Cal Dive International, Inc. (OTCMKTS:CDVI) recently made a big move up from lows of $0.0126 to highs over $0.30 a share. Since then however the stock has been in steep decline and looks to be headed for another retest of 52 week lows.
CDVI has been in decline for many years now since its hay day back in 2008 when the stock traded near $20 a share on a bigger exchange; a downturn in drilling activity following the Maconda disaster in the Gulf left the Company with underused capacity that has not been fully utilized since.
CDVI said on December 1 that it is continuing to work with potential capital providers to refinance its first lien credit agreement. As amended, the revolving credit facility capacity will step-down from $100.0 million to $90.0 million on December 2, 2014, and the Company will be in payment default under the first lien credit agreement upon such step-down. CDVI says they are working with lenders under its first lien credit facility on a forbearance of such default, and is also working cooperatively with the lenders under its second lien credit facility and the holders of its convertible notes.
Cal Dive International, Inc. (OTCMKTS:CDVI) is a marine contractor that provides manned diving, pipe lay and pipe burial, platform installation and salvage, and light well intervention services to the offshore oil and natural gas industry on the Gulf of Mexico OCS, Northeastern U.S., Latin America, Southeast Asia, China, Australia, West Africa, the Middle East, and Europe, with a diversified fleet of dive support vessels and construction barges.
The company was founded in 1975 and owns an aging fleet of diving support vessels and construction barges capable of operating in water depths of up to 1,000 feet.
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On October 16, CDVI announced that it is continuing to work on a refinancing of the Company’s first lien revolving credit facility in an amount up to its previous capacity of $125.0 million. As previously disclosed, the Company has also been working with its existing second lien lenders on an amendment to the second lien facility that would be effected at the same time that the first lien refinancing is closed, and that would increase the current cap on first lien debt to allow for the $125.0 million capacity under the new first lien credit facility, and would grant relief from certain financial covenants contained in that facility. The Company reported that, although considerable progress has been made on reaching agreement on these documents, it has not yet come to final terms on either the new first lien credit facility or the amendment to the second lien facility.
While the Company remains hopeful that these matters will be resolved, there can be no assurance that agreements on these facilities will be reached. For the time being, the Company’s existing lenders under the first lien revolving credit facility have continued to work cooperatively with the Company to allow the extra time needed to complete this complicated refinancing. However, if an agreement cannot be reached in a timely fashion, the Company will have to consider other, potentially less satisfactory measures to provide liquidity for its operations.
Great opportunity still exists for CDVI who is in a prime position to take advantage of deregulation in the Mexican oil and gas market. They are already working for Pemex, the state-owned oil Company, which is set to be privatized as part of deregulation.
Conclusion: CDVI has been highly volatile since hitting the OTCBB trading massive volume. The stock seems to be under heavy accumulation here and there is a large part of the investing public that believes wholeheartedly in the Company’s prospects.
Currently trading at a $1.5 million market valuation CDVI has been in absolute free fall in recent days on fears the Company will be forced to announce bankruptcy. There are currently two opposing viewpoints on CDVI assets which consist of an aging fleet of vessels. Some investors suggest the Company is carrying the assets at less than they are worth citing the recent sale of its U.S. surface diving fleet and the fact that the Company reported a gain on the sale. Others suggest the fleet has aged tremendously and is essentially obsolete.
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In any case CDVI volume has exploded as the stock continues to make new 52 week lows. Clearly there is a massive short position here and any good news could act as a catalyst for a significant reversal. For now, CDVI continues to drop into oblivion.
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Disclosure: we hold no position in CDVI either long or short and we have not been compensated for this article.