Yet again another great commentary from Bassoe on the Borr acquisition of Paragon. I like this bit:
In the beginning, some may have considered Borr to be an asset play with no intention of becoming a long-term, established contractor. The company could stack its rigs efficiently, wait for a rise in rig values, and sell everything for a profit. In and out.
As time went on, Borr continued adding assets. And although jackup values rose (primarily as a result of Borr’s transactions), the prospect of Borr selling off rigs at higher prices faded as they eventually became too big for any of the established drilling contractors to acquire them.
Whether this was the plan the from the beginning or something that just happened over time, the quick sale and profit option became less tenable. So what could have started as a pure asset-flipping maneuver turned into a deliberate quest to become a fully-fledged drilling contractor. [Emphasis added.]
That has happened to a lot of people in the industry. Standard Drilling now aim for medium term capital appreciation, which is a significant change in their original position. The Nor bondholders had to sell out to an operational company in less than a year after their 2016 capital raise. York can’t really believe the Bibby DSVs or their Rever Offshore assets will ever appreciate? Will the Boa Deep C and Sub C ever return to active service? What on earth will someone pay for the Lewek Constellation? etc…
Without some fundamental change in the demand side of the market the asset recovery story should really be dead-and-buried now under a welter of evidence and transactions. You need to be long delivery capability and short assets to profit from “The New Offshore”. Backlog, liquidity, and capability. Everything else is noise.