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$VTG Vantage has plans to “continue to retire debt in the open market” and expects $10 million to $12 million of gains in the first quarter from what it already bought and retired early, Douglas Smith, chief financial officer, told investors Friday on a conference call to discuss fourth-quarter results.

The company, which owns drillships and platforms, purchased bonds or pre-paid loans with a face value of $60.6 million in the fourth quarter, according to a statement today. Added to earlier repurchases and paydowns, the company retired almost $200 million of debt in 2014, Smith said. About $146 million of that was from elective paydowns, Smith said in a telephone interview today.

Rig owners such as Vantage and Hercules Offshore Inc. are confronting a glut of new vessels at a time customers are canceling work because of falling crude prices. Brent oil, a global benchmark, has dropped 48 percent from a June high. Vantage’s $2.79 billion of bonds and loans began tumbling in September.

“We believe 2015 and 2016 will be difficult years for ultra-deepwater rigs,” Paul Bragg, chief executive officer of the Houston-based company, said during the call. “Eventually the year will arrive when customers have increased spending plans. At that point, you’ll be surprised how quickly we go from the first uptick to a rig shortage.”
Bond Prices

Vantage’s largest bond, $1.13 billion of 7.5 percent first-lien notes due November 2019, dropped 0.75 cent to 60.75 cents on the dollar to yield 21 percent at 3:46 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The company’s $730 million of 7.125 percent secured bonds due April 2023 fell to 60.1 cents to yield 16 percent from 66.3 cents on Feb. 18, according to Trace. Both notes traded around par in September.

The company’s purchases as of Oct. 2 included $40 million face value of its 7.125 percent notes at a weighted average cost of 96.2 percent of face value; $19.4 million of the 7.5 percent notes at a weighted average cost of 95 percent; and $13.4 million of 7.875 percent convertible notes due 2042 at par, according to an Oct. 3 statement.

Vantage can buy back more securities if it adds to its rig work orders because the rigs would be earning the company money while they’re under contract.
‘Maintain Liquidity’

Without putting more rigs under contract, “I need to maintain liquidity because that asset will not be contributing to cash flow,” Smith said by telephone.

The company had free cash flow of $140.8 million in the first three quarters of 2014, according to data compiled by Bloomberg. Free cash is money that can be used for debt repurchases, stock dividends and buybacks, or reinvestment in a business.

Vantage will repurchase its securities as long as prices are favorable, Smith said on the conference call.

Executives expect the company to generate $5 million to $15 million of net income and earnings before interest, taxes, depreciation and amortization of $98 million to $105 million in the first quarter, Smith said.





http://www.bloomberg.com/news/articles/2015-03-06/oil-servicer-vantage-drilling-plans-to-buy-back-more-of-own-debt?cmpid=yhoo