After thinking some more about the risks and rewards inherent in an investment in Awilco Drilling I have decided to buy a relative small position in the stock. There are a lot of risks, but at the same time I do think it’s an asymmetric bet. It’s highly likely that a very large part of my original investment will be returned in the next three years, and while the future is uncertain there is a wide range of possible favorable outcomes. Dayrates going down to $250K/day is probably still fine, dayrates staying at the current level is great and dayrates going up is even better.
Awilco Drilling also reported the results for the first quarter of 2013 yesterday and it’s good news all around. EBITDA was up compared to the last quarter of 2012, revenue efficiency was at 91.2% (pretty good for the winter season I’d guess) and most importantly the board approved a $1.0/share dividend. At current prices that represents a 25% annualized yield, and that’s more than what I would have expected given the tendency of companies to find reasons to spend and keep cash. Also positive is that Premier Oil exercised its option to extend the term of its drilling contract with AWDR, so rates have been locked in for a longer period in 2014.
Long Awilco Drilling