CALLXOM24 days ago9Kviews

Exxon: the backlog has repriced and the market has not noticed

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.

Dhruv Anand@dhruv_anand

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 Exxon, 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. A regulatory or fiscal change in the host jurisdiction is the risk that is not hedged and would overwhelm the project economics entirely.

Discussion · 6

Omri ShakedAUG 20

I think the setup matters more than the thesis here. The depreciation schedule really is the whole disagreement. How much does this depend on the macro cooperating?

Dhruv AnandAuthorAUG 20

Reasonable, and I have thought about it a lot. The bear has to be right that the channel clears without a guide-down. That is possible and it is not what the sell-through says.

Noa BergmanAUG 20

This lines up with what I saw in the filings. The elasticity decay across the price actions is the tell. Would you underwrite this without the catalyst date?

Dhruv AnandAuthorAUG 19

Good question. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit.

Omri ShakedAUG 19

This changed my mind. The depreciation schedule really is the whole disagreement. Where does this break if rates back up another 50bp?

Dhruv AnandAuthorAUG 19

Good question. The read-across is real for the closest comparable and much weaker beyond it, because the contract structures differ.

Discussion · 6

Price attestation