FLC showing overhead resistance at 12 3/4, looking for a move through there soon.
Excerpts from a recent Prudential Report
We Are Upgrading R&B Falcon To Strong Buy/SBI, Convinced That The Company
Has Cured Its Financial Woes And Is Well Positioned For Recovery.
In our opinion, R&B Falcon has successfully overcome its most serious
operating obstacle of 1999--a looming shortfall of cash that has been
averted through the company's completion of $1.7 billion of new financings
since December which have left the company with over $650 million in cash
on its balance sheet as of June 30, 1999. Furthermore, the company is
poised to add another $350 million in liquidity with the completion of two
project financings that are scheduled to be finalized within the next month.
Since R&B Falcon Clearly Now Has Enough Cash To Meet Its Obligations Going
forward, we believe the company has more than enough cash resources to
complete the remaining $900 million of shipyard investments it has
committed to spending over the next 18 months. In fact, we estimate that
R&B Falcon will be able to spend roughly $550 million on its shipyard
projects during the second half of 1999 and still finish the year with
roughly $700 million in cash on its balance sheet. Likewise, we believe
the company can spend approximately $400 million to complete its shipyard
project in 2000 and still retain over $450 million in cash at the end of
2000 even if the company does not complete any of the $300 million in
non-core asset sales it is pursuing. We believe the company will complete
at least $200 million of these sales over the next 18 months, leaving the
company with $650 million in cash at the end of 2000.
Investors Can Now Focus On The Massive Upside Operational Potential That
Should Emerge Over The Next Two Years. R&B Falcon's financial woes over
the past year have been caused by shipyard cost overruns and contract
cancellations associated with the attempted expansion of its deepwater
drilling fleet. While many of these projects failed to meet expectations,
the big surprises appear to be behind the company now, and the rewards of
the investments, muted as they are, still lay ahead. In fact, we estimate
that roughly $275 million in annual operating income will be added with the
deployment of just six deepwater rigs over the next two years. We also
estimate deepwater drilling operating income will increase by roughly $115
million in 2001 over 2000 as a result of a full year's utilization of just
three rigs which are to be delivered in 2000. |
