reports
- Martin Huseby Karlsen
- 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
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
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...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Cycle duration narrative intact with dayrate risk skewed to the upside
As sell-side consensus awareness of 2024 challenges now (finally) looks to be properly understood, we see all capital markets stakeholders being ready to focus on the (in our view) attractive 2026e valuation of the offshore drillers. In the coming months, we expect to see further evidence of cycle duration through long-term tenders and awards. For high-spec deepwater rigs, we also see the opportunity to push dayrates higher, potentially breaking the USD500k barrier after being rangebound at USD4...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Aramco rollercoaster
For the offshore drillers, the capital markets’ interpretation of Aramco-related news over the past few days appears to be mirroring the rollercoaster on the offshore planned amusement park in Saudi Arabia, ‘The Rig’. In this note, we summarise the recent Aramco commentary and events, along with our perspective. From a ‘direct impact’ viewpoint, it is key to understand what companies may face suspensions and/or see rigs released. For an ‘indirect impact’ perspective (for the international jackup...
- Martin Huseby Karlsen
Aramco reported to have sent suspension letters
News reports today suggest Aramco recently sent some letters to request the contract suspension of a few offshore drilling rigs. The magnitude of rigs and companies involved is unknown. A rig reduction would be in line with yesterday’s commentary at the Aramco earnings call, implying that the total offshore rig count (jackup) would be lower as it looks to release offshore oil jackups but add gas rigs (onshore and offshore). From an industry perspective, we believe the key focus point should be t...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
While waiting for Aramco news
With Aramco’s full-year results due on 11 March, a spending update is expected, which could provide some read-across to its future jackup rig count following the cut in production capacity target from 13mmboed to 12mmboed. While waiting for further clarity related to the impact on its jackup count, we have the impression that a wide range of potential outcomes are being explored and discussed by industry participants, with respect to the timing of potential rig reductions as well as the number o...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Aramco contracted jackup suggested to have been offered in Vietnam ten...
Updates suggest a jackup (believed to be Shelf Drilling Victory) contracted with Saudi Aramco has been offered into a tender in Vietnam. Following Aramco’s cut in its production capacity target, there has been added uncertainty in the jackup market related to it potentially releasing jackups. To our knowledge, the rig is still contracted with Aramco, and this may be contingency planning from Shelf Drilling’s perspective. Nevertheless, we expect this to create a new round of questions among inves...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Odfjell Drilling (Buy, TP: NOK65.00) - Remains a sector top-pick
Despite a slight Q4 EBITDA miss due to unplanned downtime, we see positive momentum for Odfjell Drilling ahead. As a preferred contractor for Aker BP and Equinor, it is uniquely placed in Norway with industry-leading backlog coverage and earnings visibility. It is one of the few offshore drillers where we are above 2024–2026 consensus (5–7%). We see solid execution, greater comfort in terms of the 5-year surveys, and wider appreciation of its attractive valuation as key to a stock re-rating. We ...
- Martin Huseby Karlsen
Odfjell Drilling (Buy, TP: NOK65.00) - Still standing out
As a preferred contractor for Aker BP and Equinor, Odfjell Drilling is uniquely placed in Norway, with industry-leading backlog coverage and earnings visibility. We are 8% above consensus on Q4e EBITDA, and it is one of the few offshore drillers where we are above consensus for 2024–2026e. We see solid execution, greater comfort in terms of the 5-year surveys, and wider appreciation of its attractive valuation as key to a stock re-rating. Adjusted for dividend payments, the stock is trading at a...
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