reports
- Martin Huseby Karlsen
Aker Solutions (Hold, TP: NOK40.00) - Probably dead money for a while
Despite Q1 EBITDA 25% above consensus (but in line with our estimate) and 2024e EBITDA c10% higher on updated guidance, we struggle to get excited about the story. The investment case suffers from a lack of financial details for the OneSubsea JV, which we believe investors would need to support a higher valuation. Meanwhile, a forecast working capital unwind and weak cash transition would probably be in focus. We also sense growing concern about the 2026+ outlook as Norway projects end, and back...
- Martin Huseby Karlsen
Subsea 7 (Buy, TP: NOK225.00) - On track for long-term growth
Q1 EBITDA was 5–10% above consensus and the best first quarter since 2017. Subsea and conventional performed well, while renewables broke even, although we see it improving with several new projects commencing late-Q1/early-Q2. The tender pipeline is strong, and management said it is in early discussions with clients for work extending towards the end of the decade, providing support for the cycle duration. There were no changes to the 2024–2025e guidance, and we have made limited estimate chang...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Aker Solutions (Hold, TP: NOK40.00) - Cash conversion in focus for 202...
We forecast Q1 EBITDA well above (28%) consensus, as we expect projects to reach profit recognition milestones, temporarily boosting margins. However, a working capital unwind is set to start in 2024 – likely as soon as Q1 – resulting in weak cash conversion and cash flow from operations. Following the partial sale of its subsea business, the investment case suffers from a lack of financial details for the OneSubsea JV, which we believe would be needed for investors to underwrite a higher valuat...
- Martin Huseby Karlsen
Subsea 7 (Buy, TP: NOK225.00) - Consensus underestimates long-term mar...
We expect regular seasonality in Q1, but believe this is not fully reflected by consensus (we are 10% below on EBITDA). We find consensus too conservative on margin expansion until 2026e. Excluding PLSVs, leases and JV contributions, we calculate consensus EBITDA implies only 1%-point EBITDA margin expansion in 2024–2026. We are 18% above consensus on 2026e EBITDA, and see upside potential to the guided USD250m/year shareholder return in 2026. We reiterate our BUY and have raised our target pric...
- Martin Huseby Karlsen
Shelf Drilling (Buy, TP: NOK40.00) - Set to maintain liquidity
For Shelf Drilling (parent), we consider the proposed refinancing of its 60%-owned subsidiary SDNS a likely relief as investors have been focused on its capital structure and liquidity situation post the recent Aramco suspensions. The proposed USD300m bond offering in SDNS would be a complete refinancing that is set to address both the earlier announced short-term liquidity requirement in SDNS (cUSD50m) as well as pushing debt maturity in SDNS from 2025 to 2028. Although Shelf Drilling has suffi...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Nel (Sell, TP: NOK3.50) - Rough start to the year
Nel reported soft Q1 figures, with revenue at its lowest since Q3 2022 (adjusted for the Nikola one-off gain), and EBITDA below our estimate. Put in context with poor backlog coverage for 2025e, the lack of large orders remains a concern and success is required in the near term. We have lowered our revenue for 2024e by 10% and for 2025e by 6%. We reiterate our SELL and NOK3.5 target price.
- Martin Huseby Karlsen
Nel (Sell, TP: NOK3.50) - Facing one-off tailwind in Q1
We forecast Q1 EBITDA of NOK4m, well above consensus of NOK-59m, as we believe consensus does not fully capture one-off gains related to compensation for the cancellation of the Nikola agreement. We still see a risk to collections of the missing payments from its largest client last year (representing 26% of revenue), and any comment on this project should be key. Still-limited order intake raises concerns about future growth, as our estimates and consensus assume large-scale orders materialisin...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Shelf Drilling North Sea (Buy, TP: NOK45.00) - Key contract win in the...
The niche market in the North Sea is less affected by the more competitive near-term jackup environment, in our view. The CJ70 extension with Equinor and additional options should help earnings visibility and crystalise its underlying value. Additionally, it should be helpful in assessing various alternatives in light of the previously highlighted temporary liquidity shortfall in Q2 2024. The stock is trading at a significant discount to underlying values and peers. Bridging the gap in implied a...
- Martin Huseby Karlsen
Limited change in EP spending
After reviewing oil companies’ most recent spending plans, we estimate offshore spending growth of c7% YOY for 2024, in line with our November update. Growth is concentrated, with Petrobras being the key driver, favouring service companies with Brazil exposure. Looking ahead, further spending growth is likely to be partly limited by total spending already being on a par with operating cash flow. Delayed energy transition spending is seen as positive for oil services, while recent E&P consolidati...
SOC SUBSEA 7 S.A.
SDRL SEADRILL LTD
ARCHERO ARCHER
AKER AKER ASA CLASS A
TGS TGS-NOPEC GEOPHYSICAL COMPANY ASA
ODL ODFJELL DRILLING
AKSOO AKER SOLUTIONS ASA
DO DIAMOND OFFSHORE DRILLING INC.
RIGN TRANSOCEAN LTD.
BWO BW OFFSHORE LIMITED
CGG CGG
BORR BORR DRILLING
MSEIS MAGSEIS FAIRFIELD
PRS PROSAFE
SHLF SHELF DRILLING LTD.
VAL VALARIS LTD
NE NOBLE CORP NEW
OTL ODFJELL TECHNOLOGY LTD
SDNS SHELF DRILLING NORTH SEA
DDRIL DOLPHIN DRILLING
DOFG DOF GROUP ASA
- Martin Huseby Karlsen
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Focus shifting to entry points
Aramco’s rig suspensions came as a negative surprise for many, but we now sense a shift in focus among investors from concern to entry points for jackup names. As many suspended rigs are likely to aggressively look for work elsewhere, we expect mixed news flow to mean still-volatile share prices. Still, we believe current levels in our coverage universe represent a good entry point for long-term investors seeking jackup exposure.
- Martin Huseby Karlsen
Borr Drilling (Buy, TP: NOK95.00) - Bump in the road, patience needed
With the full effects of the Aramco situation yet to unfold, we see the risk of a bump in the road for the premium jackup market in the coming quarters, with volatile news flow. We have cut our estimates accordingly. However, we believe a solid cash position should support dividends and the shareholder-friendly approach should continue. We reiterate our BUY but have cut our target price to NOK95 (110).
- Martin Huseby Karlsen
Shelf Drilling (Buy, TP: NOK40.00) - Not for the fainthearted
With Aramco rig suspensions (and likely terminations) now confirmed, we have cut our 2024–2026e EBITDA by 16–28%. Being the most exposed offshore driller to the Aramco situation, the stock has already taken a beating, and we view current levels as an attractive entry point. We see no balance sheet concerns. While its shareholder return story has clearly been dented, we consider the 2025e EV/EBITDA of 2.8x and cash flow yield to EV of 15% as compelling. We reiterate our BUY but have cut our targe...
- Martin Huseby Karlsen
Local Middle East contractors confirm Aramco suspensions
This morning local contractors ADES and ADC confirmed the suspension of rigs contracted with Aramco for 5 and 3 jackups, respectively. This brings the total confirmed suspensions to 16 jackups, while we believe a scenario with a total of 20–25 jackups being affected (of c90 contracted with Aramco) may unfold. Looking ahead, the key for the wider jackup market relates to how these rigs are marketed for work elsewhere, as it appears rigs are becoming available on short notice. Over time, we believ...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Reflections on dayrates ahead
As per our most recent sector updates, we believe deepwater datapoints could surprise on the upside in the comings months, potentially breaking the USD500k barrier after being rangebound at USD450k–490k for c12 months. Still, dayrate bifurcation among deepwater rigs is still there, but we are encouraged by the disciplined behaviour for tier-1 rigs. We see similar trends for harsh semis. Within the jackup segment, bifurcation between local and international contractors could be more pronounced as...
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