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Post by bjspokanimal on Apr 17, 2024 18:08:19 GMT -5
The $1.8 billion tab was clearly a bid for a lot more than just near-term debt retirement. It was enough to also provide a lot of liquidity as well. The question is, what do they want with a liquidity injection now, given that the last half of this year is going to provide a lot via projections of a big surge in free cash flow? Also curious, is that the CEO views deleveraging as one of his key deliverables this year, and this ain't deleveraging.
They clearly have plans of some sort for this liquidity injection. My vote (MHEO), is an increased fortitude toward rig reactivations. Let me explain. The CEO has previously cited 3 requirements needed, in some combination, to justify a reactivation(s). 1) Sufficiently long contract duration, 2) Sufficiently high dayrate, 3) Sufficient client participation with reactivation expenses. Well, the market has already provided much of the first 2 requirements. Industry dayrates are now beginning to exceed $500k and contract durations are getting longer and longer.
The only thing that hasn't happened, is a client offering sufficient reactivation cash, albeit Asgard's recent signing indicates that clients aren't adverse to up-front payments. Bottom line: I think the company is preparing to dislodge a reactivation contract or 2 in the months to come, especially with its 3, stacked 7th generation units. With sufficient contract term and dayrate, sharing 20 to 30% of reactivation expense with a client who, like with Asgard, is not averse to up-front costs on an otherwise attractive deal, could well be all that's needed to get some deals done.
Remember, Transocean has no other 7th generation drillships with open availability for a 4 or 5 year deal. Inspiration is an older, 6th generation ship and the 7th gen Invictus is the named (albeit substitutable) rig for a long contract in Mexico starting next year. The time is ripe for Transocean's 3, stacked 7th generation drillships and they're my candidate for some of that excess bond issuance money.
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Post by kingrig on Apr 17, 2024 19:03:01 GMT -5
The $1.8 billion tab was clearly a bid for a lot more than just near-term debt retirement. It was enough to also provide a lot of liquidity as well. The question is, what do they want with a liquidity injection now, given that the last half of this year is going to provide a lot via projections of a big surge in free cash flow? Also curious, is that the CEO views deleveraging as one of his key deliverables this year, and this ain't deleveraging. They clearly have plans of some sort for this liquidity injection. My vote (MHEO), is an increased fortitude toward rig reactivations. Let me explain. The CEO has previously cited 3 requirements needed, in some combination, to justify a reactivation(s). 1) Sufficiently long contract duration, 2) Sufficiently high dayrate, 3) Sufficient client participation with reactivation expenses. Well, the market has already provided much of the first 2 requirements. Industry dayrates are now beginning to exceed $500k and contract durations are getting longer and longer. The only thing that hasn't happened, is a client offering sufficient reactivation cash, albeit Asgard's recent signing indicates that clients aren't adverse to up-front payments. Bottom line: I think the company is preparing to dislodge a reactivation contract or 2 in the months to come, especially with its 3, stacked 7th generation units. With sufficient contract term and dayrate, sharing 20 to 30% of reactivation expense with a client who, like with asgard, is not averse to up-front costs on an otherwise attractive deal, could well be all that's needed to get some deals done. Remember, Transocean has no other 7th generation drillships with open availability for a 4 or 5 year deal. Inspiration is an older, 6th generation ship and the 7th gen Invictus is the named (albeit substitutable) rig for a long contract in Mexico starting next year. The time is ripe for Transocean's 3, stacked 7th generation drillships and they're my candidate for some of that excess bond issuance money. I hope you’re correct |
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Post by psvwordtkampioen on Apr 17, 2024 20:51:09 GMT -5
The one and only reason that I ever got interested in this stock are the cold-stacked rigs. As soon as it becomes a seller's market, this company can turn things around very very quickly, with huge changes in its finances.
On paper.
Just adding two drill ships a day adds a million in revenue per day! With three reactivated drill ships, you are looking at a billion in revenue a year added!
While oil companies certainly are interested in those cold-stacked rigs, they do not want to pay for refurbishment up front. They hate the risk, *and they look terrible in the eyes of their investors*, having to fork over half a billion dollar to reactive a drill ship. This then is becoming a game of chicken. If RIG can reactive these drill ships they can put them in the market for a long contract with dayrates of $600k or even $700k.
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Post by rajiv on Apr 17, 2024 21:31:47 GMT -5
you're dreaming....
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Post by kingrig on Apr 18, 2024 0:26:52 GMT -5
The one and only reason that I ever got interested in this stock are the cold-stacked rigs. As soon as it becomes a seller's market, this company can turn things around very very quickly, with huge changes in its finances. On paper. Just adding two drill ships a day adds a million in revenue per day! With three reactivated drill ships, you are looking at a billion in revenue a year added! While oil companies certainly are interested in those cold-stacked rigs, they do not want to pay for refurbishment up front. They hate the risk, * and they look terrible in the eyes of their investors*, having to fork over half a billion dollar to reactive a drill ship. This then is becoming a game of chicken. If RIG can reactive these drill ships they can put them in the market for a long contract with dayrates of $600k or even $700k. At best they will active 1 cold stacked rig |
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Post by psvwordtkampioen on Apr 18, 2024 2:42:01 GMT -5
That is correct.
It would be the first sheep that crosses the bridge…
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Post by kingrig on Apr 18, 2024 4:43:18 GMT -5
That is correct. It would be the first sheep that crosses the bridge… are you looking for your date??? The sheep went home |
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Post by Blitz on Apr 18, 2024 9:12:31 GMT -5
The $1.8 billion tab was clearly a bid for a lot more than just near-term debt retirement. It was enough to also provide a lot of liquidity as well. The question is, what do they want with a liquidity injection now, given that the last half of this year is going to provide a lot via projections of a big surge in free cash flow? Also curious, is that the CEO views deleveraging as one of his key deliverables this year, and this ain't deleveraging. They clearly have plans of some sort for this liquidity injection. My vote (MHEO), is an increased fortitude toward rig reactivations. Let me explain. The CEO has previously cited 3 requirements needed, in some combination, to justify a reactivation(s). 1) Sufficiently long contract duration, 2) Sufficiently high dayrate, 3) Sufficient client participation with reactivation expenses. Well, the market has already provided much of the first 2 requirements. Industry dayrates are now beginning to exceed $500k and contract durations are getting longer and longer. The only thing that hasn't happened, is a client offering sufficient reactivation cash, albeit Asgard's recent signing indicates that clients aren't adverse to up-front payments. Bottom line: I think the company is preparing to dislodge a reactivation contract or 2 in the months to come, especially with its 3, stacked 7th generation units. With sufficient contract term and dayrate, sharing 20 to 30% of reactivation expense with a client who, like with Asgard, is not averse to up-front costs on an otherwise attractive deal, could well be all that's needed to get some deals done. Remember, Transocean has no other 7th generation drillships with open availability for a 4 or 5 year deal. Inspiration is an older, 6th generation ship and the 7th gen Invictus is the named (albeit substitutable) rig for a long contract in Mexico starting next year. The time is ripe for Transocean's 3, stacked 7th generation drillships and they're my candidate for some of that excess bond issuance money. Great post, spok. I like the way you think... I too thought the same thing when I saw all that excess cash moving in. What's Thiggy gonna do with it? Is he going to buy another 8th gen with a 20K BoP or reactivate some 7th gen rigs? GoM discoveries are moving into deeper and deeper waters as are Namibia's and Guyana's. Using less capable drillships with lower dayrates is not a good thing. I would guess the super majors know this. Some lower tier players will opt for this, but as big oil and the super majors are forced into to deeper and deeper waters for E&P, they'll want high spec ships. The added costs of managed pressure devices and 20K BoP are so much cheaper. Seeing KG-1 getting paid its dayrate through upgrades and RIG's recent +$500K dayrate, it looked liked a turning point that signals compromise regarding cost sharing for upgrades that could lead to cost sharing for reactivations. We'll see... |
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Post by bjspokanimal on Apr 18, 2024 10:07:00 GMT -5
@ psvword; actually, it wouldn't be the first sheep to cross that bridge. Some time ago, Petrobras paid most of the reactivation expense for a Valaris rig. It was the DS-17, if memory serves. At the time, it was hoped that the event would signal more client paid reactivations, but that ended up being the only one so far in the industry. Also, it doesn't take a half $billion to reactivate a drillship, as you say. Estimates generally run between $60m to $160m depending on what's needed and how long a rig's been stacked.
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Post by Blitz on Apr 18, 2024 10:09:46 GMT -5
This article points to the need for high-spec drillships as an oil major continues to focus on the security and proven resources of the US GoM. bp especially will not want lower spec drillships and equipment that could lead to another preventable oil spill such as its Deepwater Horizon disaster... and RIG is a big player in the GoM. And now this... bp focuses on Gulf of Mexico despite play-opening discoveries by peers in Guyana, Namibia Laura Hurst, Bloomberg April 17, 2024 www.worldoil.com/news/2024/4/17/bp-focuses-on-gulf-of-mexico-despite-play-opening-discoveries-by-peers-in-guyana-namibia/(Bloomberg) – For a company that made its name with frontier oil discoveries from Iran to Alaska, bp Plc is notably absent from today’s hottest new oil plays. The company’s head of exploration and production is just fine with that. Investors in ExxonMobil Corp. have the excitement of huge discoveries in Guyana, and TotalEnergies SE and Shell Plc can look to promising deep-water finds in Namibia. But for bp, real value lies in an intensely drilled region where the company has decades of experience — the Gulf of Mexico. “I don’t feel jealous,” said Gordon Birrell, executive vice president of production and operations, when asked about his rivals’ recent exploration success. “We’ve got a lot of resource to be developed.” Exploration has long been a key metric for the oil and gas industry, but these days it has added piquancy for bp. The London-based company’s total proved oil and gas reserves of 6.8 Bboe are about a third less than its European peers Shell and TotalEnergies. That gap grows to 40% to 60% when compared to U.S. majors ExxonMobil and Chevron Corp. The relative deficit in bp’s reserves is largely the result of its exit from Russia’s state-run oil giant Rosneft PJSC, following Moscow’s invasion of Ukraine in early 2022. That move was followed by most other major oil companies, many of which have written off the value of their investments in the country and see little prospect of returning. Yet the sting was greatest for bp, which took an impairment of $24.4 billion, lost a third of its oil and gas production and about 50% of its reported reserves. “We did exit Russia, we did write the reserves off. It was a big number, there’s no question,” Birrell said in an interview in London. “But what we’re left with is 18 billion barrels of good stuff, so it’s not a problem.” About half of those 18 Bbbl — a number that quantifies resources that meet bp’s internal expectations for return on investment and is larger than figure for proved reserves under the official Securities and Exchange Commission’s definition — are in the Gulf of Mexico. bp’s plan for the region relies on discoveries made more than a decade ago that were initially too difficult to develop, but can now be tapped thanks to technological advances. Fields such as Kaskida and Tiber are found in a geological layer known as the Paleogene — a formation that’s under such high pressure that it exceeded the capability of most equipment when the discoveries were made. After the initial exploration drilling, bp had to step back and wait for drilling technology to improve. “That code has been cracked and bp held on to its leases Kaskida and Tiber,” said Mfon Usoro, a principal analyst at researcher Wood Mackenzie Ltd. “The technology is commercial in the market, that’s what has brought these projects to the forefront.” Today’s rigs can withstand pressures as high as 20,000 pounds per square inch, making it possible for bp to complete the wells. Still, tapping the Paleogene doesn’t come cheap. “Deeper means higher cost,” said Usoro. Wood Mackenzie calculates that the cost of producing a barrel from the Paleogene is in the mid-to-high $40s. That’s more expensive than other parts of the Gulf of Mexico and far above the $7 and $9 at bp’s assets in the Permian and the Eagle Ford shale formations, respectively, according to company data. But it’s still competitive in a global portfolio, thanks to the region’s attractive fiscal terms and widespread existing infrastructure, Usoro said. “With the Gulf of Mexico, you tend to have that long, stable cash flow after that upfront investment,” she said. bp is on track to invest $7 billion in the Gulf of Mexico from 2022 to 2025 and expects 350,000 boed of production there in the second half of this decade, up from less than 270,000 bpd last year. Neither Kaskida nor Tiber have yet been given the green light. bp hopes to reach a final investment decision on the former project this year, with Tiber following later. The main challenge remaining in the developments is finding slots in shipyards to build their offshore production facilities, Chief Executive Officer Murray Auchincloss told analysts in February. Sustaining production. Birrell doesn’t rule out exploring for more oil and gas or acquiring companies for their reserves. That’s a change in tone for bp, which under former Chief Executive Officer Bernard Looney set out a plan to radically embrace decarbonization and renewable energy. That strategy has gone through several iterations, with the most recent tweak last year when it slowed its planned reduction in oil and gas output. That’s not enough for activist investor Bluebell Capital Partners, which argues that the speed of bp’s shift away from fossil fuels is misguided and hurting the share price. Like most bp veterans, Birrell has spent his career focused on oil and gas. He rose through the ranks with postings in the North Sea and Azerbaijan, becoming head of the company’s upstream division in 2020. He has remained on the top leadership team through both a major restructuring that same year, and the surprise resignation of Looney last year in a scandal over the former CEO’s undisclosed relationships with colleagues. In Birrell’s view, the only thing that has changed in bp’s strategy is the level of pragmatism. The company will keep pace with society’s broader transition to cleaner energy and won’t race ahead with technologies that aren’t yet economic, he said. And through this long process, oil and gas still has a part to play. “Depending on what you want to do from 2030 to 2040, then we may need to go and find more barrels,” he said. “We have the core capability to go exploring in the world. It’s still retained in bp, there’s no question about it.” |
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Post by psvwordtkampioen on Apr 18, 2024 10:29:41 GMT -5
@ psvword; actually, it wouldn't be the first sheep to cross that bridge. Some time ago, Petrobras paid most of the reactivation expense for a Valaris rig. It was the DS-17, if memory serves. At the time, it was hoped that the event would signal more client paid reactivations, but that ended up being the only one so far in the industry. Also, it doesn't take a half $billion to reactivate a drillship, as you say. Estimates generally run between $60m to $160m depending on what's needed and how long a rig's been stacked. Yeah, I went a bit overboard (... pun intended). Half a billion has been mentioned, but it is usually a lot lower. And I should have been more specific about which sheep - the first one from Transocean. It must be the excitement about this stock tanking again, haha. |
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Post by bjspokanimal on Apr 18, 2024 14:57:03 GMT -5
@ blitz; the post above suggests that the cost of developing a barrel of oil in the Permian or Eagle Ford shale is $7 to $9 per barrel. Obviously, a second opinion or 30 would be nice.
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Post by Blitz on Apr 18, 2024 15:52:44 GMT -5
@ blitz; the post above suggests that the cost of developing a barrel of oil in the Permian or Eagle Ford shale is $7 to $9 per barrel. Obviously, a second opinion or 30 would be nice. In my research, the cheapest fracked oil I’ve seen for fresh ‘n easy new wells had $20 handles. Most of the low cost new shale wells have $30 handles. Light sweet deepwater wells also have $30 handles. |
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Post by Blitz on Apr 18, 2024 15:54:39 GMT -5
According to a 2023 survey, oil producers operating in the Eagle Ford region needed WTI oil prices to amount to a minimum of 56 U.S. dollars per barrel in order to profitably drill a new well. This compared to a breakeven price of 31 U.S. dollars per barrel for existing wells. Dec 8, 2023
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Post by bjspokanimal on Apr 22, 2024 14:55:44 GMT -5
Re: Whether or not Transocean has plans to use the proceeds of it's private debt
placement, less what it's using to retire the other 2 issuances that it's tendering,
to enhance it's ability to get some reactivation contracts...
I would add that Transocean really is at some crossroads right now. Here are some:
1. They have completed all of the contract preparation expenses for the 7 rigs that
they were working on from late last summer until last month. Their expenses are
thus dropping significantly in Q2 and Q3.
2. They have completed the cap-ex for their 2 pure newbuilds (Atlas & Titan) and
their stranded newbuild (Aquila). Those projects will no longer be a cap-ex
drain on their working capital.
3. All of the rigs mentioned in #1 and #2 above will be out drilling for elevated
dayrates by June (although Aquila may not be drilling until later in the summer).
Thus, the big surge in cash-flow expected beginning in the current quarter and
accelerating through the remainder of the year will ease any liquidity concerns
leading up to 2025 and free them to use issuance proceeds to augment their ability
to get their 3, 7th generation stacked drillships some reactivation contracts.
4. Transocean's deepwater competitors, primarily Valaris and Noble, are now talking
about holding out for client-paid or client-assisted reactivations for the handfull
of stacked drillships they have remaining. Valaris took delivery of 2, previously-
stranded drillships (DS-13 and DS-14 I believe they were dubbed) and promptly
cold-stacked them rather than aggressively marketing them with offers to pay for
full activation of them themselves.
5. Dayrates are finally piercing the $500k/day level for the industry's best, 7th
generation drillships and lead times for contracting them are increasingly exceeding
how long it would take to reactivate a cold-stacked rig. It's beginning to look like
contracting a cold-stacked drillship could involve a shorter timeline than waiting
for a hot drillship to become available.
6. There are a lot of FIDs expected to generate tenders for rigs this year. Barclays
cited 6 to 8 that should come to fruition by the end of the current quarter. Petrobras
has said they'll need 5 more drillships by 2028 and Exxon will need 1 or 2 more in Guyana by
sometime in 2025. In order to GET one by 2025, they're going to have to contract it
very soon, given the lead times we're seeing now. Even Invictus's onsey-twosey contracts in
the GOM are getting multi-month extensions.
7. Almost all major IOCs and NOCs whose balance sheets were hammered badly during covid
have now recovered and are, or already have, revisited FIDs that were put on hold 4
years ago.
8. Transocean CEO Thigpen highlighted, during the last CC, how much cheaper it would be
to reactivate a stacked rig than it would be to either buy and launch one of the few
remaining stranded rigs or to build a new drillship from scratch. Noble's CEO stated
in February that it would take upwards of $1 billion to build a 7th generation drillship
from scratch and we know from experience with Atlas and Titan that it would take at
least $1.3 to $1.4 billion to build an 8th generation drillship with a similar 1,700 ST
hookload capacity and twin, 20k, psi BOPs. Noble's CEO said a pure newbuild would
require dayrates between $600k and $650k on a full, 10 year contract in order to justify
building a drillship from scratch. NO driller currently has any plans to build a
drillship from scratch anytime this decade. If somebody did, it would take 4 years to
plan, build, and launch such a rig.
It's for at least these 8 reasons that I believe Transocean's executives believe that we
are at a sufficient such number of crossroads that it would pay to get more aggressive with
getting it's 3, 7th generation drillships unstacked, and possibly one or 2 of it's 5, stacked
6th generation ships as well by 2026. We should know in a few months if that's what they
have in mind with their new, liquidity injection.
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Post by rajiv on Apr 22, 2024 21:26:31 GMT -5
Hey, this is a great write up!! There is only one problem, though, and that is that everything that you wrote about the expenses going down, and the ships being put to work has already been known to the market for quite some time. It’s already discounted into the price of the stock. The only thing that will make the stock go up from here is major new Signed fixtures at day rates above $500,000.
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Post by bjspokanimal on Apr 22, 2024 22:27:21 GMT -5
@ rajiv; I completely agree with you that everything that all investors or potential investors know about a company at any given point in time is reflected in its stock at that time. Personally, I spend little time being concerned about the stock price and instead think about where it's valued relative to how the future looks for the company. I see the stock as quite cheap relative to where I see the company 1 to 3 years from now, so I own it with no regrets. I won't speculate on why the aggregate Transocean investor prices it where it's currently at. Perhaps it's the still negative EPS, the debt, the fact that they still haven't unstacked anything. I'm looking at all 3 of those things... in terms of where I think they'll be by 2026, and assume that the stock price will ultimately reflect my view of 2026 when we get there. I hope that helps to understand my thinking here.
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Post by kingrig on Apr 22, 2024 23:06:56 GMT -5
Re: Whether or not Transocean has plans to use the proceeds of it's private debt placement, less what it's using to retire the other 2 issuances that it's tendering, to enhance it's ability to get some reactivation contracts... I would add that Transocean really is at some crossroads right now. Here are some: thanks spok |
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Post by kingrig on Apr 22, 2024 23:09:36 GMT -5
Hey, this is a great write up!! There is only one problem, though, and that is that everything that you wrote about the expenses going down, and the ships being put to work has already been known to the market for quite some time. It’s already discounted into the price of the stock. The only thing that will make the stock go up from here is major new Signed fixtures at day rates above $500,000. everything he said does include day rates going above $500k plus CAPEX going substantially lower, in other words PROFITS & debt repayments are just around the corner, at most 2 more quarters to profitville |
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Post by Blitz on Apr 23, 2024 7:29:10 GMT -5
Hey, this is a great write up!! There is only one problem, though, and that is that everything that you wrote about the expenses going down, and the ships being put to work has already been known to the market for quite some time. It’s already discounted into the price of the stock. The only thing that will make the stock go up from here is major new Signed fixtures at day rates above $500,000. If everything is 'already' figured into a stock's price... why do they pop or drop on news and earnings' beats or misses. By the way, that's rhetorical...  Here's an example of everything not being known... Namibia Racks Up Another Major Offshore Oil Discovery By Alex Kimani - Apr 22, 2024, 7:00 PM CDT oilprice.com/Energy/Crude-Oil/Namibia-Racks-Up-Another-Major-Offshore-Oil-Discovery.html Galp saw its share price pop 20% on Monday. |
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Post by rajiv on Apr 23, 2024 12:13:55 GMT -5
Right! And the example you gave for Galp would be the equivalent of Transocean announcing a major new fixture for 2 to 3 drillships under 3-5 year contracts @$600k/day.
I bet that would push Transocean up by 15% to 25%
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pete
Dealer
Not a Waitress
Posts: 16
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Post by pete on Apr 23, 2024 12:30:58 GMT -5
Hey, this is a great write up!! There is only one problem, though, and that is that everything that you wrote about the expenses going down, and the ships being put to work has already been known to the market for quite some time. It’s already discounted into the price of the stock. The only thing that will make the stock go up from here is major new Signed fixtures at day rates above $500,000. I do not fully agree. RIG comes with a risk of financial insolvency that is also baked into the price. Risk of financial insolvency tends to only be fully alleviated when real cash begins to flow, and not before. It is a "show me the money" type of precaution based on the risk of total wipe out involved. Many people even to this day will not touch RIG with a 10' bean pole because of this risk. Once you can provide concrete (not theoretical or speculative) evidence of a financial turn around, the sense of trepidation changes. The old investment strategy is to buy where the market is irrationally fearful, and RIG is exactly that case if you think the numbers point to them headed for a turn around. |
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Post by bjspokanimal on Apr 23, 2024 14:57:54 GMT -5
Re: "risk of financial insolvency", I don't believe the stock price is affected
by such a risk, given current industry trends, but I do believe that people are
aware of Transocean's greater vulnerability than it's previously BK re-organized
competition should the current up-cycle be interrupted. Clearly, another covid-
like event within the next few years, before Transocean has a chance to pay down
debt and lock in long-term, high-dayrate contracts on more of it's fleet,
would have a high probability of pushing the company toward bankruptcy. People
are very aware of the risk posed by this much debt should the up cycle end. I
just happen to see a pretty low probability of that happening.
I don't own Transocean to the exclusion of it's competitors because it's safer
than them, it isn't at all safer. I own it because it has the most upside, due
to it's depressed stock price owing from high debt, still-negative EPS and no
reactivations to date. Transocean's competitors are further up the ladder of
Templeton's mantra while Transocean is still an earlier-stage, turnaround
candidate.
To that end, an example. Back following the severe recession of 2009, I bought
Bank of America stock for $6. Subsequent to that, Warren Buffett bought it
in a big way, preferreds at a time when the common stock was $8. After Buffett
bought, it jumped over $10 but, as usual when Buffett buys, it settled back down
to $8 again and I backed up the truck again. Why stocks tend to settle back down
after a Buffett inspired spike, is a story in and of itself which I've previously talked
about on this forum.
I bought BAC for the same reason Buffett did. It was beaten down, it was lagging
it's competitors in terms of technology and replacing brick & Mortar with more online
services, it's price-to-book ratio was in the 30s, and it's newer CEO was hell-bent
to catch up with it's competitors. Like Transocean in mid-2000, it was a deeply
contrarian, turn-around play.
At that time, people were very critical of BAC, just as they are today when bringing
up Transocean's debt, negative EPS, and lack of reactivations. With BAC back then,
as with Transocean today, those conversations are music to my ears, because it tells
me there's a lot of people who are aware of Transocean, but not yet big investors in
Transocean yet. Essentially, like BAC, I want to own Transocean BEFORE they start
making money (albeit cash flow and EBITDA are currently pretty good), paying down
debt and reactivating stacked rigs because once those things start happening in
earnest, the stock won't be under $6 anymore. I essentially gauge where I think
it'll be with those things by 2026, and let the stock do what it'll do in response.
Sometimes I'm wrong, we all are. Another Covid could hit and Transocean would plummet
below $1 and file bankruptcy. That could happen... it's the risk we take and why we
contrarians diversify among many turn-around candidates, and even hedges. I've been
buying significant amounts of gold recently for the first time ever (I hate gold since
it produces no income or production, but with the national debt past $34 trillion and
rapidly approaching $35 trillion, this isn't our fathers' country anymore).
Finally, speaking of contrarian, turn-around plays, I shared with Blitz a new position
of mine this winter. I'd be happy to share it with this forum if there's interest.
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Post by redbullnvodka on Apr 23, 2024 17:52:25 GMT -5
I think you should share it…..i purchased some at $3.68 if it’s what I think it is.
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Post by kingrig on Apr 23, 2024 19:03:32 GMT -5
Re: "risk of financial insolvency", I don't believe the stock price is affected by such a risk, given current industry trends, but I do believe that people are aware of Transocean's greater vulnerability than it's previously BK re-organized competition should the current up-cycle be interrupted. Clearly, another covid- like event within the next few years, before Transocean has a chance to pay down debt and lock in long-term, high-dayrate contracts on more of it's fleet, would have a high probability of pushing the company toward bankruptcy. People are very aware of the risk posed by this much debt should the up cycle end. I just happen to see a pretty low probability of that happening. I don't own Transocean to the exclusion of it's competitors because it's safer than them, it isn't at all safer. I own it because it has the most upside, due to its depressed stock price owing from high debt, still-negative EPS and no reactivations to date. Transocean's competitors are further up the ladder of Templeton's mantra while Transocean is still an earlier-stage, turnaround candidate. To that end, an example. Back following the severe recession of 2009, I bought Bank of America stock for $6. Subsequent to that, Warren Buffett bought it in a big way, preferreds at a time when the common stock was $8. After Buffett bought, it jumped over $10 but, as usual when Buffett buys, it settled back down to $8 again and I backed up the truck again. Why stocks tend to settle back down after a Buffett inspired spike, is a story in and of itself which I've previously talked about on this forum. I bought BAC for the same reason Buffett did. It was beaten down, it was lagging it's competitors in terms of technology and replacing brick & Mortar with more online services, it's price-to-book ratio was in the 30s, and it's newer CEO was hell-bent to catch up with it's competitors. Like Transocean in mid-2000, it was a deeply contrarian, turn-around play. At that time, people were very critical of BAC, just as they are today when bringing up Transocean's debt, negative EPS, and lack of reactivations. With BAC back then, as with Transocean today, those conversations are music to my ears, because it tells me there's a lot of people who are aware of Transocean, but not yet big investors in Transocean yet. Essentially, like BAC, I want to own Transocean BEFORE they start making money (albeit cash flow and EBITDA are currently pretty good), paying down debt and reactivating stacked rigs because once those things start happening in earnest, the stock won't be under $6 anymore. I essentially gauge where I think it'll be with those things by 2026, and let the stock do what it'll do in response. Sometimes I'm wrong, we all are. Another Covid could hit and Transocean would plummet below $1 and file bankruptcy. That could happen... it's the risk we take and why we contrarians diversify among many turn-around candidates, and even hedges. I've been buying significant amounts of gold recently for the first time ever (I hate gold since it produces no income or production, but with the national debt past $34 trillion and rapidly approaching $35 trillion, this isn't our fathers' country anymore). Finally, speaking of contrarian, turn-around plays, I shared with Blitz a new position of mine this winter. I'd be happy to share it with this forum if there's interest. oh my, do share |
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