Paragon Offshore PLC (OTCMKTS:PGNPQ) Keeps Climbing

Paragon Offshore PLC (OTCMKTS:PGNPQ) is one microcap that isn't going to let a little thing like bankruptcy slow it down. Shares have been on a tear since February as investors remain optimistic Paragon can restructure and benefit from the current rise in oil prices. We're already witnessing this rebound as first quarter results came in better than expected. Now microcap traders are asking how much higher can shares keep going?Paragon describes itself as "a global provider of offshore drilling rigs. Paragon's operated fleet includes 34 jackups, including two high specification heavy duty/harsh environment jackups, four drillships, and two semisubmersibles. Paragon's primary business is contracting its rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for its exploration and production customers on a dayrate basis around the world. Paragon's principal executive offices are located in Houston, Texas. Paragon is a public limited company registered in England and Wales with company number 08814042 and registered office at 20-22 Bedford Row, London, WC1R 4JS, England."The first quarter results were indeed better than expected. For the first quarter 2016, adjusted EBITDA was $115.4 million, compared to $97.6 million in the fourth quarter of 2015. Excluding gains and the tax impact of the gains, Paragon's adjusted net income for the first quarter 2015 was $42.0 million, or $0.47 per diluted share. Total revenues for the first quarter of 2016 were $265.1 million compared to $299.6 million in the fourth quarter of 2015. CEO Randall Stilley said:

"Paragon delivered better than anticipated operating results during the quarter even as we continued to engage in a process to restructure our balance sheet and eliminate a significant amount of debt. Contract drilling costs were approximately 28% lower versus the fourth quarter 2015, while contract drilling revenues were down only 12%, highlighting our ongoing ability to execute in a difficult environment."

Paragon's total contract backlog at March 31, 2016 was an estimated $806 million compared to $1.01 billion at December 31, 2015, including approximately $142.1 million of backlog for the Paragon DPDS3 that Paragon's customer Petrobras has indicated it will contest in connection with the length of prior shipyard projects relating to the rig. During the quarter, Paragon added approximately $40.0 million in net backlog related to previously disclosed contract extensions in the North Sea and Middle East.Utilization of Paragon's marketed floating rig fleet was 68 percent in the first quarter of 2016, an increase from the 61 percent utilization achieved in the fourth quarter of 2015. The increase in marketed utilization in the first quarter of 2016 reflects the removal of the Paragon MDS1 from the calculation as that rig is cold-stacked and not currently being marketed. Average daily revenues for Paragon's floating rig fleet increased by five percent to $265,000 per rig in the first quarter of 2016 from $252,000 per rig in the fourth quarter of 2015.Utilization of Paragon's marketed jackup rig fleet was lower at 51 percent in the first quarter compared to the 55 percent utilization in the fourth quarter of 2015. Average daily revenues for Paragon's jackup fleet during the first quarter decreased by six percent to $114,000 per rig from $121,000 per rig during the fourth quarter of 2015.What we liked most about the earnings report was the company's outlook. While all offshore drilling companies have had difficulty with the oil price crash, the fact remains that offshore drilling is absolutely essential as older fields run out and Big Oil needs to bring new supplies online. CEO Randall Stilley said:

"Paragon's focus is on emerging from our Chapter 11 process mid-summer as a stronger, more competitive company that is well-positioned for the future. We intend to continue to manage our costs and maintain adequate liquidity while we aggressively pursue any new contracts that are available. In spite of the downturn, Paragon will continue to differentiate itself through our dedicated service delivery of safe, reliable, and efficient operations."

Currently trading with a market cap of $69 million, PGNPQ was able to reach a deal with its creditors while preserving 65% of the company for the equity holders. Some of the term loan holders were not happy with the deal; however, the bankruptcy judge has given the green light for the creditors to vote on the bankruptcy plan. The reality is that Paragon is a gem on the OTC Markets operating under bankruptcy protection and will emerge this summer as a much stronger company with a solid balance sheet. Overall, we expect shares to continue climbing higher and rewarding shareholders going forward. We believe the worst is over for Paragon Offshore. We will be updating Insider Financial as soon as we know more. For continuing coverage on PGNPQ, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in PGNPQ and have not been compensated for this article.