Petter Narvestad (+47)

Transcription

1 Supply market report Siem Offshore 3Q12 Preview Recommendation Buy - Target NOK Petter Narvestad (+47) [email protected] This report was prepared by an analyst employed by Fondsfinans ASA, the Norwegian affiliate of Fondsfinans Inc., who is not registered as a research analyst with FINRA or subject to FINRA rules governing research. See the last page of this report for Important Disclosure Information 1

2 Positive dayrate development seen in 2H12 as expected SUPPLY MARKET OVERVIEW Seasonal dayrate evolution AHTS & PSV GBP/day AHTS BHP+ Demand side: - Back-end heavy drilling- & subsea activity in Fewer period contracts relative to Brazil fleet dropping off in GBP/day High/Low Average PSV 4000 dwt High/Low Average Source: Fondsfinans Research, Hagland Offshore, broker reports Supply side: - Owners moving vessels back to the North Sea expecting a strong market - Larger spot fleet - Weak underlying PSV market as newbuilds are delivered 2

3 2012 drilling activity lagging... DRILLING ACTIVITY NCS* exploration drilling activity OSV = Offshore Support Vessel (PSV, AHTS, Standby) North Sea spot market has picked up, but not delivered the same spikes as seen last year t Drilling of exploration/appraisal wells lagging targets - Late arrival of new rigs - More demanding geology - Successful wells take longer to complete Disappointing drilling activity: Only 27 exploration wells started in 9M12 leaving vs. an annual forecast of 55 from NPD at start of the year and 41 as of 9m11 Source: Fondsfinans Research, Norwegian Petroleum Directorate (NPD), Deloitte *NCS: Norwegian Continental Shelf Not possible to close the gap in 4Q12 Still potential for high dayrates through November 3

4 Fixing activity is volatile but rising high levels SPOT MARKET OVERVIEW WEEKLY REPORTED SPOT FIXTURES 60 Other 50 Supply duties Rig Move Fondsfinans Research, Hagland Offshore, Westshore 4

5 What a difference Greenland makes on vessel supply SPOT MARKET OVERVIEW VESSEL SUPPLY VS. LARGE AHTS SPOT RATE 4X AHTS and 3X PSV drilling off Greenland AHTS dayrate Spot fleet no. vessels GBP/day Fondsfinans Research, Hagland Offshore, Westshore

6 Who do we spot in the spot market? SPOT MARKET OVERVIEW KEY SPOT MARKET PLAYERS AHTS PSV Current End 2Q12 End 1Q12 End 2011 Current End 2Q12 End 1Q12 End 2011 Siem Offshore Deep Sea Supply Farstad Shipping Solstad Offshore Havila Shipping DOF Maersk Viking Supply Ships Rem Offshore Sum Other Total Fondsfinans Research, Hagland Offshore, Westshore 6

7 ...which, puts utilization under pressure SPOT MARKET OVERVIEW SPOT MARKET UTILIZATION 100% 90% 80% 70% 60% 50% 40% 30% 7 jan. 11 feb. 11 mar. 11 apr. 11 mai. 11 jun. 11 jul. 11 aug. 11 sep. 11 okt. 11 nov. 11 des. 11 jan. 12 feb. 12 mar. 12 apr. 12 mai. 12 jun. 12 jul. 12 aug. 12 sep. 12 okt. 12 Rolling 4-week utilization AHTS PSV Fondsfinans Research, Hagland Offshore, Westshore

8 ..and for those who are still in doubt: Yes there is a link between utilization and dayrates SPOT MARKET OVERVIEW UTILIZATION & DAYRATES Rolling 4-week utilization 85% AHTS utilization AHTS Spot Rate 80% % % 65% % % % 45% % 0 8 jan. 11 feb. 11 mar. 11 apr. 11 mai. 11 jun. 11 jul. 11 aug. 11 sep. 11 okt. 11 nov. 11 des. 11 jan. 12 feb. 12 mar. 12 apr. 12 mai. 12 jun. 12 jul. 12 aug. 12 sep. 12 okt. 12 Fondsfinans Research, Hagland Offshore, Westshore

9 Fundamentals point to improved market conditions despite 2012 spot weakness SUPPLY MARKET OVERVIEW A clear mismatch between AHTS and number of new drilling units coming to market, FPSOs and other installations - Rig newbuilding fleet (jack-ups & semis) at 22% of existing fleet - PSV fleet growth on the other hand may seem excessive, but in demand from the new ultra-deepwater units working only on DP International absorption of vessels remain key for North Sea spot balance - Brazil is back in tendering mode after long break - Covers all vessel sizes - Deepwater West Africa activity increasing & East Africa emerging - Drilling in US GoM is back at pre Macondo levels and vessels leaving after the spill is returning back Norwegian shelf activity rising - New large discoveries such as Johan Sverdrup, Skrugard & Havis - Promotes more exploration and development drilling - Opens up more Barents Sea acreage - Will drive demand for large AHTS and large PSVs 9

10 We see stable EBITDA in 3Q12 vs. 2Q12 2Q12 ESTIMATES Estimates & consensus 3Q11 2Q12 3Q12E Revenues EBITDA EBIT incl associated Net interest EOI and currency Pre-tax profit Net profit Source: Fondsfinans Research, Siem Offshore BBG consensus EPS reported EPS adjusted Estimate changes 2012E 2013E Revenues Change (%) 0 % 0 % EBITDA Change -1 % 0 % EBIT Change -2 % 0 % Pre-tax profit Change -5 % 0 % Net profit Change -5 % 0 % EPS adjusted Change -8 % 0 % Avg. dayrates USD E 2013E Mid-size PSV Change 0 % 0 % Large PSV Change 0 % 0 % MPSV/PSV w ith crane Change 0 % 0 % AHTS average Change -1 % 0 % 10

11 Target maintained at NOK 12.5 Buy reiterated VALUATION NAV model USDm Current USD/share Value of medium sized PSVs MV Value large PSVs MV Value MPSVs MV New building instalments BV AHTS MV Joides Resolution DCF Big Orange MV Well Intervention Servises (WIS) PSV vessels in Brazil BV ModFrag Total asset values Cash Other current assets Current liabuilities Other long-term assets/liabilities Interest bearing debt Net asset value NAV USD per share 2.64 NAV NOK per share USD/NOK We assume unchanged vessel values No value put on Siem WIS Vessel NAV at NOK 15 share We apply 15% discount to NAV in target Source: Fondsfinans research 11

12 Key figures ESTIMATES, MULTIPLES & PEERS Company overview Key figures (USDm) E 2013E Revenues EBITDA Operating profit Net interest and other Pre-tax profit Net profit EPS reported EPS, adj. diluted EBITDA grow th (Y/Y) 912 % 290 % 10 % -34 % 29 % 65 % 5 % 39 % EBITDA margin 7 % 25 % 50 % 45 % 30 % 31 % 36 % 35 % 40 % EV Marketcap EV/EBITDA P/E, adj P/BV ROE 6 % 13 % 14 % 11 % 4 % 1 % 1 % 2 % 9 % ROCE -2 % 13 % 14 % 9 % 3 % 2 % 3 % 4 % 6 % EV/EBITDA at target P/E, adj at target EV/EBITDA - Full peer group Median P/E full peer group median Average dayrates USD AHTS MRSV PSV ORSV Average OPEX USD AHTS MRSV PSV ORSV Source: Fondsfinans Research, Siem Offshore 12

13 Multiples overview PEER PRICING Peer table FUNDAMENTALS EV/EBITDA P/E adj. Company Ticker Crncy M. cap. Net. debt EV Price E 2013E E 2013E Siem Offshore (FF Est) USD Deep Sea Supply (FF Est) USD na na Siem Offshore (Cons) SIOFF NO USD high high 9.7 DeepSea Supply (Cons) DESSC NO USD neg. neg Dof Asa DOF NO USD na neg Farstad Shipping FAR NO USD Havila Shipping Asa HAVI NO USD neg. neg Eidesvik Offshore Asa EIOF NO USD Solstad Offshore Asa SOFF NO USD high neg BOURBON SA GBB FP USD high Gulfmark Offshore Inc-Cl A GLF US USD Tidew ater Inc TDW US USD Hornbeck Offshore Services HOS US USD neg Seacor Holdings Inc CKH US USD n.a Average Median Source: Fondsfinans Research, Bloomberg 13

14 Market favors share liquidity & dividends FUNDAMENTAL PRICING Historical P/NAV Source: Fondsfinans Research, Company reports 14

15 Spot spikes normally drives share prices SHARE PRICE VS: SPOT RATES 15

16 12-month relative performance PEER PERFORMANCE Source: Fondsfinans Research, Bloomberg Farstad DOF Siem Solstad DeepSea Havila Eidesvik -14 % -7 % -12 % 4 % 12 % -31 % 12 % 16

17 Solid demand outlook for 2H12 and 2013 SPOT MARKET OVERVIEW THE DEMAND SIDE OF THE EQUATION Exploration drilling Solid pick-up in exploration drilling Exploration and production drilling Adding estimate for production and injection wells the picture improves further Source: Fondsfinans Research, NPD, ODS Petrodata Remember Subsea activity also peaks in 2H and generates additional OSV demand 17

18 UK still licking post financial crisis wounds but represent huge OSV demand potential SPOT MARKET OVERVIEW THE DEMAND SIDE OF THE EQUATION UK offshore drilling UK exploration drilling fell to a 8- year low of 49 wells in Was 105 wells in exploration and appraisal Wells expected in 2012 Development drilling stable YoY at 130 wells - Down from 170 in 2008 Source: Fondsfinans Research, UK Drilling Authority, Upstream online 18

19 Growth in rig fleet points to OSV demand growth SPOT MARKET OVERVIEW RIG SUPPLY NCS rig fleet The number of rigs drilling on NCS set to grow by 8 units during 2012 These will be used for drilling as soon as they arrive Provides high confidence to expectations of shift in demand for AHTS and PSV services Source: Fondsfinans Research, NPD, ODS Petrodata 19

20 Tight AHTS supply ahead Worrisome PSV backlog SUPPLY MARKET OVERVIEW OSV order book PSV orders at 39% of existing fleet AHTS orders 14% of existing fleet - Only 4 vessels seen coming into the North Sea basin PSV>4000dwt PSV<4000 dwt AHTS >20k BHP Source: Fondsfinans Research, Farstad Shipping, ODS Petrodata AHTS 12-20k BHP AHTS small Subsea On order PSV total AHTS total Existing fleet Orderbook in % 39 % 14 % 20

21 Main types of high-end OSVs SUPPLY MARKET OVERVIEW 21

22 Disclosures and risk factors Risk factors Risk assessment Volatile supply market Large order book Oil price setback Currency Cancelled contract for Joides Resolution Siem Offshore is exposed to the very volatile supply market. Historical dayrates have been significantly different from what is currently available. The order book for supply vessels is high and could prolong low dayrates if demand fails to meet our expectations. The supply market is dependent on the volatile oil price where oil companies can cut investment plans overnight if the oil price falls significantly. We believe the oil price will remain strong in the next few years and expect no further negative effect on activities unless the price falls below USD 80/barrel for a sustained period. Siem Offshore reports earnings in USD. Its operations are exposed to a number of currencies including NOK, GBP and EUR. Changes currency values may impact significantly on earnings and valuations. The contract for Joides Resolution has a cancellation clause (3 months notice) with a limited fee of USD 3m. The unit is expected to generate a net profit of USD 5-6m to Siem Offshore and a cancellation would reduce earnings. Share Sector Offshore Reuters SIOFF NO Risk High Outstan 395.8m Market $ 538m Net $ 761m Enterpri $ 1 299m Free 66.3% Averag 175 High/lo 11.0 / 7.7 Weight % Rel. -24/ -34/ -28 Abs. -18/ -28/ -09 Key disclosures Definitions of ratings Buy Low risk: with a potential of min 5%. Medium risk: with a potential of min 10%. High risk: with a potential of min 15%. Neutral Low risk: -5% to +5%. Medium risk: -10% to +10%. High risk: -15% to +15%. Sell Low risk: min 5%. Medium risk: min 10%. High risk: min 15%. Risk ratings are based on price volatility, fundamental criteria and perceived risk. Ratings are: Low (L), Medium (M) and High (H). Target: Our valuation as of today. Time frame of target: Target is what we value the share as of today. Recommendation distribution as of : Recommendation No Percent Recommendation No Percent Buy % Buy 3 9 % Neutral % Neutral 1 7 % Sell 2 4 % Sell 0 0 % Total % Total 4 Our intention is to issue preview and update research on a quarterly basis. Our investment recommendation is elaborated in accordance with The Norwegian Securities Dealers Associations standards. This report has not been sent to the company for correction of any factual errors. Fondsfinans is organized with Chinese walls between the Corporate Department and the Research/Broking Department. In addition, Fondsfinans has internal instructions and guidelines for handling sensitive information. The analyst receives compensation that is impacted by overall firm profitability, including investment banking activities. The analyst is partner in DIS Fondsfinans. Fondsfinans is under supervision of The Financial Supervisory Authority of Norway. The recommendation has not been changed. The previous recommendation was issued Ownership per in Siem Offshore: Analyst (including his/her closely related persons or companies): 0, corresponding to 0% of the company share capital Employees (including their respective closely related persons or companies): , corresponding to 0.22% of the company share capital Group Fondsfinans (including the holdings of its Chairman, his spouse and their closely related companies, Erik Must AS and its 100% controlled subsidiaries): , corresponding to 0.96% of the company share capital Fondsfinans may hold shares in Siem Offshore as a result of daily trading/market making. Information on such holdings is not given when of non-significant value. This report was issued and distributed Companies in each recommendation category that have been investment banking clients over the past 12 months: 22

23 Key figures 23 Siem Offshore Analyst: Petter Narvestad Tel Sector: Supply Price (NOK): 7.75 Shares outs. (incl. convertible): Date: 23.okt.12 Book equity per share (NOK): 10.7 Market cap (USDm): 538 Next result: 25.okt.12 Equity ratio: 41.4% Net int.-bearing debt: 761 Target 12.5 Enterprise Value (USDm): Recommendation BUY 12 month high/low (NOK): 11.0 / 7.7 Figures in USD E 2013E 3Q11 4Q11 1Q12 2Q12 3Q12E Operating revenues Operating expenses EBITDA Ordinary depreciation Gain on sale of assets Operating profit (EBIT) Assosiated companies Net interest expenses Currency gain/loss and other Pre tax & one-offs EOI Pre tax profit Minorities Taxes Reported profit/loss Adjustments Tax effect of adjustments Adjusted profit Cashflow adjusted Average dayrate assumptions in USD 1000 Medium PSVs Large PSVs AHTS Data per share No. of shares (average, diluted) 292.5m 377.4m 396.0m 396.0m 396.0m 396.0m 396.0m 396.0m 396.0m 396.0m Price Dividend EPS reported EPS adjusted CFPS adjusted P/E adjusted P/CF adjusted EV/EBIT EV/EBITDA P/BOOK Return on equity (adj.) 4.3 % 0.9 % 1.3 % 1.7 % 8.8 % Return on capital employed (adj 2.6 % 1.7 % 2.8 % 3.9 % 5.6 % Balance Sheet Data E 2013E 10 largest shareholders as of End 2Q12 Current assets Name Shares % Fixed assets Siem Industries Inc % Total assets Ace Crown Int. Ltd % Current liabilities MP Pensjon % Long-term liabilities Handelsbanken % Shareholders' equity Skagen Vekst % Ojada AS % Book equity per share Rovdefrakt AS % Equity ratio 52.9% 43.5% 39.5% 42.4% 41.9% Odin Offshore % Net interest bearing debt DnB SMB % Net. int.b.debt/equity Holberg Norge % Cashflow statement 10 largest % Cashflow from operations Other shareholders % Net change in working capital Total outstanding (not dil.) % Net investments Free cashflow

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