understand that you'd perhaps discount it because of inflation, but 10% doesn't really sound like inflation expectations. And if that 10% is your own hurdle rate, your target return, then why discount at all? Seems to me that it'd just be easier to take the number and see what CAGR you're looking to get. How are people thinking about this that I'm perhaps missing here?
I think that using a discount rate of 10% is pretty low. They have debt that yields 7%, and as an equity holder you are certainly facing a lot more risk. Awilco isn't risk free just because they pay dividends. Lower dayrates => significantly lower IV.

Let's just hope that Awilco is not the marginal operator. 

The Awilco rigs are ancient.  Newer rigs should have newer technology that will make them slightly more efficient.
Luckily there are almost no newer rigs constructed in this class. With the upgrades done in 2011 and the new BOPs in 2016 I'm guessing that the Awilco rigs are doing pretty well compared to the competition.
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 11, 2014, 06:29:59 AM
Let's just hope that Awilco is not the marginal operator. 

The Awilco rigs are ancient.  Newer rigs should have newer technology that will make them slightly more efficient.

Remember that rig efficiency is not the only cost component that determines who the marginal operator is.  Building a new mid-water semi-submersible rig for the harsh environment is $350-$400 million per rig.  So not only costs to operate the rig (fuel, labor, etc), but also debt service (quite substantial for a new rig), shore-based costs (SSGA), and tendering costs. 

Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on October 11, 2014, 06:50:29 AM

Luckily there are almost no newer rigs constructed in this class. With the upgrades done in 2011 and the new BOPs in 2016 I'm guessing that the Awilco rigs are doing pretty well compared to the competition.

I concur, this is really Awilco's saving grace.  Their rigs were designed for the North Sea water depth (1000-1500 feet) and rough conditions.  Refurbished and with new BOPs, they are the right rigs for North Sea work.   This is what will keep Awilco's rigs active even in the toughest markets.  It just won't guarantee that the market will pay high rates.

The big action offshore is in much deeper water 5000+ feet. These fields require using much larger rigs which can command much higher rates. Not surprisingly most of the new rigs are being built for these conditions.  No one wants to build brand new rigs for shallower water when they can build deeper water rigs that can charge much higher rates.

As a rough analogy, a brand new 18 wheeler can carry more freight than an old, but recently refurbished, 4x4 pickup truck, but if all you need to carry is a relatively small load  over rough terrain - you'd choose the old pickup truck every time. 

Title: Re: AWLCF - Awilco Drilling
Post by: 60°North Investments on October 11, 2014, 08:01:41 AM
A question I often times wonder (might be a really stupid question as well) and thought I'd ask now when it came up again, is why do people discount the numbers in these cases (especially with something like 10%)? I mean, if you get $X of dividends per share excluding taxes for the lifetime of a company (say 15 years), why would you discount that number with something as high as 10%? I understand that you'd perhaps discount it because of inflation, but 10% doesn't really sound like inflation expectations. And if that 10% is your own hurdle rate, your target return, then why discount at all? Seems to me that it'd just be easier to take the number and see what CAGR you're looking to get. How are people thinking about this that I'm perhaps missing here?
I think that using a discount rate of 10% is pretty low. They have debt that yields 7%, and as an equity holder you are certainly facing a lot more risk. Awilco isn't risk free just because they pay dividends. Lower dayrates => significantly lower IV.

My point was that with the numbers from shhughes1116, 10% + 1.25% or 10% + 5.5%, wouldn't it be much simpler to just look at it as 11.25% or 15.5% returns for the buyer/shareholder? Unless I'm missing Hielko's point, I agree that if the most probable case for Awilco was an expected return of 11% p.a. that might not really be enough for the assumed risks. I'm just struggling to see why would you discount it here, instead of taking the return as is and then deciding whether you think that's enough for the risks you're taking?
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 11, 2014, 08:18:58 AM
When determining the net present value of their future cash flows, I generally use 10% discount rate.  That represents what I see to be a reasonable opportunity cost over 10-15 year time horizon.  Given that awilcos weighted cost of capital is about 7.5%, I don't view that as an unreasonable discount rate.  Obviously you can adjust it higher or lower based on your perception of risk.  (Disclaimer: I seem to have a lower perception of risk with Awilco than others on this board). 

The whole exercise gives me an idea of whether the current value of the stock reflects the expected future cash flows.  Using the present value of future cash flow to determine the expected rate of return is misleading because it doesn't take into account your opportunity cost for another investment. 
Title: Re: AWLCF - Awilco Drilling
Post by: Tim Eriksen on October 11, 2014, 09:50:12 AM
Let's just hope that Awilco is not the marginal operator. 

The Awilco rigs are ancient.  Newer rigs should have newer technology that will make them slightly more efficient.

All mid water semis are ancient.  They are third generation rigs.  There are 25 rigs in the UK mid water market, only three are built after 1990.  Awilco's rigs would easily rank in the top ten after their recent upgrades.  Dolphin Drilling's Blackford recently underwent $210 million in upgrades and is on a $428,000 day rate for the next two plus years.  The rig was built in 1974.  It is nearly ten years older than Awilco's rigs. Yes newer rigs command better rates, but since newer rigs are deep water, recently refurbished older rigs command the higher rates.
 
Title: Re: AWLCF - Awilco Drilling
Post by: yadayada on October 11, 2014, 10:03:48 AM
What about Lamprell? It looks cheaper to be honest, with the net cash position. Less shaky competitive position
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on October 11, 2014, 10:08:05 AM
I'm just struggling to see why would you discount it here, instead of taking the return as is and then deciding whether you think that's enough for the risks you're taking?
If you discount it at a rate that you think is fair you answer the question how high the stock price should be, and you can determine how small/big the under/overvaluation is.
When determining the net present value of their future cash flows, I generally use 10% discount rate.  That represents what I see to be a reasonable opportunity cost over 10-15 year time horizon.  Given that awilcos weighted cost of capital is about 7.5%, I don't view that as an unreasonable discount rate.  Obviously you can adjust it higher or lower based on your perception of risk.  (Disclaimer: I seem to have a lower perception of risk with Awilco than others on this board). 
Using a fixed return requirement for your opportunity cost doesn't make sense since you need to adjust it for risk. Plenty of possible 10%+ IRR investments that are not good. Awilco is financially leveraged and leveraged to drilling activity/oil prices: might require a higher discount rate than your average company. The fact the basically all drilling companies have a beta that is significant above 1 should be some sort of indication that the risk is above average, unless you think that the market fails to understand the whole sector.

Your WACC number also doesn't make a lot of sense. How can their WACC be this low if their debt is @ 7%, tax rate is low and they are primarily equity funded?
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 11, 2014, 02:04:36 PM
@ Hielko  - Thanks, you were right about the WACC.  When calculating the rate, I flip flopped equity (1,125,000,000) with debt (125,000,000). 

In general, I would agree with the beta for rig operators.  The sector is cyclical, sector participants tend to be poor capital allocators, and there is still an overhang of risk from catastrophic rig failure (i.e. Transocean), thus a higher beta is warranted relative to other sectors of the market.  While I agree with the markets view that the sector is cyclical, in the context of Awilco, the risk of poor capital allocation seems to be far far far less.  Moreover, I think the risk of catastrophic rig failure is minimal.  I view a catastrophic rig failure as a relatively unlikely event to begin with, and I view it as even less likely in a company where management only needs to focus on two rigs.  Unfortunately the overhang of catastrophic rig failure will remain until BP's case with the US Government is resolved. 

Using a fixed return requirement for your opportunity cost doesn't make sense since you need to adjust it for risk.

Why?  We are talking about a cigar-butt type of company that is not reinvesting money in growth.  Thus the more relevant discount rate for me is my opportunity cost for cash.  Using a similar investment horizon, I would say the risk free rate is ~2.3% (current 10-year Treasury).  It is certainly debatable whether I have adjusted the discount rate high enough relative to the risk-free rate to compensate for risk.  However, as I noted above, I seem to have a different perception of Awilco's risk than others on this discussion board.  While many folks seem to perceive a two-rig fleet, along with management's seeming reluctance to seek growth opportunities, as an extraordinary risk, I view it in quite the opposite manner.  Reluctance to seek growth opportunities, coupled with a two-rig fleet, is an asset because management is focused 100% on the two rigs operating in the same geographic area.     

Title: Re: AWLCF - Awilco Drilling
Post by: kirkomi on October 11, 2014, 11:22:26 PM
What about Lamprell? It looks cheaper to be honest, with the net cash position. Less shaky competitive position

AWLCF and Lamprell are totally different businesses. Lamprell is a rig maker.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on October 13, 2014, 09:53:30 AM
Great discussion here, thanks all. One thing I have been pondering about for a while is why it is common practice to adjust for risk by means of the discount rate? I.e. it seems to be acceptable to say: well, I use a 10% discount rate for most stuff but Awilco is risky so I use a 15% discount rate. But isn't that a very arbitrary approach to estimate risk?

Wouldn't it be much clearer to work out a few scenarios and explicitly assign probabilities to them? I.e.:

70% chance of things working out (using the standard discount rate)
25% chance of lower rates (using standard discount rate but lowering expected cashflow)
5% change of disaster (equity is worth 0).

and take the weighted average of these scenarios. This way you force yourself to make explicit assumptions about the risks you are incurring, instead of stuffing everything away in an arbitrary discount rate.
Title: Re: AWLCF - Awilco Drilling
Post by: oddballstocks on October 13, 2014, 10:16:34 AM
Great discussion here, thanks all. One thing I have been pondering about for a while is why it is common practice to adjust for risk by means of the discount rate? I.e. it seems to be acceptable to say: well, I use a 10% discount rate for most stuff but Awilco is risky so I use a 15% discount rate. But isn't that a very arbitrary approach to estimate risk?

Wouldn't it be much clearer to work out a few scenarios and explicitly assign probabilities to them? I.e.:

70% chance of things working out (using the standard discount rate)
25% chance of lower rates (using standard discount rate but lowering expected cashflow)
5% change of disaster (equity is worth 0).

and take the weighted average of these scenarios. This way you force yourself to make explicit assumptions about the risks you are incurring, instead of stuffing everything away in an arbitrary discount rate.

I think that's an excellent way to look at it.  As to why people do it other ways? I'm guessing because b-school encourages a discount rate change for 'risk'.  Your method is how I've seen people in the business world approach this problem, I've never heard anyone say "why not adjust the discount rate." it's always "what are the chances this won't work verses it works? Is it worth doing?"
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 13, 2014, 10:19:22 AM
Just thought these were some interesting numbers:

Since August 19th (ex-div day), ~5,250,000 shares have traded on the pink sheets.  There are ~30 million shares outstanding, of which about half are owned by the controlling shareholders.  So the free float is ~15,000,000 shares, of which I thought most traded on the Oslo exchange.  So I must say I am absolutely amazed by the volume, relative to the size of the free float, and given it traded on the pink sheets with relatively low volume in the past.  Out of curiosity, does anyone know if your broker(s) will allow you to borrow shares and sell short?   

Also a couple pieces of news which bode well for rig operators:
1.  PEMEX signed a contract with SLB to install the infrastructure to support deep water drilling (http://www.upstreamonline.com/live/1379980/OneSubsea-wins-Lakach-prize).  The depth of this field requires midwater and/or deepwater drilling rigs.  This may soak up some of the impending supply of deepwater rigs coming into the market in 2015 and 2016.   
2.  The decline in Brazilian offshore drilling is partly the result of domestic energy policies by the current Brazilian President, which prevent Petrobras from developing these fields profitably.  Current polling suggests that Rousseff is going to lose to a more business-friendly candidate (http://blogs.barrons.com/emergingmarketsdaily/2014/10/13/brazil-rallies-neves-endorsed-supported-by-new-poll/?mod=BOL_hp_blog_stw).  A change in domestic energy policy may yield more offshore drilling in Brazil.   
3.  In addition to #2, domestic policies implemented by Rousseff have required Petrobras to operate more and more domestically-built drilling rigs.  Because of this policy, Petrobras is contracting fewer and fewer non-domestically-built rigs.  This may also change if a more business-friendly president is elected in Brazil.   





Title: Re: AWLCF - Awilco Drilling
Post by: Picasso on October 13, 2014, 10:38:24 AM
I tried to borrow 30k shares to sell short but was denied.

I probably need to try shorting AWDR.NO instead.
Title: Re: AWLCF - Awilco Drilling
Post by: yadayada on October 13, 2014, 10:39:56 AM
What about Lamprell? It looks cheaper to be honest, with the net cash position. Less shaky competitive position

AWLCF and Lamprell are totally different businesses. Lamprell is a rig maker.
yeah but similar multiples. Seems Lamprell is more durable if your bullish about oil.
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 13, 2014, 11:06:54 AM
@ Picasso - Recently? 
Title: Re: AWLCF - Awilco Drilling
Post by: Picasso on October 13, 2014, 11:10:34 AM
@ Picasso - Recently?

At the time of my last post.
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 13, 2014, 11:24:50 AM
If you don't mind me asking, what is your target price? 

I certainly agree that Awilco was a bit overvalued at $25, but I figured folks would be covering their short positions at this price.  Going short at ~$14.50 implies (imho) that the rigs won't operate until the end of their useful life, or that rig day rates will fall well below the 2009 lows seen in the North Sea. 
Title: Re: AWLCF - Awilco Drilling
Post by: Picasso on October 13, 2014, 11:30:56 AM
Oh I'm not shorting the stock, just been following the story for a while.  I thought it was pretty representative of the idea that there are very few bargains out there when investors are piling into a deep sea driller with a couple rigs to earn maybe 15%.  But that's my opinion and I haven't redone my cash flow estimates for about six months but I assume the prospects look worse today.

I just tried to get the short borrow but was unable to do so.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on October 13, 2014, 01:37:35 PM
Great discussion here, thanks all. One thing I have been pondering about for a while is why it is common practice to adjust for risk by means of the discount rate? I.e. it seems to be acceptable to say: well, I use a 10% discount rate for most stuff but Awilco is risky so I use a 15% discount rate. But isn't that a very arbitrary approach to estimate risk?

Wouldn't it be much clearer to work out a few scenarios and explicitly assign probabilities to them? I.e.:

70% chance of things working out (using the standard discount rate)
25% chance of lower rates (using standard discount rate but lowering expected cashflow)
5% change of disaster (equity is worth 0).

and take the weighted average of these scenarios. This way you force yourself to make explicit assumptions about the risks you are incurring, instead of stuffing everything away in an arbitrary discount rate.
That's not a good idea because an idea with a 100% probability of being worth $100/share is a better idea than one that has a 50% probability of being worth $0/share and $200/share IF this represents systematic risk (idiosyncratic risk can be diversified). The higher discount rate accounts for the variability in the outcomes that is correlated with the big fundamental risk factors.

In the Awilco case: you do 'deserve' to be compensated for risk related to oil prices, day rates and other large economic influences. But you don't deserve a higher return because it is a two rig company because that is company specific risk that you can diversify away (in theory).
Title: Re: AWLCF - Awilco Drilling
Post by: writser on October 13, 2014, 02:33:23 PM
Good point, hadn't thought about that. But how do you arrive at a correct risk-adjusted discount rate? Wouldn't a scenario-based approach still be better than an arbitrary 'let's use 15% instead of 10%' approach?
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on October 13, 2014, 02:58:45 PM
Good point, hadn't thought about that. But how do you arrive at a correct risk-adjusted discount rate? Wouldn't a scenario-based approach still be better than an arbitrary 'let's use 15% instead of 10%' approach?
No because the scenario based approach is not a substitute. You still need that 'arbitrary' higher discount rate in every single scenario. With the scenario based approach you can capture more precisely what the expected value is, but it doesn't capture how risky it is.

And every single valuation method at some point encounters estimates that you can describe as arbitrary if you want to critique it. It's not like you have to randomly go for 15% because 10% is too low, and I certainly haven't said anything about what the correct rate is. But you can do better than just a random guess to figure out an appropriate discount rate.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on October 13, 2014, 03:02:28 PM
Good point, hadn't thought about that. But how do you arrive at a correct risk-adjusted discount rate? Wouldn't a scenario-based approach still be better than an arbitrary 'let's use 15% instead of 10%' approach?
No because the scenario based approach is not a substitute. You still need that 'arbitrary' higher discount rate in every single scenario. With the scenario based approach you can capture more precisely what the expected value is, but it doesn't capture how risky it is.

And every single valuation method at some point encounters estimates that you can describe as arbitrary if you want to critique it. It's not like you have to randomly go for 15% because 10% is too low, and I certainly haven't said anything about what the correct rate is. But you can do better than just a random guess to figure out an appropriate discount rate.

That was exactly my point. How?
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 16, 2014, 07:13:11 AM
Some related news....

Transocean Leader - Awarded a four year contract in an undisclosed location at a dayrate of $335,000 for the first three years and at an indexed rate for the fourth year ($478 million estimated backlog). The rig's prior dayrate was $400,000.

Most recent (current?) location is in the North Sea, off the coast of Norway.  Rig just received AoC from Norwegian authorities about 10 days ago, so likely still operating for Statoil.   
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on October 16, 2014, 09:58:14 AM
Some related news....

Transocean Leader - Awarded a four year contract in an undisclosed location at a dayrate of $335,000 for the first three years and at an indexed rate for the fourth year ($478 million estimated backlog). The rig's prior dayrate was $400,000.

Most recent (current?) location is in the North Sea, off the coast of Norway.  Rig just received AoC from Norwegian authorities about 10 days ago, so likely still operating for Statoil.   

What was the year (in which the $400K dayrate) was agreed to?

I'm not familiar with the nitty-gritty specs of the rigs but looks like Transocean Leader is a 4th Gen Rig (compared to 3rd Gen WilHunter + WilPhoenix). This means a water depth of 4500 ft for Leader compared to 1200-1500 feet for Awilco's rigs.

But assuming that the day-rate drop was solely due to the recent oil price drop/softness it seems about a 20% day-rate drop.
Title: Re: AWLCF - Awilco Drilling
Post by: Tim Eriksen on October 16, 2014, 10:32:01 AM
Some related news....

Transocean Leader - Awarded a four year contract in an undisclosed location at a dayrate of $335,000 for the first three years and at an indexed rate for the fourth year ($478 million estimated backlog). The rig's prior dayrate was $400,000.

Most recent (current?) location is in the North Sea, off the coast of Norway.  Rig just received AoC from Norwegian authorities about 10 days ago, so likely still operating for Statoil.   

What was the year (in which the $400K dayrate) was agreed to?

I'm not familiar with the nitty-gritty specs of the rigs but looks like Transocean Leader is a 4th Gen Rig (compared to 3rd Gen WilHunter + WilPhoenix). This means a water depth of 4500 ft for Leader compared to 1200-1500 feet for Awilco's rigs.

But assuming that the day-rate drop was solely due to the recent oil price drop/softness it seems about a 20% day-rate drop.

Looks like the old three year deal with the 400k day rate was agreed to in February 2011
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 16, 2014, 11:57:49 AM
Yes, capable of deeper operations than Awilco's rigs.  However, currently operating in 900-1000 ft depths, similar to Awilco's rigs.  Similar BOP equipment as well. 

I expected a steeper concession on day rates for Transocean given the length of the contract, but a 16.25% decrease for a 4 year contract is not too bad given the current expectations for rigs.  Maybe has something to do with the recent re-certification by the Norwegian government...  Interesting to note that one of Diamond Offshore's midwater rigs recently had its contract cancelled by Statoil due to non-compliance with Norwegian requirements.     
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 16, 2014, 12:02:27 PM
Forgot to mention...rig age is similar to Awilco's rigs.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on October 17, 2014, 07:35:34 AM
From the Broyhill Letter:

Quote
Given the amount of cash we have on hand today, our investors should be hoping for the market to fall, as panicked
sellers give us the opportunity to invest at lower prices, which ultimately drive future returns. We recognize that this is
counterintuitive and may mean short-term losses in those positions we currently hold, but those losses should be less
than those suffered by the overall market, and more than offset by gains from additional purchases. The examples below
should give you a sense of the opportunities we see today, as a result of recent volatility:

 The collapse in energy prices has wreaked havoc on the oil sector, which has dropped 20% since the summer.
Many stocks in the industry have fallen much further. A recent investment in a Norwegian drilling company
has effectively been cut in half in recent months due to uncertainty around Scottish Independence and the
speculative unwind in commodity-related businesses. In the short-term, we are likely to see continued volatility
in the shares. In exchange for accepting this volatility, we receive the majority of the company’s cash flow in
the form of dividends, which approximate a 30% yield today. The founder owns about half of the shares
outstanding and the company’s rigs were last valued in excess of the total market capitalization.

Sounds like Awilco...
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on October 17, 2014, 08:07:49 AM
I don't understand the thesis for this investment. Day rates have been steadily rising for the past few years, however, oil prices have been falling for the last year. The major players in this space are spinning off their old rigs, and that's what is left for investors to buy, and that too in an industry renowned for being risky and levered to commodity prices.....I just don't see why this is attractive.
Title: Re: AWLCF - Awilco Drilling
Post by: SwedishValue on October 17, 2014, 08:46:15 AM
If you base your decisions solely on quality, then it is obviously not a buy. If you at all use price as a factor for investment decisions, a ~25-30% expected cash yield on assets depreciating at less than 10% could potentially compensate for the less than Coca Cola quality.
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on October 17, 2014, 09:12:42 AM
Then why aren't majors buying them up instead of spinning them off?
Title: Re: AWLCF - Awilco Drilling
Post by: ukvalueinvestment on October 17, 2014, 09:28:14 AM
I know very little of this situation, but I do recall that Awilco was spun off for a very specific non financial reason.  Does anyone remember?
Title: Re: AWLCF - Awilco Drilling
Post by: yadayada on October 17, 2014, 09:33:26 AM
if your buying this you basicly say that you break even if rates plummet after 4 years. So to make decent money on it, you need thm continue for 5-10 years at elevated dayrates.

I guess there is a float element in here though. Youc an reinvest the dividend. But im not so sure there is much added value in that. Since it is not exactly a risk free float.
Title: Re: AWLCF - Awilco Drilling
Post by: Libs on October 17, 2014, 09:44:31 AM
I don't understand the thesis for this investment. Day rates have been steadily rising for the past few years, however, oil prices have been falling for the last year. The major players in this space are spinning off their old rigs, and that's what is left for investors to buy, and that too in an industry renowned for being risky and levered to commodity prices.....I just don't see why this is attractive.

I bought some this week. Their existing contracts should produce $6-7 in dividends over the next six quarters. That's half the $14 price right there.

If oil rebounds or even stays at these levels, I think they will get new contracts.

That's how I see it. Speculative but a good bet.

Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on October 17, 2014, 09:47:03 AM
I know very little of this situation, but I do recall that Awilco was spun off for a very specific non financial reason.  Does anyone remember?
Transocean had to divest the rigs after a big acquisition due to regulatory concerns (too much market share in UK)

For those interested, did a little DCF model to check how the current price compares to intrinsic value: http://alphavulture.com/2014/10/17/awilco-drilling-back-to-square-one/
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 17, 2014, 09:50:35 AM
An investment in Awilco is essentially a determination of probability.  It is most likely that these rigs continue to operate for the duration of their usable life; which is another 17 years.  So the question is whether the sum of dividends over that time results in a sufficient return relative to your perceived risk of this investment.  This becomes an exercise in probability. Is the probability that rig day rates remain above their 2009 lows greater than the probability of day rates dropping below the 2009 lows?  I think that 2009 lows will turn out to be the bottom, and to be honest, I think the recent transocean day rate for Transocean Leader (335k/day) is probably close to the bottom in the North Sea.  If that's the case, then the free cash flow is sufficient to recoup your investment over the life of these declining asserts, plus a modest return. 
Title: Re: AWLCF - Awilco Drilling
Post by: SwedishValue on October 17, 2014, 10:08:16 AM
Then why aren't majors buying them up instead of spinning them off?

I do not see how this has anything to do with the price.

Also, I don't know.
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 17, 2014, 11:48:02 AM
They are spinning them off because they are levered and need the cash.  In the case of Transocean, they are spinning off partial ownership in Caledonia because they need the cash and because I think they feel that the relatively stable North Sea business deserves a higher multiple than what they are receiving currently when tucked into Transocean. 
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on October 17, 2014, 01:35:01 PM
They are spinning them off because they are levered and need the cash.  In the case of Transocean, they are spinning off partial ownership in Caledonia because they need the cash and because I think they feel that the relatively stable North Sea business deserves a higher multiple than what they are receiving currently when tucked into Transocean.

Spinoffs hurt liquidity rather than help liquidity.
Title: Re: AWLCF - Awilco Drilling
Post by: matjone on October 18, 2014, 10:18:42 AM
 I remember last time I looked at the drillers there were running mid 80's rig utilization IIRC.  If you combine that with a dayrate decline of 15% or more maybe this turns out to be just an average investment?

Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on October 18, 2014, 06:13:23 PM
They are spinning them off because they are levered and need the cash.  In the case of Transocean, they are spinning off partial ownership in Caledonia because they need the cash and because I think they feel that the relatively stable North Sea business deserves a higher multiple than what they are receiving currently when tucked into Transocean.

Spinoffs hurt liquidity rather than help liquidity.

If they were using the cash to simply delever the balance sheet, then I would completely agree with you.  However, I believe the intention is to use this cash to pay for newbuilds that have been ordered and are nearing completion.   
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on October 19, 2014, 09:46:04 AM
I don't understand the thesis for this investment. Day rates have been steadily rising for the past few years, however, oil prices have been falling for the last year. The major players in this space are spinning off their old rigs, and that's what is left for investors to buy, and that too in an industry renowned for being risky and levered to commodity prices.....I just don't see why this is attractive.

I bought some this week. Their existing contracts should produce $6-7 in dividends over the next six quarters. That's half the $14 price right there.

If oil rebounds or even stays at these levels, I think they will get new contracts.

That's how I see it. Speculative but a good bet.

Here's the deal though, the contracts are, I believe about 2 years long on average? So even if you get your money back withing 2 years, and the new contracts entered into are significantly lower, it could make it a much more average returning asset from there on out. What are you anticipating rates to be there?
Title: Re: AWLCF - Awilco Drilling
Post by: Libs on October 21, 2014, 09:22:58 AM
I don't understand the thesis for this investment. Day rates have been steadily rising for the past few years, however, oil prices have been falling for the last year. The major players in this space are spinning off their old rigs, and that's what is left for investors to buy, and that too in an industry renowned for being risky and levered to commodity prices.....I just don't see why this is attractive.

I bought some this week. Their existing contracts should produce $6-7 in dividends over the next six quarters. That's half the $14 price right there.

If oil rebounds or even stays at these levels, I think they will get new contracts.

That's how I see it. Speculative but a good bet.

Here's the deal though, the contracts are, I believe about 2 years long on average? So even if you get your money back withing 2 years, and the new contracts entered into are significantly lower, it could make it a much more average returning asset from there on out. What are you anticipating rates to be there?

No Called Strikes has an earlier post with some assumptions (rough) on how much of a decline in rig prices would impact dividends and thus share price.

Even with a 35% decline in rig rates, the dividend would support a $14 stock price, assuming a required 13% dividend rate. ( Note the many caveats he noted).

I'm fully prepared to take a loss if things get worse than that.




Title: Re: AWLCF - Awilco Drilling
Post by: Fat Pitch on October 21, 2014, 10:54:59 AM
Looks like Awilco is back to the price I originally purchased at before selling it in the mid 20s. Company is pretty cheap, but your main risks are tax rate, blowouts and day rates. Management looks sensible enough to just run off these assets.

Size positioning is key. Can’t buy too much since there are real risks you have permanent impairment of capital. This isn’t bad in a basket of other securities in different sectors (Canadian pipeline construction, O&G, etc).
Title: Re: AWLCF - Awilco Drilling
Post by: Tim Eriksen on November 11, 2014, 10:17:50 PM
Very strong quarter.  EPS of $1.27. 
http://hugin.info/147077/R/1870602/657887.pdf
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on November 12, 2014, 02:56:27 AM
Hmmm:

Maybe the world is NOT coming to an end?  The "fast money" crowd came piling in and then panicked to get out.   They love to buy high and sell low.

Looks like we will have a nice up day.

Another $1.15/share dividend.  This will be seven dividends coming up for my original purchase.

Excellent earnings and cash flow.  Appears that way for at least another year...

Makes me wish I got more under $14/share.

Title: Re: AWLCF - Awilco Drilling
Post by: writser on November 12, 2014, 04:18:55 AM
Hmmm:

Maybe the world is NOT coming to an end?  The "fast money" crowd came piling in and then panicked to get out.   They love to buy high and sell low.

Looks like we will have a nice up day.

Another $1.15/share dividend.  This will be seven dividends coming up for my original purchase.

Excellent earnings and cash flow.  Appears that way for at least another year...

Makes me wish I got more under $14/share.

Frankly I think that's a bit too short-sighted. Obviously this quarter was going to be very good because both rigs were already booked at attractive rates. The next quarters will be great as well. That's no news at all. The stock has been sold down because investors are afraid dayrates are coming down after the current contracts expire. Whether that will happen (and thus whether Awilco will be a great investment at $14) is still not clear as far as I am concerned. Nevertheless I am still holding, looks like a decent bet.

With regards to the Hess option postponement: I'd say that deferring the decision is a slight negative. Maybe Hess is shopping around or trying to squeeze Awilco - if they badly need a rig and the market was tight they would probably sign a contract right away. But I don't think it's an extremely relevant piece of information.

According to todays' presentation management expects 2015 maintenance costs to be around $60m in total.

- Routine capex $20m
- BOP commitment $25m
- SPS $15m
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on November 12, 2014, 05:39:58 AM
Is the hess option postponement a good sign or a bad sign? It at least shows that Hess may be thinking about renewing, but it shows that they want to push it off till last minute so they don't get whacked by potentially lower oil prices if they accept now.

IMO Hess is waiting for oil price volatility to decline and oil prices to begin to firm and to get more clarity about the IRR in their projects going forward. It's a lessor's market and they know it. Maybe the fact that they are willing to still consider Awilco's rigs is a sign that they are still somewhat interested in Awilco's rigs (due to Awilco's proven expertise?) and would rather take Awilco's rigs, if they were to take any.

It's still better than them flatly declining to renew the option.

Today's results mean nothing new, really. For a stock like Awilco with so much visibility/transparency, current backlog, which means everything for the current shareholders, ironically means nothing for the stock price. Guidance and business after current backlog ends, means everything.
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on November 12, 2014, 02:08:46 PM
Keep in mind that the contract work for Hess is well abandonment work...it will continue to occur regardless of the price of Brent crude....Hess knows this and Awilco knows this.   

Hess is simply squeezing Awilco by postponing the decision.  My guess is that come February, both parties will agree to scrap the option and come to an agreement on a longer contract at a dayrate lower than what is specified in the current option, thus enabling Awilco to continue with the well abandonment work.  Hess wins by getting a lower dayrate while Awilco wins by getting some longer-term visibility on cash flow.  More importantly, given the recent contracts signed for the Transocean Leader and Songa Dee in the Norwegian area of operations, along with the recent cold stacking of the Borgny Dolphin in the UK area of operations, I think the floor for dayrates in the UK are higher than the market anticipates.     
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on November 12, 2014, 06:54:57 PM
I stand corrected.  According to the conference call, the unpriced option was postponed because Hess was not sure if they would need the rig. 
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on November 17, 2014, 05:05:40 AM
m.seekingalpha.com/pr/11711205-paragon-offshore-announces-acquisition-of-a-majority-stake-in-prospector-offshore

Paragon offshore purchases prospector offshore.  Prospector offshore listed in Oslo... Operates two high spec jackups in the North Sea, with three more contracted for delivery. 
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on November 18, 2014, 08:59:13 AM
I'm wondering if this is where the Awilco Drilling money went? They also sold back shares in Royal Caribbean earlier this month for ~$500mm

Quote
Awilco Eco Tankers books another pair of VLCCs at South Korean yard at a cost of $97m each for delivery in 2016 and 2017
The Anders Wilhelmsen (Awilhelmsen) group of Norway and US-based investor Wilbur Ross are ordering two more 320,000-dwt tankers at South Korea’s DSME.

They are likely to be delivered either late in 2016 or early in 2017 and are costing $97m each.

The newbuildings have been ordered by Awilco Eco Tankers, a 50:50 joint venture between Awilhelmsen and Ross-controlled Transportation Recovery Fund (TRF).

Earlier this year, the venture ordered two sisterships for delivery in 2016 at the same price, which was considered attractive as, today, it would cost at least $100m to order a VLCC at a yard such as DSME.

Meanwhile, Awilhelmsen this week sold 3.5 millon shares in Royal Caribbean Cruises for NOK 3.2bn ($500m). The Norwegian company still holds 16% of the stock, making it the cruise giant’s biggest shareholder.

Four years ago, Awilhelmsen sold one millon shares in the company.

Last year, Awilhelmsen had a pre-tax profit of NOK 1.528bn, with the cruise gains totalling NOK 1.17bn. Managing director Sigurd E Thorvildsen says the sale will free up capital for Awilhelmsen to invest in its other business areas, including shipping.

Thorvildsen says the company is considering further tanker investments.

Last year, it sold three suezmax tankers. Ridgebury Tankers took the 164,000-dwt Wilsky (built 2009) for $43.3m, while two 1997-built units also went for further trading.

Awilhelmsen also has a 33.7% stake in listed Awilco LNG, which has a fleet of five LNG carriers and a 48.7% stake in Awilco Drilling.

Anders Wilhelmsen was formed in 1939 and is owned by the families of brothers Arne and Gjert Wilhelmsen.
Title: Re: AWLCF - Awilco Drilling
Post by: CorpRaider on November 26, 2014, 10:34:40 AM
Wow, Seadrill, NADL news is decimating this entire group today.  Anyone around in the mid 80's (or not) know of any rules of thumb for bottom of cycle p/b ratios in this industry? 
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on November 26, 2014, 10:36:45 AM
The entire rig market is feeling the tremors of SDRL's decision to ELIMINATE its dividend. The fact that one of the richest, smartest, most aggressive, most generous player in the rig market - John Fredriksen - contradicted himself (mislead the market?) by saying the div is secure until 2016, then within a few months deciding to not reduce it...but ELIMINATE it. Not only that, JF even increased his personal position in SDRL not long ago...

Awilco's price per share is is below $12 as we speak...around $6 in earnings is contractually guaranteed. Any thoughts here? There are concerns that NADL's rigs will compete with AWLCF's.
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on November 26, 2014, 01:39:25 PM
Wow, Seadrill, NADL news is decimating this entire group today.  Anyone around in the mid 80's (or not) know of any rules of thumb for bottom of cycle p/b ratios in this industry?

I think you're looking at it the wrong way.  Figure out the market value of their ships.  Then figure out if the stock is trading at a discount to the sum of the parts.

George Economou does this arbitrage all the time.
Title: Re: AWLCF - Awilco Drilling
Post by: plato1976 on November 26, 2014, 02:27:58 PM
$6 doesn't matter b/c as I believe they also carry a ton of debts
If they cannot make much money after these contracts it may be worth very little
All depend on oil price...

The entire rig market is feeling the tremors of SDRL's decision to ELIMINATE its dividend. The fact that one of the richest, smartest, most aggressive, most generous player in the rig market - John Fredriksen - contradicted himself (mislead the market?) by saying the div is secure until 2016, then within a few months deciding to not reduce it...but ELIMINATE it. Not only that, JF even increased his personal position in SDRL not long ago...

Awilco's price per share is is below $12 as we speak...around $6 in earnings is contractually guaranteed. Any thoughts here? There are concerns that NADL's rigs will compete with AWLCF's.
Title: Re: AWLCF - Awilco Drilling
Post by: plato1976 on November 26, 2014, 02:32:57 PM
Nice idea
Yes, fleet price with some discount and then minus debt may be the best way to have a conservative estimation on the entry to this distressed asset

Wow, Seadrill, NADL news is decimating this entire group today.  Anyone around in the mid 80's (or not) know of any rules of thumb for bottom of cycle p/b ratios in this industry?

I think you're looking at it the wrong way.  Figure out the market value of their ships.  Then figure out if the stock is trading at a discount to the sum of the parts.

George Economou does this arbitrage all the time.
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on November 26, 2014, 02:36:13 PM
I forgot to mention that you need to include the value (or un-value) of any long-term contracts that the company has entered into.
Title: Re: AWLCF - Awilco Drilling
Post by: CorpRaider on November 26, 2014, 03:34:45 PM
Yeah, thanks for the advice.  I just wondered if there is a quick rule of thumb for bottom of cycle price to books to use as indicia that we're in the neighborhood of distressed levels before picking a target to deep dive (e.g., in '86 we got to .33 p/b).  I will probably just wait for Berkowitz and/or Icahn to get more aggressive.  I don't have access to data to get anything other than a "precisely wrong" market value for the fleets (of course I will be fine with that after I know I'm "roughly right" and just fine tuning) and I don't want to underwrite the contracts, I'm looking for nuclear winter type margin of safety with potentially distressed counterparties.  I also don't really like the business, with the cycles and the capital intensity and the E&P companies trying to stick you with the costs when you have a blowout or crew gets killed, etc...actually I think I just talked myself out of it.   ;D
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on November 26, 2014, 04:19:37 PM
Nice idea
Yes, fleet price with some discount and then minus debt may be the best way to have a conservative estimation on the entry to this distressed asset

Wow, Seadrill, NADL news is decimating this entire group today.  Anyone around in the mid 80's (or not) know of any rules of thumb for bottom of cycle p/b ratios in this industry?

I think you're looking at it the wrong way.  Figure out the market value of their ships.  Then figure out if the stock is trading at a discount to the sum of the parts.

George Economou does this arbitrage all the time.

Awilco is a distressed asset?  I think that is a bit extreme.  Contract drilling is a cyclical business, and they are entering a trough in the cycle.     
Title: Re: AWLCF - Awilco Drilling
Post by: plato1976 on November 26, 2014, 04:49:23 PM
You never know, if oil stays at 60-70 for a long time it will be very distressed

Nice idea
Yes, fleet price with some discount and then minus debt may be the best way to have a conservative estimation on the entry to this distressed asset

Wow, Seadrill, NADL news is decimating this entire group today.  Anyone around in the mid 80's (or not) know of any rules of thumb for bottom of cycle p/b ratios in this industry?

I think you're looking at it the wrong way.  Figure out the market value of their ships.  Then figure out if the stock is trading at a discount to the sum of the parts.

George Economou does this arbitrage all the time.

Awilco is a distressed asset?  I think that is a bit extreme.  Contract drilling is a cyclical business, and they are entering a trough in the cycle.   
Title: Re: AWLCF - Awilco Drilling
Post by: JAllen on November 26, 2014, 04:52:55 PM
Fredriksen's MO is to dividend out all of the earnings of his companies, then when turmoil hits, he recaps them at advantageous terms and/or injects capital into whichever sub-sector of the shipping industry is collapsing.  He is, of course, quite a few steps ahead of every one else in the business.


But I would expect that SDRL is looking to take advantage of attractive opportunities here actually.  He knows that if he cuts entirely the dividend, the stock will sink so he can buy more.
Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on November 26, 2014, 08:49:19 PM
It seems that the macro situation got a little ugly recently due to:
1- Drop in oil prices.  Though oil prices may recover in the future.  It may depend on whether or not you think that shale oil production will keep prices down.
2- US sanctions on Russia.  Certain projects look like they will be put on hold, e.g. all of Exxon's projects in Russia.  I don't know how much this impacts world supply/demand for rigs.

Quote
Fredriksen's MO is to dividend out all of the earnings of his companies, then when turmoil hits, he recaps them at advantageous terms and/or injects capital into whichever sub-sector of the shipping industry is collapsing.  He is, of course, quite a few steps ahead of every one else in the business.
Him, George Economou, and many of the shipping CEOs strike me as shady.  I dislike this industry.
Title: Re: AWLCF - Awilco Drilling
Post by: constala on November 27, 2014, 03:31:26 AM
Those div cuts/suspension by over leveraged rivals Seadrill and NADL  offer a decent entry point in Awilco, which has a stronger balance sheet, a skillful owner, however certainly more operational risks with just 2 rigs- but this concentration also means added focus and motivation to secure decent contract renewals.  Also UK North Sea with harsher environment and stringent UK regulation offers some form of barrier to entry. At NOK 86 it looks a fairly decent risk/reward proposition. 
Title: Re: AWLCF - Awilco Drilling
Post by: roughlyright on December 05, 2014, 09:50:08 AM
I know that Seadrill is a different company with lot of more debt load. I am not sure whether the comparison to Seadrill is relevant.But does anyone here think that Awilco will cut its dividend?
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 05, 2014, 10:55:13 AM
I know that Seadrill is a different company with lot of more debt load. I am not sure whether the comparison to Seadrill is relevant.But does anyone here think that Awilco will cut its dividend?

By "cut" do you mean - being able to, but choosing not to pay - the dividend and hence hoard cash?

Or by "cut" do you mean will it go down in the coming quarters? About the first I don't know, about the second...it can be modeled pretty easily. It definitely won't stay at $1.15/share for the next few years.
Title: Re: AWLCF - Awilco Drilling
Post by: GregS on December 05, 2014, 11:37:43 AM
I know that Seadrill is a different company with lot of more debt load. I am not sure whether the comparison to Seadrill is relevant.But does anyone here think that Awilco will cut its dividend?

By "cut" do you mean - being able to, but choosing not to pay - the dividend and hence hoard cash?

Or by "cut" do you mean will it go down in the coming quarters? About the first I don't know, about the second...it can be modeled pretty easily. It definitely won't stay at $1.15/share for the next few years.

siddharth18 is right.

It's best to think of Awilco's dividend policy as a variable dividend policy.  They committed to paying out substantially all of their FCF after a cash buffer and Capex.  So this isn't a situation where they are paying 50% FCF and the question is whether they can maintain that.  Anything but a nominal drop in FCF should be expected to affect the dividend.

Read through this thread and there's been plenty of discussion of how to model Awilco's FCF and dividend going forward.  The upcoming yard stay for their rigs alone will result in at least a temporary cut.  Operational risks could certainly impact future cash flow.  Future day rates for new contracts will be the biggest factor once current contracts run off.

Whether Awilco changes their policy and decides to hoard more cash is hard to say.  While I suppose it is possible, they've said nothing to indicate that.  They've also left open the possibility of seeking growth opportunities.  Given where the rig market is at the moment, I would expect they are looking at possible acquisitions but I can't handicap the odds.
Title: Re: AWLCF - Awilco Drilling
Post by: saltybit on December 08, 2014, 08:39:14 AM
New post from OTCAdventures http://otcadventures.com/?p=1512 (http://otcadventures.com/?p=1512)
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on December 08, 2014, 08:52:33 PM
I have to agree with Dave over at OTC adventures.  I think Awilco is WAY oversold.  That is, if you think we are going to be using oil in the near future...

One thing the market is not taking into consideration is possible disruptions in oil supply from Iran, Russia, ISIS or who knows?  Trouble from Russia or the Middle East could spike oil prices very quickly.

Back in 08 oil went from $140 to $40 to $100 in the space of a few months.

One mistake I made was focusing too closely on Awilco.  It has solid, quality contracts and a GREAT balance sheet.  This is all well & good!  HOWEVER, the mistake was not calculating that no matter how good/solid an individual company is, they are going to get hammered if the whole sector goes down.

Awilco is my largest position.  I will be adding further before the end of the year...

Title: Re: AWLCF - Awilco Drilling
Post by: ItsAValueTrap on December 08, 2014, 10:04:39 PM
One thing the market is not taking into consideration is possible disruptions in oil supply from Iran, Russia, ISIS or who knows?  Trouble from Russia or the Middle East could spike oil prices very quickly.

American companies with oil projects in Russia have to halt their projects.  So this reduces the worldwide demand for rigs somewhat.
Title: Re: AWLCF - Awilco Drilling
Post by: Palantir on December 16, 2014, 06:49:43 AM
Which brave souls are still holding?
Title: Re: AWLCF - Awilco Drilling
Post by: jschembs on December 16, 2014, 07:13:31 AM
i just purchased a starter position, against my better senses...
Title: Re: AWLCF - Awilco Drilling
Post by: Libs on December 16, 2014, 07:37:08 AM
Still holding, bought at $14.

At least there's this:

<The Board approved a dividend distribution payable in Q4 2014 of USD 1.15 per share.  The share will trade ex-dividend on 18 November 2014, the record date is 19 November 2014 and the payment date is on or around 19 December 2014.>
Title: Re: AWLCF - Awilco Drilling
Post by: shhughes1116 on December 16, 2014, 07:37:22 AM
I'm still holding...painful to say the least!
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on December 16, 2014, 08:13:53 AM
I sold out two weeks ago (around $11.75), booking about a 10% loss, which is all the more painful considering I was up about 50% at one point. I feel silly looking back at the blue sky (not too long ago, when PPS was $25+) when I thought the majority shareholder will get sell the company at the top of the cycle. They did sell...but only their stake - and that should've been my first clue, if not writing on the wall that the smart money is looking to sell around $20/share, not buy or even hold.

For me to hold at this price, I must have confidence that these rigs won't be cold-stacked or that the cycle will turn before the current contracts are up and I simply don't. The Hess decommissioning work offers some safety, but not as much as I seek. I simply don't understand if/when/why the cycle will turn.

If there's $6 worth of contractually guaranteed EPS for this company, is paying $10 (don't forget $3 worth of debt) worth it when you don't know how north-sea is going to look like after the next few years? More rigs coming online, shale apparently imposing a price ceiling and no price floor apparently in sight.

While north-sea won't have a glut of rigs due to the regulatory and physical constraints (moving a rig costs tens of millions), if UDW rig rates are going to get pinched, then wouldn't north-sea midwater semi-subs follow suit ?

Maybe someone can correct me if I'm being too gloomy but it's not like we have a wildly asymmetric payoff if things work out here anyway. If you are of the view that oil price recovers quickly, why not buy LEAPs on some of the more levered drillers like SDRL?

My 2¢
Title: Re: AWLCF - Awilco Drilling
Post by: SwedishValue on December 16, 2014, 08:42:42 AM
Well one thing that bodes well for Awilco is their OPEX-structure. Compare Awilco to any other listed drill operator, and it looks like their breakeven rate would be around 30-40k USD less than that of other operators (meaning the be rate for Awilco would be around 140-150k USD/day).
Title: Re: AWLCF - Awilco Drilling
Post by: NoCalledStrikes on December 16, 2014, 08:45:22 AM
I'm out.  Right now, it is too binary for me.  If no rig gets stacked, I think you'll do ok now even at a significantly reduced day rate, but if one does get stacked you lose. Probabilistically, you would probably do with a hundred positions like this, but I don't carry that long a list, so I generally don't do binary plays.

I got too greedy and didn't lighten up enough when the stock was doing well. I also took too long to appreciate the significance of the insider selling. My once large gain went to no capital gain, but I did collect a rather nice dividend for the year... On the plus side, watching AWILCO crumble encouraged me to sell my other energy holdings in November before they declined much.
Title: Re: AWLCF - Awilco Drilling
Post by: Schwab711 on December 16, 2014, 10:56:07 AM
Well one thing that bodes well for Awilco is their OPEX-structure. Compare Awilco to any other listed drill operator, and it looks like their breakeven rate would be around 30-40k USD less than that of other operators (meaning the be rate for Awilco would be around 140-150k USD/day).

I commented on this on OTCAdventures but I don't think you can call them the lowest-cost operator since rigs are highly differentiated and their rigs likely have some of the lowest demand for their services. This industry was producing excellent ROIC due to a similar cycle that occurred 15 years ago. With the glut of rigs there's not much reason to believe that ROIC will be anything near double-digits in my opinion.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on December 16, 2014, 11:37:57 AM
i just purchased a starter position, against my better senses...
Given the negativity here I think you might have picked a good time.

FWIW: I'am long, recently added to my position, but it isone of my smallest positions
Title: Re: AWLCF - Awilco Drilling
Post by: SwedishValue on December 16, 2014, 03:11:42 PM
I have a position. It is my smallest position, but I have only five positions fwiw. I think it's satisfying to note that whereas I lost around 40% in my local currency on stock the depreciating, I have recouped half of that in dividends, holding the stock throughout the worst 8 month turmoil in the oil rig business in a very long time.
Title: Re: AWLCF - Awilco Drilling
Post by: SpecOps on December 17, 2014, 05:34:41 AM
I'm still long here, really annoyed I put in a sell order a few cents above the share price at the peak when I wanted to sell it, and it never got hit and is down 45% since then.

That'll teach me a valuable lesson in being greedy for a few cents.

At these prices though I think risk/reward is attractive, but only a small position for me.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on January 12, 2015, 04:11:19 PM
http://oilpro.com/post/9507/now-ultra-deepwater-rig-contract-cancelled-early-drilling-dominoe

http://www.offshoreenergytoday.com/camac-considers-legal-options-against-northern-offshore/
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on February 10, 2015, 07:31:59 AM
Nice article in the financial times today about decommissioning in the UK North Sea. Among the highlights:

Oil & Gas UK, the industry’s lobby group, believes that between 2014 and 2023 oil companies will spend £14bn plugging North Sea wells and removing infrastructure.

Wood Mackenzie says that spending on decommissioning will exceed that of developing oilfields in the North Sea from 2022.

Most decommissioning costs can be deducted for tax purposes.

Title: Re: AWLCF - Awilco Drilling
Post by: zippy1 on February 12, 2015, 05:51:24 AM
Quarter out. The presentation is kind of interesting.
http://hugin.info/147077/R/1894041/671335.pdf
Title: Re: AWLCF - Awilco Drilling
Post by: GregS on February 12, 2015, 08:50:05 AM
This was interesting

Quote
Timing of Return to Higher Activity Levels is Uncertain
•Significant market change during the quarter due to sharply falling oil price
•Prompt reaction from Operators with reductions in current and planned expenditure
•Continued low level of rig contract activity in the UK
•Hints on potential stimulus /tax treatment from UK government but nothing confirmed
•Increased number of available rigs expected to last through 2015 and 2016
•The UK market still has barriers to entry
•Globally, some increase in mid-water Semi Submersible rig attrition programmes
•Accelerated market downturn leads to increased uncertainty with respect to the market recovery

They also noted up to 6 rigs available for new contracts during 2015.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on February 25, 2015, 08:48:15 AM
Today is the last day for Hess to declare their option on WilHunter. No news yet, but the stock was hammered up at the close in Oslo.
Title: Re: AWLCF - Awilco Drilling
Post by: BG2008 on February 25, 2015, 10:03:47 PM
AWDR - Hess option for WilHunter expired

With reference to our press release of 27 October 2014, Awilco Drilling PLC announces that Hess Limited have allowed their option on WilHunter to lapse.

WilHunter is one of Awilco Drilling's two Enhanced Pacesetter semi-submersibles and is equipped for drilling in water depths up to 1,500ft.

Aberdeen, 26 February 2015


For further information please contact:
Jon Oliver Bryce, CEO
Phone: +44 1224 737900

Cathrine Haavind, IR Manager
Phone: +47 93 42 84 64
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on February 26, 2015, 07:25:51 AM
Surprised at the market impact today. Apparently people thought that they would exercise their option?
Title: Re: AWLCF - Awilco Drilling
Post by: matjone on February 26, 2015, 12:08:35 PM
http://oilpro.com/post/9176/5-reasons-why-transocean-scrapping-7-offshore-rigs-just-beginning
https://whopperinvestments.wordpress.com/2015/02/21/weekend-reading-tisch-on-value-investing/
Title: Re: AWLCF - Awilco Drilling
Post by: bizaro86 on February 26, 2015, 01:12:32 PM
Surprised at the market impact today. Apparently people thought that they would exercise their option?

This seems like pretty strong proof that markets aren't efficient to me. Why would anyone think Hess would exercise an option to hire the rig at an above market rate? If markets were anywhere close to efficient that should have been priced in...
Title: Re: AWLCF - Awilco Drilling
Post by: krazeenyc on February 26, 2015, 01:19:00 PM
Surprised at the market impact today. Apparently people thought that they would exercise their option?

This seems like pretty strong proof that markets aren't efficient to me. Why would anyone think Hess would exercise an option to hire the rig at an above market rate? If markets were anywhere close to efficient that should have been priced in...

FWIW, Hess exercising the option would not have required it to pay the previous day rate. During one of the conference calls the guys at Awilco explained that Hess renewing the option would be based on whether they needed more time to complete the decommissioning.  Apparently Hess is done. If they needed more time to complete the job, Hess would have renewed, and ideally negotiated a number that worked for both parties.
Title: Re: AWLCF - Awilco Drilling
Post by: bizaro86 on February 26, 2015, 01:22:38 PM
Surprised at the market impact today. Apparently people thought that they would exercise their option?

This seems like pretty strong proof that markets aren't efficient to me. Why would anyone think Hess would exercise an option to hire the rig at an above market rate? If markets were anywhere close to efficient that should have been priced in...

FWIW, Hess exercising the option would not have required it to pay the previous day rate. During one of the conference calls the guys at Awilco explained that Hess renewing the option would be based on whether they needed more time to complete the decommissioning.  Apparently Hess is done. If they needed more time to complete the job, Hess would have renewed, and ideally negotiated a number that worked for both parties.

Ah, that makes more sense, thanks!
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on February 28, 2015, 11:39:40 AM
From the Broyhill Letter:

Quote
Given the amount of cash we have on hand today, our investors should be hoping for the market to fall, as panicked
sellers give us the opportunity to invest at lower prices, which ultimately drive future returns. We recognize that this is
counterintuitive and may mean short-term losses in those positions we currently hold, but those losses should be less
than those suffered by the overall market, and more than offset by gains from additional purchases. The examples below
should give you a sense of the opportunities we see today, as a result of recent volatility:

 The collapse in energy prices has wreaked havoc on the oil sector, which has dropped 20% since the summer.
Many stocks in the industry have fallen much further. A recent investment in a Norwegian drilling company
has effectively been cut in half in recent months due to uncertainty around Scottish Independence and the
speculative unwind in commodity-related businesses. In the short-term, we are likely to see continued volatility
in the shares. In exchange for accepting this volatility, we receive the majority of the company’s cash flow in
the form of dividends, which approximate a 30% yield today. The founder owns about half of the shares
outstanding and the company’s rigs were last valued in excess of the total market capitalization.

Sounds like Awilco...

It was. They're still in.


Quote
There are few moats in the oil drilling
business, but our research indicated that rigs operating in the North Sea benefitted from barriers to entry - in
the form of regulatory hurdles and excessive capital requirements - which limit supply in the region. We were
also attracted to the region’s growing decommissioning work – a source of demand less correlated to oil prices.
We purchased our investment in Awilco as shares declined by a third during oil’s descent only to watch our
investment decline by another third since initial purchase. So why do we own the stock today? Unlike most
equity investments where the majority of a company’s value is in the discounted value of long-term cash flows,
Awilco’s value is front-end loaded. The way we see it, current contracts should generate about half of the
stock's present market capitalization in dividends over the next year. Beyond that, Awilco represents a cheap
option on higher oil prices at some point over the rigs’ seventeen year useful lives.
Title: Re: AWLCF - Awilco Drilling
Post by: Sunrider on March 01, 2015, 10:46:50 PM
Hi - could you kindly provide a link to the document with the last quote? Can't seem to find it on their site?

Thanks - C.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on March 02, 2015, 05:39:43 AM
Hi - could you kindly provide a link to the document with the last quote? Can't seem to find it on their site?

Thanks - C.

https://gallery.mailchimp.com/443e8872e35ccdde12b72e8cd/files/Broyhill_Asset_Management_Annual_Letter.pdf
Title: Re: AWLCF - Awilco Drilling
Post by: Sunrider on March 02, 2015, 06:11:51 AM
Thank you!
Hi - could you kindly provide a link to the document with the last quote? Can't seem to find it on their site?

Thanks - C.

https://gallery.mailchimp.com/443e8872e35ccdde12b72e8cd/files/Broyhill_Asset_Management_Annual_Letter.pdf
Title: Re: AWLCF - Awilco Drilling
Post by: permabear on March 11, 2015, 02:53:27 PM
Awilco longs, what are your thoughts now? Still holding on? Planning on buying more?

I must admit, I bought Awilco at multiples of the current price. I was blinded by the juicy dividend yield. I'm still holding and contemplating loading up more at $6 and below, should the stock get there.

Assuming they can earn $200k net operating profit per day ($300k day rates less $100k opex), the rigs operate for 10 years and they can achieve an average utilization of 75%, I think you can earn a 20% IRR on Awilco (assuming a $6 entry price). This assumes a constant dividend of $1.36/year for the next 10 years. At $6 per share, the enterprise value per rig is ~$112m. They acquired the rigs for $191m (~$96m/rig) in 2010 and have spent at least $100m (~$50m/rig) in upgrades since.
Title: Re: AWLCF - Awilco Drilling
Post by: matjone on March 11, 2015, 06:11:30 PM
I still have about a 1% position.  I am not sure if I'll average down or not - many rigs are being scrapped and I'm kind of curious what prices people are going to be getting for them.
Title: Re: AWLCF - Awilco Drilling
Post by: permabear on March 11, 2015, 08:15:39 PM
I think the scrap value is very minimal. Awilco uses $15m residual value per rig.
Title: Re: AWLCF - Awilco Drilling
Post by: matjone on March 12, 2015, 06:54:20 AM
Yeah it seems that Tisch was buying below scrap value knowing they would not have to be scrapped, whereas we bought above scrap value and they may have to be scrapped after all.  Not saying that will necessarily happen, I just don't know.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 16, 2015, 03:25:54 AM
Looks like the stock is incorporating some cold reality (a possibility of cold-stacking/scraping) that seemed unrealistic just a few months ago.

Speaking of scrap value...has anyone calculated at what price would we be getting a free option ? In other words, what price per share represents the profit from contractually guaranteed backlog (assuming zero new contracts)? From the calculation here (http://otcadventures.com/?p=1512 (http://otcadventures.com/?p=1512)) it seems about $170M ($5.6/share) worth of net income is guaranteed to flow between 2015 start and Q2 of 2017, compared to $220M marketcap.

The current price of option would hence be around 50 million - or am I missing something?
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on March 16, 2015, 04:31:28 AM
Besides yard survey expenses for each rig, I think you also need to account for the fact that they will incur costs for upgrading the BOPs. Don't know how much they have prepaid so far, but total costs should be ~$45 million for both rigs. In addition to this warm stacking or cold stacking Willhunter is presumable not going to be free.
Title: Re: AWLCF - Awilco Drilling
Post by: permabear on March 16, 2015, 05:34:56 AM
Looks like the stock is incorporating some cold reality (a possibility of cold-stacking/scraping) that seemed unrealistic just a few months ago.

Speaking of scrap value...has anyone calculated at what price would we be getting a free option ? In other words, what price per share represents the profit from contractually guaranteed backlog (assuming zero new contracts)? From the calculation here (http://otcadventures.com/?p=1512 (http://otcadventures.com/?p=1512)) it seems about $170M ($5.6/share) worth of net income is guaranteed to flow between 2015 start and Q2 of 2017, compared to $220M marketcap.

The current price of option would hence be around 50 million - or am I missing something?

I don't know if you can bank on the contractually guaranteed backlog. Diamond Offshore recently disclosed they received requests for early termination, even when this was not contractually allowable:

Quote
On February 12, 2015, our subsidiary received notice of termination of its drilling contract from Dana Petroleum (E&P) Limited, the customer for the Ocean Nomad. The drilling contract was estimated to conclude in accordance with its terms in August 2015. We do not believe that Dana had a valid basis for terminating the contract, and we intend to defend our rights under the contract.

Another example is Hercules Offshore/Aramco. I bet Awilco is having these kinds of conversations. Apache can walk away and leave it up to Awilco to litigate. Awilco would likely choose to amend the contract and take a lower dayrate instead.
Title: Re: AWLCF - Awilco Drilling
Post by: Schwab711 on March 16, 2015, 07:17:30 AM
Looks like the stock is incorporating some cold reality (a possibility of cold-stacking/scraping) that seemed unrealistic just a few months ago.

Speaking of scrap value...has anyone calculated at what price would we be getting a free option ? In other words, what price per share represents the profit from contractually guaranteed backlog (assuming zero new contracts)? From the calculation here (http://otcadventures.com/?p=1512 (http://otcadventures.com/?p=1512)) it seems about $170M ($5.6/share) worth of net income is guaranteed to flow between 2015 start and Q2 of 2017, compared to $220M marketcap.

The current price of option would hence be around 50 million - or am I missing something?

I don't know if you can bank on the contractually guaranteed backlog. Diamond Offshore recently disclosed they received requests for early termination, even when this was not contractually allowable:

Quote
On February 12, 2015, our subsidiary received notice of termination of its drilling contract from Dana Petroleum (E&P) Limited, the customer for the Ocean Nomad. The drilling contract was estimated to conclude in accordance with its terms in August 2015. We do not believe that Dana had a valid basis for terminating the contract, and we intend to defend our rights under the contract.

Another example is Hercules Offshore/Aramco. I bet Awilco is having these kinds of conversations. Apache can walk away and leave it up to Awilco to litigate. Awilco would likely choose to amend the contract and take a lower dayrate instead.

This is exactly how it happens. Think if you had 2-year cell phone agreements for each of your 5 employees but you fired 3 of them. Would you continue to pay for 5 phone plans or calculate the break-even? Contractually Guaranteed doesn't mean "Put a gun to their head". I think this a really common mistake and they generally only get caught through mistakes or really putting yourself in the company's situation.
Title: Re: AWLCF - Awilco Drilling
Post by: jawn619 on March 16, 2015, 11:40:15 AM
So let me get it straight,
This company has a
220,731,525(market cap) + 139,697,000(debts) - 75,951,000(cash) = about 250mil enterprise value

In the next year they are guaranteed through contracts to have 478,000,000 in 2015 of revs. This translates to around 170mil of ebitda.

So main concerns are will Awilco be able to collect the guaranteed contract amounts and then will they be able to renew their contracts or find anyone to lease off them where the environment for renewals doesn't look good.

Title: Re: AWLCF - Awilco Drilling
Post by: Schwab711 on March 16, 2015, 01:44:31 PM
So let me get it straight,
This company has a
220,731,525(market cap) + 139,697,000(debts) - 75,951,000(cash) = about 250mil enterprise value

In the next year they are guaranteed through contracts to have 478,000,000 in 2015 of revs. This translates to around 170mil of ebitda.

So main concerns are will Awilco be able to collect the guaranteed contract amounts and then will they be able to renew their contracts or find anyone to lease off them where the environment for renewals doesn't look good.

Basically, yes. The odds are high that the contracts will be carried out with the current terms, I was just trying to point out the bear case (since I've been burned by guaranteed contracts before). But you would need to know the contract termination terms to know the actual bear case for the stock. I'm not familiar with the depreciation cycle but the rigs may very well be held on the BS at higher carrying value than the current market value. AWLCF doesn't appear to have the liquidity to withstand a contract termination(s) or delays in future contract signings.

Remember as well that we are looking FCF to exceed EV such that ((Sum(FCF) - EV)*(1+g)^n)/(1 + r)^n => g > 10% (n = 2 or 3 probably; and I'm sure most of us are shooting for "g" much higher than 10%). Once you apply a discount for a relatively high capital loss scenario (Possibly as low as 50% - 60% loss currently) than AWLCF really should trade below EV to make it a worthwhile risk given the environment.
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on March 16, 2015, 02:51:39 PM
All valid points, but isn't there a difference between a state owned company like Aramco/Pemex and an independent like Hess/Apache? I would presume that the contract is governed by UK/Scottish laws where the contract is fully enforceable? What would Hess/Apache possibly gain from breaking the contract and dragging this out? Apart from losing the case, millions in legal fees and losing reputation...? And it's not like either of those companies is on the verge of bankruptcy or starving for liquidity...


If Awilco suspected such a move, they could simply suspend their dividend to maintain a bigger cash hoard (excess cash is around $30M already).


I think the bottom line is that it depends in the fine print of the contract. Would've been much worse if the rigs were leased to Pemex where they include a 30-day termination clause in the contract and enforcing a contract against a NOC in its home country is an uphill battle.


Regarding the BOPs - does anyone know if they have resale values in case the rigs are scrapped?


It's really telling how (last year) there was little focus on rig scrap values due to the "rig expiration" date being 2031...compared to now.
Title: Re: AWLCF - Awilco Drilling
Post by: Mephistopheles on July 08, 2015, 08:24:07 PM
I'm doing some preliminary research on this stock and am wondering if anyone can help me answer a few questions, or point me in the right direction to figure it out:

1. From now until the contracts end, how can we think about what kind of additional capex the rigs will need? For example, I've heard they will need to upgrade BOPs; but I can't find any info on this in the AR. They did upgrade the rigs in '09 and the contracts will be ending in a couple of years; will there really be a need for new BOPs? What other costs can one reasonably expect?

2. If oil stays this low forever, it's safe to say that the rigs will be cold stacked, then sold or scrapped. What are the costs for cold stacking North Sea rigs? And what is a reasonable expectation for the length of time they would do this before throwing in the towel? Management seems to be shareholder friendly and opportunistic, so I would assume that they wouldn't wait around too long for a new contract.

This seems to be a pretty straightforward investment. Just add and subtract, and assign probabilities on the free upside option vs. the maximum downside loss. I just want to learn how to think about what inputs I need to put in and where to get them from.

Thanks
Title: Re: AWLCF - Awilco Drilling
Post by: siddharth18 on July 08, 2015, 08:40:28 PM
I'm doing some preliminary research on this stock and am wondering if anyone can help me answer a few questions, or point me in the right direction to figure it out:

1. From now until the contracts end, how can we think about what kind of additional capex the rigs will need? For example, I've heard they will need to upgrade BOPs; but I can't find any info on this in the AR. They did upgrade the rigs in '09 and the contracts will be ending in a couple of years; will there really be a need for new BOPs? What other costs can one reasonably expect?

2. If oil stays this low forever, it's safe to say that the rigs will be cold stacked, then sold or scrapped. What are the costs for cold stacking North Sea rigs? And what is a reasonable expectation for the length of time they would do this before throwing in the towel? Management seems to be shareholder friendly and opportunistic, so I would assume that they wouldn't wait around too long for a new contract.

This seems to be a pretty straightforward investment. Just add and subtract, and assign probabilities on the free upside option vs. the maximum downside loss. I just want to learn how to think about what inputs I need to put in and where to get them from.

Thanks

1. Here is what I got from IR regarding capex - http://i.imgur.com/yj6v5xw.png

2. Yeah scrapped or sold...If Awilco can't run the rigs profitably, who else can? If I recall correctly, the cold stack shouldn't run more than a couple of million dollars per rig...I could be wrong. Regarding what management might or might not do, it just depends on what the parent company's outlook on oil price is. They have been in this game for longer than anyone else so the decision ideally shouldn't be monumentally stupid.
Title: Re: AWLCF - Awilco Drilling
Post by: Mephistopheles on July 08, 2015, 09:03:02 PM
I'm doing some preliminary research on this stock and am wondering if anyone can help me answer a few questions, or point me in the right direction to figure it out:

1. From now until the contracts end, how can we think about what kind of additional capex the rigs will need? For example, I've heard they will need to upgrade BOPs; but I can't find any info on this in the AR. They did upgrade the rigs in '09 and the contracts will be ending in a couple of years; will there really be a need for new BOPs? What other costs can one reasonably expect?

2. If oil stays this low forever, it's safe to say that the rigs will be cold stacked, then sold or scrapped. What are the costs for cold stacking North Sea rigs? And what is a reasonable expectation for the length of time they would do this before throwing in the towel? Management seems to be shareholder friendly and opportunistic, so I would assume that they wouldn't wait around too long for a new contract.

This seems to be a pretty straightforward investment. Just add and subtract, and assign probabilities on the free upside option vs. the maximum downside loss. I just want to learn how to think about what inputs I need to put in and where to get them from.

Thanks

1. Here is what I got from IR regarding capex - http://i.imgur.com/yj6v5xw.png

2. Yeah scrapped or sold...If Awilco can't run the rigs profitably, who else can? If I recall correctly, the cold stack shouldn't run more than a couple of million dollars per rig...I could be wrong. Regarding what management might or might not do, it just depends on what the parent company's outlook on oil price is. They have been in this game for longer than anyone else so the decision ideally shouldn't be monumentally stupid.


Thanks siddharth! Very helpful
Title: Re: AWLCF - Awilco Drilling
Post by: permabear on July 31, 2015, 10:20:12 AM
Issued today. Management had said that the work was ahead of schedule.

Quote
AWDR - Hess agreed to early release of WilHunter
Awilco Drilling PLC and Hess Limited have mutually agreed to release the WilHunter ahead of the 1st December 2015 contract date as a consequence of the successful early completion of the decommissioning program.  There will be no negative financial repercussions to either party as a result of this early release.

WilHunter is now moored at Invergordon and is being actively marketed against future opportunities.

WilHunter is one of Awilco Drilling's two Enhanced Pacesetter semi-submersibles and is equipped for operations in water depths up to 1,500ft.

Aberdeen, 31 July 2015


For further information please contact:
Jon Oliver Bryce, CEO
Phone: +44 1224 737900

Cathrine Haavind, IR Manager
Phone: +47 93 42 84 64


This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
Title: Re: AWLCF - Awilco Drilling
Post by: phil_Buffett on August 19, 2015, 12:32:21 AM
http://hugin.info/147077/R/1946319/706167.pdf

q2:

dividend $0,50
Title: Re: AWLCF - Awilco Drilling
Post by: permabear on September 15, 2015, 01:53:39 PM
Any Canadian owners of Awilco on this board? Does this qualify as a TFSA/RRSP investment? Thanks
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on September 15, 2015, 03:18:59 PM
I had this previously in my RRSP and there was no tax withheld on the dividends.


I wonder how sustainable is the 0.50 $ dividend given the state of the O&G industry.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on September 15, 2015, 06:25:09 PM
I had this previously in my RRSP and there was no tax withheld on the dividends.


I wonder how sustainable is the 0.50 $ dividend given the state of the O&G industry.

Just depends if they are able to secure work for the WilHunter. Management thinks they are close, thus the warm-stack.
Title: Re: AWLCF - Awilco Drilling
Post by: permabear on September 16, 2015, 11:14:57 AM
I had this previously in my RRSP and there was no tax withheld on the dividends.

So it is considered a qualified investment for TFSA/RRSP? I read that the security has to be on a designated exchange, one of which is the Oslo exchange, although I don't own the shares outright, I own an OTC ADR. According to what I read, OTC securities are ineligible for registered accounts. I suppose the argument is that the underlying security trades on a designated exchange?

Designated exchanges: http://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp (http://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp)
Qualified investments: http://www.taxtips.ca/rrsp/qualifiedinvestments.htm (http://www.taxtips.ca/rrsp/qualifiedinvestments.htm)
Title: Re: AWLCF - Awilco Drilling
Post by: bizaro86 on September 16, 2015, 02:41:17 PM
I had this previously in my RRSP and there was no tax withheld on the dividends.

So it is considered a qualified investment for TFSA/RRSP? I read that the security has to be on a designated exchange, one of which is the Oslo exchange, although I don't own the shares outright, I own an OTC ADR. According to what I read, OTC securities are ineligible for registered accounts. I suppose the argument is that the underlying security trades on a designated exchange?

Designated exchanges: http://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp (http://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp)
Qualified investments: http://www.taxtips.ca/rrsp/qualifiedinvestments.htm (http://www.taxtips.ca/rrsp/qualifiedinvestments.htm)

My understanding is that it has to be the same security. So if it has the same ISIN, you're fine. If it's actually an ADR, then generally speaking it isn't the same security.
Title: Re: AWLCF - Awilco Drilling
Post by: gary17 on September 16, 2015, 04:15:13 PM
http://business.financialpost.com/personal-finance/tfsa/are-you-sure-you-can-invest-that-in-your-tfsa?__lsa=baf3-fd7f

I think you should ask for professional tax or legal advice on this topic.



Title: Re: AWLCF - Awilco Drilling
Post by: phil_Buffett on November 19, 2015, 02:22:57 AM
http://hugin.info/147077/R/1967958/719093.pdf


q3: dividend again at $0,50
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on November 19, 2015, 07:46:33 AM
Hey all:

WOW, a great quarter!

Of course, this won't be repeated in the near future, as part of that is a one time payment.

Nice to get a $.50/share dividend.

A few interesting things I noticed...Cash now exceeds market cap of the company ($151MM vs. $135MM).


How is the balance sheet?  $151MM cash vs. debt of $105MM.

Contracted future revenue WELL exceeds market cap of the company ($276MM vs. $125MM).  Looking at latest quarters numbers, about half of this should be cash flow...And that is being extremely conservative.  Future cash flow from signed contracts should EASILY pay off the debt.  You then have $151MM in cash, management & two rigs.

BUT IT ALL DEPENDS ON THE PRICE OF OIL!

I just don't get it...
Title: Re: AWLCF - Awilco Drilling
Post by: permabear on November 19, 2015, 08:15:04 AM
Fear is that they don't contract their rigs in the short-term, are forced to stack them and delay upgrades (i.e. less marketable), and if/when the oil price returns to profitable levels for E&Ps, the rigs will be at the end of their useful life.
Title: Good article on Awilco
Post by: roughlyright on January 13, 2016, 10:24:54 AM
Good article posted on seeking Alpha
http://seekingalpha.com/article/3802336-2-years-after-tempering-the-awilco-enthusiasm-whats-next (http://seekingalpha.com/article/3802336-2-years-after-tempering-the-awilco-enthusiasm-whats-next)
Title: Re: Good article on Awilco
Post by: Tim Eriksen on January 13, 2016, 11:14:31 AM
Good article posted on seeking Alpha
http://seekingalpha.com/article/3802336-2-years-after-tempering-the-awilco-enthusiasm-whats-next (http://seekingalpha.com/article/3802336-2-years-after-tempering-the-awilco-enthusiasm-whats-next)

The author's optimism on Awilco's ability to secure a contract for the second rig seems incredibly naive.  There are three other warm stacked rigs and six cold stacked rigs in the area with probably six more rigs ending contracts in the next few months.  Logic tells me that they all would rather be contracted at $175,000 per day versus just sitting.  The current market won't support it.  His Q4 estimate seems to ignore the rig going to the yard.  I expect them to lose money in the quarter.

The author does make a point on the value of the cash flow from the one rig should be over the next two years combined with Awilco's cash buffer.  Awilco has the cash to pay off their bond and pay for one rig's SPS and BOP.   The market has to improve because one rig at $215,000 per day is probably EPS break even.   I would expect the dividend to be cut below $0.25 per quarter.
Title: Re: AWLCF - Awilco Drilling
Post by: permabear on February 03, 2016, 11:34:44 AM
http://www.osjonline.com/news/view,uk-to-lead-global-decommissioning-surge_41608.htm

Quote
DW anticipates that 146 platforms will be removed from the UK during 2019-2026 – that is 51 per cent of all UK platform removals over the forecast*. This is due to the high number of ageing platforms in the UK, which have an average age of over 20 years and are uneconomic at current commodity prices, as a result of high maintenance costs and the expensive production techniques required for mature fields. However, many of the largest platforms will remain in place until the 2030s, mainly due to tiebacks that have increased production late in life.

*Forecast period is 2016-2040
Title: Re: AWLCF - Awilco Drilling
Post by: roughlyright on March 02, 2016, 11:18:02 AM
New article on SeekingAlpha

http://seekingalpha.com/article/3940066-6-reasons-awilco-drilling-edge-chasm (http://seekingalpha.com/article/3940066-6-reasons-awilco-drilling-edge-chasm)
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on February 14, 2017, 10:59:30 AM
Hey all:

Anybody still watching this one?

They reported earnings today of $.50/share and a declared another dividend of $.20/share.

One rig is in cold storage...drilling activity is picking up a LITTLE BIT according to management...

If the 2nd rig can be put back into operation, AWLCF would certainly spike higher....

What are the odds?  1 in 10?  1 in 5?

I still think this is an interesting speculation on higher oil prices.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on February 16, 2017, 01:03:02 AM
Hey all:

Anybody still watching this one?

They reported earnings today of $.50/share and a declared another dividend of $.20/share.

One rig is in cold storage...drilling activity is picking up a LITTLE BIT according to management...

If the 2nd rig can be put back into operation, AWLCF would certainly spike higher....

What are the odds?  1 in 10?  1 in 5?

I still think this is an interesting speculation on higher oil prices.

UK market is still oversupplied. Slide 14 kind of spells it out. Ideally one of the big players should be scrapping rigs. But things will eventually even out. 7 rigs will be out of contract by the end of this year. Leaving just 5 with firm contracts at the beginning of 2018, which would put us at parity in today's market. So really, this thing will really start to turn around once you see scrapping take place. Plus side for the WilPhoenix is the contact expires late Feb 2018, which if the rest of the 2017 fleet gets cold stacked, puts it in prime position to pick up additional seasonal work in 2018 when we should see day rates rising.

Other plus side, which they mentioned in the call is lots of M&A E&P activity in the UK North Sea, which is certainly a good thing for drillers. I'm wondering if they will be active again in trying to pick up rigs on the cheap or if they'll be looking to sell out during the next upcycle. Seems like it could go either way...
Title: Re: AWLCF - Awilco Drilling
Post by: LongTerm on September 21, 2017, 05:59:39 AM
For anyone still following this, looks like they have signed a 3 year follow-on contract for WilPhoenix beginning when current contract ends in April 2018. Day rate about $117k, up from the trough of earlier this year but still way off of highs 3 years ago.

http://cws.huginonline.com/A/147077/PR/201709/2135796.xml
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 21, 2017, 08:04:43 AM
I still have my Awilco shares.

This is indeed good news! 

Now if they can just get their other rig some work...
Title: Re: AWLCF - Awilco Drilling
Post by: fareastwarriors on September 21, 2017, 09:51:52 AM
I still have my Awilco shares.

This is indeed good news! 

Now if they can just get their other rig some work...

Yay!
Only down 80% now  :D :'( :'( :'(
Title: Re: AWLCF - Awilco Drilling
Post by: valuedontlie on September 21, 2017, 10:05:02 AM
Has anyone done the math on this new contract?

The day rate is $116.7k and opex has been ~$67k per day so $18m per year at 100% utilization. SG&A is ~$2m per quarter and cold-stacking of WilHunter is ~$1m per year so we're at $9m in EBITDA. Interest is around $7m per year and capex $3m so we're running a $1m free cash flow deficit. They have cash = debt right now and will generate some $20m per quarter from 3Q17 to 1Q18 so in theory they could pay the debt down 100% which would leave FCF around $6m annually or $0.20/share.

Guess my point is that unless rig opex per day is going down or they're able to contract the other rig, still not a screaming bargain. And the dividend is definitely unsustainable at this new day rate.

Anyone else have thoughts?
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 21, 2017, 11:23:42 AM
Has anyone done the math on this new contract?

The day rate is $116.7k and opex has been ~$67k per day so $18m per year at 100% utilization. SG&A is ~$2m per quarter and cold-stacking of WilHunter is ~$1m per year so we're at $9m in EBITDA. Interest is around $7m per year and capex $3m so we're running a $1m free cash flow deficit. They have cash = debt right now and will generate some $20m per quarter from 3Q17 to 1Q18 so in theory they could pay the debt down 100% which would leave FCF around $6m annually or $0.20/share.

Guess my point is that unless rig opex per day is going down or they're able to contract the other rig, still not a screaming bargain. And the dividend is definitely unsustainable at this new day rate.

Anyone else have thoughts?

I am going to guess that we will see the daily op-ex come down somewhat, along with all the other expenses. 

Obviously FCF is not going to be anything like what it was before, but there should be something.

If oil prices can rise a bit...that will increase the odds of the other rig being leased out.  If that happens, then that is truly a game changer.

With the existing lease, no more talk about the company being shut down or going out of business.  The business is viable for the next few years at least.

Management at AWLCF is excellent.  They managed to make it through the downturn, and still managed to pay a dividend (reduced).  Look at SDRL and their other competitors.  They went busto....AWLCF has made it through.
Title: Re: AWLCF - Awilco Drilling
Post by: writser on September 21, 2017, 03:45:03 PM
Has anyone done the math on this new contract?

The day rate is $116.7k and opex has been ~$67k per day so $18m per year at 100% utilization. SG&A is ~$2m per quarter and cold-stacking of WilHunter is ~$1m per year so we're at $9m in EBITDA. Interest is around $7m per year and capex $3m so we're running a $1m free cash flow deficit. They have cash = debt right now and will generate some $20m per quarter from 3Q17 to 1Q18 so in theory they could pay the debt down 100% which would leave FCF around $6m annually or $0.20/share.

Guess my point is that unless rig opex per day is going down or they're able to contract the other rig, still not a screaming bargain. And the dividend is definitely unsustainable at this new day rate.

Anyone else have thoughts?

I agree. NPV of current contract cashflow is ~$2.20 per share, NPV of new contract is ~$0.50 per share. $0.20 / share excess current assets for a total of around $3. And that is assuming they cancel all debt quickly. Optional value of rig #2 is not that high given where day rates are. So, you are effectively paying a dollar per share for terminal value in 2021. Probably a bit cheapish but not a no-brainer.

Quote
If oil prices can rise a bit...that will increase the odds of the other rig being leased out.  If that happens, then that is truly a game changer.
Sure, but if your thesis boils down to "if oil prices can rise a bit" you might as well go long crude oil futures.
Title: Re: AWLCF - Awilco Drilling
Post by: valuedontlie on September 21, 2017, 04:14:21 PM
My math was the following:

Assuming they pay down all debt immediately (i.e. no interest expense)...

Current backlog should net ~$20m per quarter through 1Q18 for $60m / $2/share. New contract nets maybe $0.20/share in FCF per year assuming non-100% utilization, ~$67k rig opex per day, and continued cold-stacking of rig #2.

Under this scenario you're essentially pay 10x FCF on EV. Yes, they bought 3 years of time to market the other rig but that remains option value at this point. Seems like a pretty fair price >$4/share. Dividend likely goes to less than $0.20/share as well.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on September 22, 2017, 02:40:55 AM
Keeps the company a going concern. Had to be done. Like others have said allows management to be more judicious in bringing the other rig out of cold-stack. Also continues to reduce the available supply in the UK. With as much M&A going on in the North Sea (most of which is PE) they're going to want to see some ROI eventually.

I'm still hoping they can pick off another cheap rig or two during this down cycle. But my gut says they'll probably try selling out this time around.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on January 03, 2018, 10:14:19 AM
Hey all:

Anybody still own/watch this thing?

Brent is just under $70/barrel today.

If that rate sticks around, OR even goes higher, then i would think rig day rates would go up along with demand for them.

If that is the case, AWLCF might do reasonably well.

Their balance sheet is in good shape...they've got good management...they've got a rig in cold storage.

With firmer crude pricing, good things could happen here?
Title: Re: AWLCF - Awilco Drilling
Post by: valuedontlie on January 03, 2018, 10:39:13 AM
I still own a small amount... still stand by my previous comments around run-rate EBITDA (~$8m) / FCF (~$0.20/share) under the new rig contract...

They will collect higher cash flows as the current contract winds down into 1Q18 and then new run-rate FCF of ~$0.20/share. Beyond that, it's mostly an option on landing a contract for the cold-stacked rig which, as you mentioned, seems to be increasing in value.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on January 03, 2018, 10:44:48 AM
You are correct, but can't imagine we get a material move in share price until the second rig gets firm work. Will be interesting when the working rig switched to the new contract what they do to the dividend. All the yield hounds might abandon the stock if they drop the dividend.

Long term I still think they'll either get more rigs or sell out this cycle. Probably would lean more towards more rigs.
Title: Re: AWLCF - Awilco Drilling
Post by: tytthus on January 03, 2018, 11:06:56 AM
How much does it cost to bring one of these rigs out of cold storage?  Who bears the cost?  How many warm stacked rigs are available?  I'd hope awilco would only sign a new contract for the cold stacked rig if they can get adequate return after the costs to bring it up to operating level.
Title: Re: AWLCF - Awilco Drilling
Post by: Hielko on January 03, 2018, 01:17:13 PM
How much does it cost to bring one of these rigs out of cold storage?  Who bears the cost?  How many warm stacked rigs are available?  I'd hope awilco would only sign a new contract for the cold stacked rig if they can get adequate return after the costs to bring it up to operating level.
I think once one of these very old rigs are moved to cold storage it's quite unlikely they will ever get back to work again. Quite expensive as far as I know, and since there is still a big supply of other rigs available...
Title: Re: AWLCF - Awilco Drilling
Post by: Tim Eriksen on January 03, 2018, 04:26:56 PM
Since the rig was refurbished in 2011 I don't think it is considered very old.  In my notes I had noted a cost of less than $10 million to get it ready.  I would think that was from a conference call but did not note which one, so I cannot confirm.  I would further presume the longer it is cold stacked the higher the cost to get it ready.  I would ask the company.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on January 03, 2018, 05:10:59 PM
It's been mentioned a few times in the conference calls when they were weighing going warm vs. cold stacked. Off the top of my head, I recall 1,2, maybe 3 million?  But still has to undergo the SPS and I think they need to pay a bit more for the BOP upgrade?
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on January 03, 2018, 05:22:14 PM
Since the rig was refurbished in 2011 I don't think it is considered very old.  In my notes I had noted a cost of less than $10 million to get it ready.  I would think that was from a conference call but did not note which one, so I cannot confirm.  I would further presume the longer it is cold stacked the higher the cost to get it ready.  I would ask the company.
Did this rig have the upgraded blowout preventer?

I don't the cost would negligible, but it should not be that high as it has been in storage a relatively short time.

Even thought the rig was older, it had been refitted relatively recently, so I think they will have a slight edge over other competitors.

I see the probability of the rig being put into service as on a sliding scale.  At current oil rates?  50/50 maybe.  At $100 barrel, almost certainly it will go into service.

We will see.
Title: Re: AWLCF - Awilco Drilling
Post by: Tim Eriksen on January 03, 2018, 07:17:11 PM
Since the rig was refurbished in 2011 I don't think it is considered very old.  In my notes I had noted a cost of less than $10 million to get it ready.  I would think that was from a conference call but did not note which one, so I cannot confirm.  I would further presume the longer it is cold stacked the higher the cost to get it ready.  I would ask the company.
Did this rig have the upgraded blowout preventer?

I don't the cost would negligible, but it should not be that high as it has been in storage a relatively short time.

Even thought the rig was older, it had been refitted relatively recently, so I think they will have a slight edge over other competitors.

I see the probability of the rig being put into service as on a sliding scale.  At current oil rates?  50/50 maybe.  At $100 barrel, almost certainly it will go into service.

We will see.
Did this rig (WilHunter) have the upgraded blowout preventer? No based on reviewing the Q3 and Q4 2015 presentations.
You are right that mgmt mentioned around 2-3 million.  I was being conservative; however, I forgot that they did not do the SPS which could add 15-20 million.  The BOP would be another 20 million.  Assuming WilHunter's needs are the same as WilPhoenix.     
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on January 03, 2018, 08:07:34 PM
Since the rig was refurbished in 2011 I don't think it is considered very old.  In my notes I had noted a cost of less than $10 million to get it ready.  I would think that was from a conference call but did not note which one, so I cannot confirm.  I would further presume the longer it is cold stacked the higher the cost to get it ready.  I would ask the company.
Did this rig have the upgraded blowout preventer?

I don't the cost would negligible, but it should not be that high as it has been in storage a relatively short time.

Even thought the rig was older, it had been refitted relatively recently, so I think they will have a slight edge over other competitors.

I see the probability of the rig being put into service as on a sliding scale.  At current oil rates?  50/50 maybe.  At $100 barrel, almost certainly it will go into service.

We will see.
Did this rig (WilHunter) have the upgraded blowout preventer? No based on reviewing the Q3 and Q4 2015 presentations.
You are right that mgmt mentioned around 2-3 million.  I was being conservative; however, I forgot that they did not do the SPS which could add 15-20 million.  The BOP would be another 20 million.  Assuming WilHunter's needs are the same as WilPhoenix.   

They went ahead and purchased the BOP for the idle rig. So while I'm sure there's sizable costs associated with the installation, the replacement process as a whole is hopefully mostly paid. This from the 1Q16 transcripts:

Quote
Jon Oliver Bryce

Let me just elaborate there. When I talked about that – I talked to one of the previous callers about protecting the company in terms of expenditure and CapEx and the WilHunter has completely come to a stall and we are not going to do the SPS until we have the site of new work and demand the crew to save on OpEx et cetera. We’ve always done all these things to help protect the company. But as Ian just said there are some cost with the WilHunter BOP even though we are not going to install it and we took a view last year should we cancel WilHunter BOP and we decided not to because the new BOP is vital from acting the rig going forward and also the way that the cancellation cost work, it wasn’t worth doing, so we are still taking delivery of the new BOP. The WilHunter will be store and preserved and that will be used at some point in the future. So that’s only exception to not spending CapEx. That was a sensible decision to continue that the new BOP and store it already for the [indiscernible] WilHunter.
Title: Re: AWLCF - Awilco Drilling
Post by: jhcap on January 23, 2018, 08:01:45 PM
Awilco finds work for WilPhoenix.

http://splash247.com/awilco-drilling-finds-work-semi-submersible/
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on January 23, 2018, 08:41:04 PM
Just seasonal work that they would've been hot stacked waiting for the new contract to start. $120k day rate. The interesting bit that hopefully they clarify on the next earnings call is I think these 115 days will go into when they were supposed to start the new contract, so not sure if it's getting pushed back or what? Their last deck showed the Apache deal running off in late April and the new contract starts the beginning of May. 
Title: Re: AWLCF - Awilco Drilling
Post by: writser on February 27, 2018, 10:29:47 AM
https://finance.yahoo.com/news/awilco-drilling-plc-contemplated-private-154901675.html

Quote
Awilco Drilling PLC (the "Company") is contemplating a private placement of new shares with gross proceeds in the amount of USD 65 million directed towards Norwegian and international investors (the "Private Placement"), subject to applicable exemptions from relevant registration, filing and prospectus requirements. ABG Sundal Collier ASA, Arctic Securities AS, and Fearnley Securities AS have been retained as managers (the "Managers") for the Private Placement. An investor presentation prepared for the Private Placement is attached hereto.

The subscription price will be fixed at NOK 29 per share. The net proceeds from the Private Placement will be used to part finance the equity requirement for the building of a new semisubmersible drilling rig for harsh environment use, to be built by the premium yard KeppelFELS in Singapore at a price of approximately USD 425 million, and with planned delivery in 2021. In connection with entering into a Letter of Intent for such newbuilding, the Company has negotiated options to build up to three additional rigs of similar design, such options to be independent of each other.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on February 27, 2018, 11:28:23 AM
Seems like they got a good deal. Only paying 20% of cost before delivery. Possibility of a rights offering to shareholders as well. Also plan looks like to place the rigs in Norway instead of UK.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on April 24, 2018, 11:48:10 PM
hey all:

AWLCF has been pretty strong lately.

Rig rates seem to be moving up along with the price of oil.

I think they made a good move contracting construction of the new rigs.  Those are still a LONG way away though.

I've got to wonder about the price of oil.  Brent crude is about $74/barrel....what will demand for rigs be if/when it is $80?  $85?  $90?

If AWLCF's cold stacked rig gets put back into service, that will be a game changer. 

If Brent is $85/barrel this time next year, those contracts for the new rigs are going to be worth a whole lot more than what AWLCF contracted them at.

With any continued strength in the price of oil, I think AWLCF could do VERY well.

Any thoughts?
Title: Re: AWLCF - Awilco Drilling
Post by: DooDiligence on April 25, 2018, 05:25:10 AM
https://images.rigzone.com/data/dayrates/
(not sure how accurate these day rates are, as there's no citation.)

https://www.rigzone.com/oil/data/offshore-rig-search/
https://www.infield.com/rigs/all-rigs
https://www.infield.com/rigs/report-rig-utilisations
(again, not sure how accurate this data is either but MarineTraffic gives AIS info on SOME locations.)

http://www.drillingcontractor.org/shell-invests-vito-development-gulf-mexico-46831
(4000 feet of water, it's a start.)

https://www.rigzone.com/news/wire/brazils_upcoming_presalt_oil_round_attracts_record_interest-24-apr-2018-154378-article/
(Anyone need their car washed?)

http://www.drillingcontractor.org/permian-still-dominates-as-onshore-market-tightens-rig-rates-rise-46635
(When will this paradigm get blown up, and for what reason?))
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on May 18, 2018, 08:39:49 AM
Hey all:

AWLCF signed a contract with Shell oil the other day for the WilPhoenix to do work on 18 wells. Management thinks the contract will last about 330 days and will be about $39MM.

Obviously this is at a much lower rate than previous contracts...but it is good to be bringing in some revenue.

Now if they can just get the other rig out & producing income, they will be on their way.

With oil at $80+ per barrel, I would think they have a chance.
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on May 18, 2018, 09:10:43 AM
I think it is more likely it gets scrapped or sold. I think they said it basically cost $1MM per year to be cold stacked so not exactly a big opportunity cost to just let it sit.
Title: Re: AWLCF - Awilco Drilling
Post by: DTEJD1997 on September 27, 2018, 11:04:57 PM
Hey all:

Brent crude is over $80/barrel now.

I would think day rates have improved somewhat.

I would also think that the odds the 2nd rig get reactivated are better than they were 12 or 6 months ago.

Does anybody know if any work on the new rig has actually commenced?

Finally, AWLCF seems to be up a little in the last few months.  I think AWLCF is well managed, but it is still obviously highly speculative...but interesting none the less.

Any thoughts?
Title: Re: AWLCF - Awilco Drilling
Post by: Gamecock-YT on March 08, 2019, 08:16:13 AM
Talk about a mind bender of a press release: CEO is stepping down and they’re exercising the option on the second rig with a private placement.