![]() Petrobras' planned budged cuts for the next 5 years are mentioned. That includes the mentions of GS's (dated) prediction of $20 oil and of massive oil oversupply, while the consensus view is that supply and demand is moving into balance and several serious sources project a coming and lasting undersupply situation in the oil market.įrom the presented floater data, you have to deduct that offshore drilling spending will fall to 15% of the 2014 level by the end of next year, which is far below consensus and would result in a decline of deepwater production by 1Mb/d per year from reduced infill drilling (such a reduced supply would provoke a surge in oil prices). But it has to be said that the arguments (Q2 presentation page 12) represent one sided selection of negatives. I am not speculating here if there is an agenda behind management's very negative view and I am not bashing the CEO. The stock is currently penalized by the display of management's extremely bearish market expectations for coming years, while the company's competitors see the bottom of the cycle near the beginning of 2017. ORIG is currently trading around 3% of book, consisting of high end assets, as if it was facing immediate insolvency, having uncompetitive assets and a disappearing market. With no new contracts in 2018, which is highly unlikely, the company would start to burn cash in that year, but still have near $250 M cash at the beginning of 2019 (no payments for new ships assumed). Under the simplified assumption that all revenues and expenses are translated into cash in the same quarter, cash is estimated at $470 M at the end of 2017. Ebitda is around $ 950M in 2016 and close to $640 M in 2017. EPS from operations will be around break even to slightly positive in 2017. The EPS numbers exclude gains from debt repurchases. Under that scenario, cash flow from operations in 2017 will remain healthy with $ 365 M Ship opex costs (for operating ships) came down again in Q2 to $113/d. Total Direct and Onshore Rig Costs ex deferrals Investments in upgrades and spares of $ 105 M in 2016 and $ 50 M in 2017 Ship opex costs (operating ships): 135k/d in Q1 of 2016, 115k/d thereafter (excluding maintenance) Further buybacks of 2017 debt, leading to a repurchase gain of $100 M ![]() An arbitration settlement of $75 M in 2017 (50% of the claims) regarding Eric Raude and Olympia Only cash revenues and costs are recorded - no deferred items No further contracts in 20 (which is obviously the worst case) Below, I present an updated financial table for 20 for Ocean Rig ( NASDAQ: ORIG), based on the current situation, updated cost and contract data and the announced ship delivery delays including payment rescheduling. ![]()
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