Fred Olsen Energy (Sell, TP: NOK3.00) - Hope is fading
Despite having exposure to the North Sea (still the most promising floater market), we believe FOE will struggle going forward. Its combination of an old fleet, lack of backlog and not enough cash flow to even cover interest payments means the upcoming restructuring could marginalise the current equity. Also, the valuation is high with the four core mid-water rigs valued at USD81m each, significantly above peers. Applying a peer group valuation, there is no equity value left. Hence, we reiterate SELL and our NOK3 target price. The Q4 results are due on 9 February.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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