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The glut of assets vs. liabilities makes this

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big-yank   Sunday, 02/16/14 10:59:50 AM
Re: Ahmed2012 post# 208
Post # of 236 
The glut of assets vs. liabilities makes this at first blush to look oversold. Its quarterlies show marked improvement over the PY. All good, right?

However the S/P markdown from its pre-filing S/P in the $50 range is not extreme, the debt-in-abeyance is large and there is a pending tax liability of substantial magnitude. The chatter about assets sales sounds encouraging except for a few tidbits. First, this company has NO management after the rats left the ship (so to speak). But, wait, there's more.

Two asset cans make up the majority of the balance sheet. The petroleum tanker fleet is the largest, but least liquid. There is a ton of capacity in this sector, many newer ships and questions regarding demand as U.S. production rises for domestic consumption and scant refinery capacity exists to process more crude for international consumption. In a nutshell, there's lots of crude but not a lot of gasoline, and few places globally to which crude can be sent for conversion... and even that would suffer enormous transportation burdens since a heck of a lot less crude fits in a transport than refined RBOB. The Baaken pipeline only exacerbates this scenario, over time, as Canadian crude makes its way to Gulf refineries and places like Venezuela are left no place to send their petroleum for processing.

Then there is the second "can" in OSGI's fleet, the LNG tankers. This is a hot ticket. In 2 years. Until the Cheniere Sabine Pass plant comes onstream in late 2015, or later, there is little LNG available to fill up these ships and make them substantively profitable. Other nat gas producers now belatedly chasing the Cheniere initiative face years of permitting challenges and Draconian approval processes before they will have any LNG metric tonnage to move by ocean transport.

I think this company will surely survive and has a longterm favorable outlook, post-emergence. I might even buy some at that time. But I sense a big dilution coming, possibly even cancellation (despite the lipstick-on-a-pig shareholder's equity #'s) and then years of patience required before this ever returns to the $50's.

In the transport space, for now, I like Dryships better, but it will be a slow build, no fast money for investors.


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