Aker Solutions (Sell, TP: NOK48.00) - Excitement overdone

We can understand the initial investor excitement about a dividend, but compared to fundamentals, we find yesterday’s share price reaction exaggerated, in particular as the stock was strong into what was a weak Q3 report. Looking ahead, we see no free cash flow generation over 2025–2027e. We reiterate our NOK48 target price but have downgraded to SELL (HOLD).

Energy Morning - 1 November 2024

Solid operations, proper capital allocation

Energy Morning - 31 October 2024

Aker Solutions (Hold, TP: NOK48.00) - Small SOTP discount removed

Having repeatedly said a capital allocation strategy update would be provided with the Q4 results, it surprised the market by announcing a dividend of NOK21/share (46% of market cap) prior to the Q3 results, effectively meaning all liquid investments are to be distributed. We expect focus to be on the value of ‘the stub’, its 20% OneSubsea stake and proper working capital adjustments. As our SOTP had a 5% discount on the items now being distributed, we have increased our target price to NOK48 (4...

Aker Solutions (Hold, TP: NOK46.00) - Low visibility beyond 2025

Despite our expectation of continued strong execution near-term (reflected in our increased 2025e EBITDA), we believe the combination of weak prospects for new large orders and the upcoming working capital unwind will weigh on the stock in the quarters ahead. We find it fairly valued on our SOTP and believe investor focus will gradually shift towards the lack of backlog upon completion of the Aker BP portfolio projects. We reiterate our HOLD and NOK46 target price.

Energy Morning - 25 October 2024

Floating on a strong backlog in Q3e

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...

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.

Steady upcycle building in duration

Our 18th annual spending survey lends support to an extended upcycle for offshore-focused oil services, with 2024–2025e offshore spending growth of 5–8%. As value chain bottlenecks (FPSO, subsea) are unfolding, we believe the foundations are in place for a longer and more stable upcycle, supported by oil companies’ discipline. In sum, service companies’ discipline and oil companies’ conservativeness are likely to extend the upcycle, avoiding past ‘boom and bust’ mentality.

Aker Solutions (Hold, TP: NOK46.00) - Tailwind before headwind

It exceeded Q2 consensus and once again raised its 2024 guidance and reported solid order intake, driven by reaching milestones on its Aker BP portfolio and dated currency adjustments. With a limited outlook for new large Aker BP projects, we still see a likely scenario of peak earnings in 2024. The portfolio of renewable projects (HVDC) continues to struggle, with significant provisions (cNOK600m) YTD. Hence, we believe investors are reluctant to ascribe high multiples to near-term earnings, an...

Re-setting expectations again

~30% EBITDA beat in Q2 on strong execution, and earnings outlook for '25+ is also improving. '24e-'25e EPS up 13-16% - BUY, TP NOK 60 (55).

Aker Solutions (Hold, TP: NOK40.00) - Still better value elsewhere

We remain well above consensus on EBITDA (28% for Q2e and 14% for 2024e), but struggle to get excited about the investment case and continue to prefer other oil service names (e.g. Subsea7). The guided working capital unwind and weak cash transition are set to hit Q2 and upcoming quarters. Also, we see growing investor concerns on the lack of prospects for 2026 and beyond, supporting a potential scenario with peak earnings near-term, and downside risk on the 2024–2027 guidance. We reiterate our ...

Execution is everything

Close to a ~NOK 1bn in EBITDA in Q2e and the NCS was not dead. High dividend capacity - BUY

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.

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...

Stronger performance than expected

Revenue and margin beat in Q1, and '24 guidance up on good visibility. Dividends will come — BUY

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...