Paragon Offshore (PGN) Reports Q1 Revenue of $430M, Offers Outlook

Paragon Offshore (NYSE: PGN) reported Q1 EPS of $0.47, may not compare to the analyst estimate of $0.23. Revenue for the quarter came in at $430 million versus the consensus estimate of $418.72 million.

Outlook

During the quarter, Paragon added approximately $108.0 million in backlog related primarily to previously disclosed new contracts and extensions in the North Sea and West Africa. In the North Sea, the Paragon HZ1 received a contract extension from early July 2015 to late August 2016 at a dayrate of $142,000 while the Paragon C463 received a new contract with GDF SUEZ for 225 days beginning late January 2015 at a dayrate of $130,000. Finally, the Paragon C20052 received a contract award for 75 days at a dayrate of $170,000 and a new contract from early July 2015 to late August 2015 at a dayrate of $145,000. In West Africa, the Paragon L782 received a new contract from late May 2015 to mid-September 2015 at a dayrate of $90,000 while the Paragon L783 received a contract extension from early March 2015 to early May 2015 at a dayrate of $129,000.

On May 6, 2015, Paragon reported that a subsidiary had received written notices of termination from PEMEX - Exploración y Producción ("PEMEX") of the drilling contracts on the Paragon L1113 and the Paragon B301. These contracts have been terminated by PEMEX pursuant to PEMEX's right to terminate the contracts on 30 days' notice. The effective termination dates for the contracts is expected to be late May 2015. As a result of the contract terminations, Paragon's backlog decreased by approximately $60 million. Paragon continues to engage in discussions with PEMEX regarding the company's remaining drilling rigs operating in Mexico.

Mr. Stilley concluded, "Despite recent improvements in oil prices, conditions in the offshore drilling space are likely to deteriorate further during the remainder of 2015. Dayrates may head lower, driven by a variety of supply and demand factors; and we believe the industry will see additional contract renegotiations and outright contract cancellations. Our approach to navigating these turbulent waters includes the following actions: (1) reduce operating costs and capital expenditures to preserve contract drilling margins and liquidity; (2) refinance the debt we assumed as part of the Prospector acquisition; (3) aggressively pursue new contracts by utilizing our position as the low cost provider of offshore rigs; (4) continue to evaluate additional opportunities to strengthen our balance sheet; and (5) above all else, maintain our focus on being the high-quality, safe, and low-cost offshore drilling contractor - a key differentiator for Paragon."

For earnings history and earnings-related data on Paragon Offshore (PGN) click here.

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