Seahawk Drilling Inc (NASDAQ:HAWK) President and CEO Randy Stilley presented to the Barclays Capital CEO Energy-Power Conference on Thursday. I’ve been following HAWK closely (see the post archive here). It’s a deeply undervalued asset turnaround play with a bad case of seconditis. Once Stilley finds the person sticking the pins in the HAWK voodoo doll, HAWK should do fine. Here’s Stilley discussing HAWK’s current liquidation value (at around the 14:30 minute mark):
The other thing that is almost ridiculous to talk about in some ways, but if you think about the underlying asset values of the fleet, if you look at our current market cap less working capital, you end up with a value per rig of about $3-and-a-half million. We just had – within the last couple of months – a third party fleet value established that came out to $313 million, which is over $15 million per rig. And the book value of course is about $20 million per rig.
And the other way to think about that is, Hercules sold a less-capable mat. slot rig earlier this year for $5 million that had no drilling equipment on it, and it was a rig that had been stacked for 10 years. So, if you think about that, and you think about that we had rigs that have all worked with the past few years that are in better condition than that, it’s obvious that our rigs are worth more than $3 million. And if we were to just start cutting them up, you could, over time, sell the drilling equipment of a rig to generate $6 to $8 million in income by doing that. Now, I’m not saying we’re going to do that today, but we’re certainly going to think about it.
Here’s the relevant slide:
Listen to the Barclays Capital Presentation.
Long HAWK.
Greenbackd 
Great post here – this really help exploit how ignorant management’s decisions were. I’ve been looking all over for this
LikeLike
Management misled investors into thinking they were exploring “strategic alternatives” when really they were concerned with their own payoff. Hercules takes down HAWK for a song and shareholders get bilked.
The value metrics don’t tell the complete story when it comes to management integrity.
Any update from Greebackd on their position in HAWK?
LikeLike
I was surprised they didn’t use enterprise value instead of current market capitalization less working capital to define the current value the market was putting on its rigs. At $7.59/sh with $47.9mm in cash and $6.4mm of debt it looks like enterprise value is about $48mm or $2.4mm per rig.
On the other hand under a liquidation scenario wouldn’t you take current assets + rig value less total liabilities. Based on the current equity value it looks like the implied liquidation value per rig is around $6.2mm. I used $115.1mm current assets + implied rig value – $149.0mm total liabilities = $89.9mm.
LikeLike