Shelf Drilling North Sea (Buy, TP: NOK40.00) - Timing of Barsk AoC is key
With the declined AoC and consequent delayed startup for SDNS’s CJ70 jackup (Barsk) in Norway, the key focus is the timing and approval of its revised AoC application. Due to the delay (we now assume November), we estimate a liquidity shortfall in H2 of at least cUSD30m to comply with minimum cash covenants (USD15m). With the AoC uncertainty and funding need, it is trading at a significant discount to underlying values and peers. Assuming the AoC is received, SDNS has close to full backlog coverage in our 2025e EBITDA, which should help derisk the story. With c40% upside potential to peer valuation, we reiterate our BUY, but have cut our target price to NOK40 (45), reflecting a c13% discount to our NAV.
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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