CALLOXYabout 1 month ago5.6Kviews

Occidental: new contracts are being signed at materially better terms

Contracts signed this year carry both higher day rates and better cost-recovery terms than the backlog they replace. The mix improves mechanically for two years.

Victor Reyes@victor_reyes

The economics run through contract terms rather than headline pricing. Cost-recovery provisions and duration change realised margin as much as the day rate does, and they are disclosed later. Contract terms are visible in the backlog disclosure. New awards carry both higher rates and improved cost recovery relative to the contracts rolling off. The position: long on Occidental, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit. What breaks this is a supply outage that re-widens crack spreads. Those happen without warning and would make the normalisation argument wrong for several quarters.

Discussion · 7

Ines FerreiraAUG 14

Been on the sidelines on this one. The elasticity decay across the price actions is the tell. What would you need to see to add rather than hold?

Victor ReyesAuthorAUG 13

Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (857)

Marco BianchiAUG 12

This lines up with what I saw in the filings. The contract structure matters more than the headline rate. What is the level where you would walk away?

Victor ReyesAuthorAUG 13

Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (855)

Ines FerreiraAUG 12

I came in sceptical. The margin bridge is doing more work here than is acknowledged. Where does this break if rates back up another 50bp?

Victor ReyesAuthorAUG 12

Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (859)

Dana KatzAUG 11

Good piece. The point about conversion rather than demand is the right one. Does the same logic apply to the closest comparable?