A Hidden 30-40% Dividend Yield: The Cheapest Way to Own Deepwater Rigs

Today I am going to pitch you the cheapest way I have found to get drillship and semisub exposure. I am talking 2.5–3× EBITDA on 2027 numbers with no assumptions about day rates recovering, just current market dynamics playing out as this company re-hires its vessels at the higher rates already on the table. This is not only for offshore bulls: the asymmetry is attractive for any smart investor who would like a +30% dividend yield.

For those not yet familiar with the offshore thesis, the setup is simple: the need for cheap, low-geopolitical-risk oil drives demand for offshore projects, which need jackups, drillships and semisubs; there is almost no new supply of these vessels because current prices are too low to justify newbuilds; and that should create a parabolic increase in pricing until newbuild economics become viable, which would require sustainable day rates almost 2× higher than today (in this name if that bull case happens we would be earning more per year on FCF than the current market cap). I recommend reading the deep dive I wrote on the industry, because beyond being extremely cheap, this name carries substantial upside optionality on that dynamic.

For those already familiar with the sector, the situation here is simple: a deepwater operator, recently restructured, with industry-leading costs and three owned vessels that are all either earning little or in preparation for their next contracts. 2026 makes the financials look ugly, the company doesn’t pay a dividend yet, it has to fund maintenance and upgrade capex, and it carries big planned downtime. We all know the market is impatient, and even more so with a niche, unknown company.

But if you look twelve months out, we should have a fully-hired fleet at much higher day rates trading at around 2–3× cash EBITDA, with a refinancing completed that lets management pay out heavy dividends, a full-payout free-cash yield I estimate at ~34% at the base case (and 15–46% across the range), this means we could be getting a sustainable dividend yield of above 30% without any assumption about day rates rising. Against 5–9× EV/EBITDA multiples for peers that don’t even offer double-digit yields (most don’t even pay a dividend), this looks quite attractive. Add any optionality from future rates rising, and you get one of the most interesting ways I’ve found to own deepwater offshore exposure. Even those that are not as big fans of offshore as me will find this extremely compelling.