Quote:
Originally Posted by bware
Are you still trading it? Is anyone still holding it? Haven't read enough to know if this is a turnaround or just delaying the inevitable failure.
nobody can tell you that, because it's not in their hands.
i have HOS. i have about a normal position for me (was about 8% with an average entry of about 5,50$, so today it's about 4%).
they basically bought themself 2 years in which they can act freely with cash on hand and this revolver. i'm not at home and don't have the exact numbers and dates, but from the top of my head:
they have about 1,05b$ in debt, about 250m is due in late 2019 and
then about 400m in the summer of '20 and '21 each. so 8 quarters is when it gets ugly.
cash now is about 200m and they burned about 8m last quarter. plus they will need to pay around 75m for two new ships next year. 8m x 8 + 75m lets them burn about 140m of cash until late 2019. so they basically have no chance to pay any of it back and will be forced to chapter11.
if you look at TDW bankruptcy I think it's reasonable to assume that shareholders won't get wiped out fully but get to keep 1% < X < 10% of the company. helps keep management and existing holders on board and HOS management seems pretty exceptional if you look at how they did compared to other companies. so i think there's a floor somewhere here. 5% of restructured HOS might not be that much worse than 100% of today's (TDW stock is flat or up after they went ch11).
but without offshore activity picking up they're pretty much dead. and this is where the big difference to TDW and GLF lies, they got about 2 more years for things to change.
market pretty much assumes offshore's dead because of US shale. but there are a few factors here. shale's breakeven came down a lot in the last 5 years to ~45$, better in some cases. due to technical advances and cost cutting. the production of shale wells drops pretty fast after about 18months, so new tech can be incorperated pretty quickly into new wells. but there's the story that 45$ breakeven might be the best that's archievable for US shale in the foreseeable future. because you have to drill a lot of new wells, the land gets more expensive and existing infrastructure is reaching full capacity right now.
technical advances in offshore drilling are visible way slower because of the long time horizon of the projects. but they are happening. 5y ago breakeven for gulf of mexico was about 60$, next year there will be projects with 45$ breakeven or less. there are some other factors i think that might help them, but those are more about oil in general.
at the moment my guess is, there's about a 20% chance their situation in 2 years is better and they will be able to refinance at ugly terms but without chapter11.
60% says they go chapter 11 and shareholders are left with <10% of the new company, which might be worth the same it is today.
15% is they go bankrupt and shareholders get nothing.
5% is a total turnaroung in oil and i will be sipping drinks on beaches all over the world for the next 10 years.
tl;dr: market thinks offshore is dead, everything is ****, no one wants to touch the sector, oil market is complex, things can turn quickly, there might be opportunity here.