Petrobras FPSO delays may hit service volumes but lengthen cycle

Being the largest global consumer of deepwater oil services, Petrobras’ strategic plans tend to get investor attention. On the positive side, its latest 5-year plan sees 5% higher E&P spending than the previous one, and has a more stable phasing between the years, which is supportive for the cycle duration. However, several FPSOs are facing significant delays, which is on the downside for oil services, leading to delays for deepwater oilfield services (primarily drilling and subsea), likely resu...

Energy Morning - 18 November 2024

Steady growth, all eyes on Denmark

DOF Group (Buy, TP: NOK140.00) - Sustained momentum in Q3

We consider DOF’s Q3 report supportive of the equity case, with all segments achieving in line or above expectations, and steady cash generation driving the leverage ratio to 2.3x at quarter-end. Of the contract updates presented on the earnings call, we highlight that two more AHTS vessels have been fixed on long-term commitments, avoiding the volatile North Sea spot market. The stock is trading at a 2025e EV/EBITDA of 3.7x. We reiterate our BUY and NOK140 target price.

Energy Morning - 7 November 2024

Energy Morning - 4 November 2024

Energy Morning - 24 October 2024

Energy Morning - 23 October 2024

Energy Morning - 15 October 2024

Petrobras set to reduce 2025 capex

Petrobras is expected to reduce 2025 capex from USD21bn to around USD17bn, according to a Reuters article today. Petrobras has a 5-year capex plan, but there are usually changes to its plans, and “current year” / “near-term” spending has a track-record of being revised lower (2024 capex was recently cut c24% to USD13.5bn–14.5bn), as Petrobras has struggled with value-chain delays. The updated spending represents YOY growth in 2025 of c21% (versus c50% earlier). The article mentions equipment pri...

DOF Group (Buy, TP: NOK140.00) - Accretive fleet expansion

The proposed acquisition of Maersk Supply Service is set to position DOF as the market leader in CSVs and large AHTS vessels, giving increased scale in an increasingly sold-out subsea market at attractive terms (24% discount to GAV). We have included Maersk in our estimates, and consider the combined valuation attractive at a 2025e EV/EBITDA of 3.9x and annualised dividend yield of 14% from Q2 2025. We reinstate a recommendation with a BUY and NOK140 target price.

Limited excitement for oil services from TotalEnergies’ Strategy & Out...

With total capex set to be flattish through this decade (organic capex lower in the out-years), TotalEnergies’ Strategy & Outlook presentation provided limited excitement for oil services. Strong capital discipline and allocation was maintained, with targeted oil production growth (3%) on flattish capex and shareholder returns being a top priority. With several large-scale developments for the next few years already defined (oil services mostly contracted), we consider its plan supportive for cy...

Crude Quarterly Q3'24: Lower oil price

Oil inventory draws for the rest of 2024. IEA is wrong – peak demand is not imminent. Both E&P and oil service shares look highly attractive.

Building shareholder value

EBITDA estimates up 2-3%. MSS adds significant scale, tier 1 vessels and market exposure, and is accretive on '25/26 multiples: BUY.

DOF Group (No_rec, TP: NOK) - Acquiring Maersk Supply Service

DOF has entered into an agreement to acquire Maersk Supply Service (MSS) for cash and shares. The transaction would add 13 AHTS vessels, eight CSVs and one cable layer, making DOF the largest owner of CSVs and large AHTS vessels. According to DOF’s investor presentation, the transaction EV is cUSD1bn, implying a 0.79x EV/GAV (DOF pre-transaction 1.06x), based on broker values, and a 2.7x–3.2x EV/MtM EBITDA excluding the 11 smaller vessels (DOF pre-transaction 4.8x on 2026e). Due to DNB Markets’ ...

Crude Quarterly Q2'24: tighter oil market ahead

Oil inventory draws for the rest of 2024. IEA is wrong – peak demand is not imminent. Both E&P and oil service shares look highly attractive.

DOF Group (Buy, TP: NOK110.00) - Profiting from solid subsea market

DOF continued its strong execution in Q1, with EBITDA 5% above consensus. Net debt was flat QOQ but this was driven by non-cash lease additions for Maersk Installer, which should start contributing to earnings from Q2. The market keeps improving and management highlighted up to 10 long-term charter opportunities and clients already tendering for project work to be executed in 2027. It targets a refinancing in 2025 and said it aims for 1.5x net debt/EBITDA before paying dividends, which we foreca...

In the right direction on most metrics

Q1 EBITDA 5% above. Estimates largely unchanged and in the high end of guidance. BUY, TP NOK 120 (95).

DOF Group (Buy, TP: NOK110.00) - Building long-term visibility

We expect still-high utilisation in Q1, and adj. EBITDA of USD107m (3% above consensus). Demand for subsea vessels remains firm, and DOF is in the process of securing new contracts for PLSVs and AHTS vessels with Petrobras, which we believe will result in 3.5–4 years’ average backlog coverage for the DOFCON and Norskan silos (together accounting for 40% of our 2025–2026e EBITDA). Peer group 2025e EV/EBITDA and FCFF yield suggest a fair value of NOK106–116. We reiterate our BUY and have raised ou...

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...