The conference call last Friday was very interesting. A few of the highlights for me...
ORIG rigs:
http://i.imgur.com/oa1EC0O.png
First thing you notice is how new their rigs are. Only 2 are older than 2011. Old rigs are being scrapped (retired) left and right b/c there is low demand in general for the rigs with oil being so depressed. And when there is ample supply the oil companies want new rigs which are more efficient, reliable and safer. Total number of offshore rigs is 308. Nearly half were made prior to 2005 and most of those are 30+ years old. These rigs are headed for the graveyard and many have already been sent there. ORIG is well suited for a recovery in this sector with the young age of their fleet. Their rigs will be in demand first.
ORIG contracts:
http://i.imgur.com/9mMe1Jq.png
The last 3 rigs are all about when oil turns around, that is company growth. Ocean Rig Santorini may be coming online a little soon, O2 2016. They are in active negotiations to delay delivery. Hopefully they can push it back to 2017. ORIG is best in class when it comes to contracts. This really insulates them from the current downturn. They are 93% contracted out for 2015 and 69% for 2016 and 44% for 2017. Even if they don't find a buyer for any uncontracted rigs for the remainder of 2015 and 2016 they are still going to be making money:
http://i.imgur.com/TiRSCln.png
Impressively the rate for rigs contracted actually increases each of the next 3 years after 2015. Total contract backlog is $4.3 billion which helps to balance out the $4.8 billion debt load:
http://i.imgur.com/JukYCrH.png
The best part of their debt is their first significant debt payment is not due until Q4 of 2017. 2+ years of buffering to get them through this downturn in oil. This provides incredible flexibility and viability.
Something else that helps is the $833 million in cash they have on hand, up from $500 million in just the last 6 months. And don't forget they just scrapped their dividend so I'd expect cash on hand to skyrocket to $1 billion+ easily by year's end. They are weathering the oil downturn very well. Its incredible for a company making money like they do all the while having a very low market cap of only $561 million.
Perhaps the most interesting comment ORIG made during the 2015 Q3 conference call was that they were going to be on the lookout for distressed assets in the near-term. With their peers struggling with much lower contract rates, aging fleets and large near term debt payments there will be excellent buying opportunities. I love that even now they have a mindset of growth and expansion. They are prepared for a market turnaround.
Last qtr. they made $.54/share, beating estimates by 100%. If oil turns around and ORIG continues 90+% contract rate including the new builds, this stock will easily/conservatively pull in $.75/share. That's $3/share per year. In a robust envt. a company can easily swing a 20 P/E ratio. 20 x 3 = $60 stock. That's a coiled spring.