Oil investors have had a hard time catching any sort of break this year and one player in the sector, Vantage Drilling Company (NYSE MKT: VTG), looks ripe for the taking for longs. Last week Friday while the markets were closed and most Americans were out buying fireworks and charcoal, Baker Hughes released their weekly rig count numbers which, for the bullish buyer, was a sign as the count rose for the first time in 29 weeks.
Vantage Drilling, an offshore drilling contractor, has seen its share price slide from 0.42 to 0.15 during the course of the last month despite efforts by the Company by hiring Lazard Freres & Co. LLC to advise with respect to financing and strategic opportunities. Although the bullish news about new rigs, 12 of them, was domestic based rigs in the Eagle Ford and Permian Basin, Greece’s FUBAR referendum and the effect its having on crude prices, is making VTG look worse than it really is.
The chart for VTG stock looks as ugly as a penny stock saturated with toxic debt that trades on the OTC markets would look. But when you have a closer look at the 10Q for the 3 months ended March 31, 2015, you can only imagine that the upcoming 10Q will give cause for why longing VTG could be a golden opportunity.
Firstly, VTG is profitable. Yes, for the three months ended March 31, 2015, Vantage Drilling reported operating income of $81 million, about $10 million less than the same period in 2014, off of total revenues of $207.98 million, roughly $7 million less than the same period the year prior. The net result was net income of $21.43 million or $0.07 per share, $0.01 less than the same period in 2014.
While the numbers look good, Vantage Drilling provided a detailed outlook of the future when they attended the RBC Capital Markets Global Energy and Power Executive Conference in New York last month. One thing that stood out was how they highlighted: Market Cap $115 Million; Book Value: $579 Million. Another was how they currently have 4 Jackups, 3 Drillships, and another under Construction – NONE OF WHICH ARE DIRECTLY INVOLVED WITH GREECE!
Besides the obvious decline in oil demand/prices, this past weekend’s Greek vote hurt oil prices simply because oil is priced in US dollars, not Drachma or Euros. We’ve all seen hoe when there is any kind of pressure on oil, the dollar reacts by rising which makes it difficult for the none star spangled banner countries to convert their currency into dollars to purchase oil, which takes a toll on demand.
How the Greek vote can factor into VTG is like finding the 7 degrees of separation between North Korea and Kim Kardashian. Even with today’s public address by Vantage about the arrest of a former Petrobras International Director who was supposedly connected in some way to VTG’s contract with Petrobras for the Titanium Explorer, investors have seen the light – VTG is way too cheap of a stock to pass by.
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