84% potential downside
Q3 EBITDA was 41% below our forecast. Our asset-based peer group valuation suggests there is no equity value in Fred Olsen Energy, and its current valuation implies all core rigs working at twice today’s dayrates. We are concerned about its opportunities to win new backlog in the North Sea, and should the UDW drillship Bolette find work we believe it would be cash flow-breakeven. We reiterate our SELL recommendation and NOK3 target price, indicating 84% potential downside.Fred Olsen Energy is engaged in offshore drilling as well as engineering and fabrication services. Co. provides services and operates within the two segments; offshore drilling and engineering and fabrication. The Offshore Drilling segment provides services to the offshore oil and gas industry. The Engineering and Fabrication segment provides engineering, fabrication, ship building and repair services for various offshore and onshore industries.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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