1. pets
2. large animals

Fred-Olsen Energy
SELL
Company update 21 May 2015
Results date 10 July 2015
Share data
Sector:
21/05/2015
Offshore
Reuters/Bloomberg
FOE.OL/FOE
Medium
Risk Rating
Outstanding shares
66
Market cap (USDm)
566
Net interest bearing debt (USDm)
1,277
Enterprise value (USDm)
1,843
48%
Free float
Average volume ('000)
354
High/low 52w
175 / 53
Weight OSEBX
0.22%
Rel. Perf 3/6/12
Abs. Perf. 3/6/12
-12 / -27 / -63
-6 / -20 / -59
Estimate changes
ESTIMATE
CHANGES
Revenues
EBITDA
Operating profit
Pre-tax profit
EPS, rep.
EPS, adj.
DPS
2015E
2016E
Change %
Curr. Prev. Curr. Prev. 2015 2016
1,103 1,188 1,100 1,255 -7 % -12 %
558
561
528
576 -1 %
-8 %
184
186
141
189 -1 % -25 %
153
135
83
132 13 % -37 %
2.16 1.94 1.18 1.89 12 % -37 %
1.72 1.94 1.18 1.89 -11 % -37 %
0.00 0.00 0.00 0.00
n.a
n.a.
Share price (NOK) & Valuation Scenarios
180
160
140
120
Value destruction!
Fred. Olsen Energy (FOE) has transitioned from creating good ROCE on its old
asset base into a phase of value destruction. While the rig market is vastly
oversupplied and scrapping is long overdue, FOE decided instead to spend USD
2.2bn (NOK 250/share) in capex during 2014 & 2015 by taking five of its old rigs
through the 5-year SPS (Special Periodic Survey) and on the delivery of the two
newbuilds. We believe several of the old rigs are at risk of being idle, which
would have a huge negative impact on the equity value of the company. In
addition, we believe the contract for the newbuild Bollsta Dolphin is at risk of
being re-negotiated or cancelled altogether if the rig is further delayed from the
yard. Combined, this could lead to the equity being wiped out altogether. We
therefore reiterate our SELL rating and lower our target price to NOK 25 (30).
With a wave of relatively new rigs rolling off contracts in the floater market, with most of
them having little hope of finding new work in the near term, there is even less hope for
the very old assets of FOE to find employment. Scrapping in our view may have been
the best alternative, but FOE is rather spending USD 800m (NOK 90/share) in capex on
five of its rigs in 2014 & 2015 with an average age of 35 years in order to make sure
they can continue to operate in a market where additional employment is hard to find.
In addition, FOE has/is taking delivery of two newbuilds during 2014 & 2015, with an
additional capex of USD 1.4bn (NOK 160/share). The newbuild Bollsta Dolphin,
scheduled for delivery in 3Q15, may be at risk of being further delayed on top of the six
months delay already announced. The rig has a 5-year contract with Chevron for use at
the Rosebank field, which has been delayed several times. The latest information
suggests that a decision with regards to the project is now postponed from end-15 to
end-16. If the rig is further delayed from yard, we believe Chevron may have a good
case for cancelling the contract altogether, or at least re-negotiate to a lower day-rate.
The combination of spending USD 800m on old rigs that may be idle and worthless
soon, and the risk of a possible cancellation/re-negotiation of the Bollsta Dolphin
contract, may potentially be lethal for FOE and wipe out the entire equity value. We
therefore reiterate our SELL rating and lower our target price to NOK 25 (30).
100
80
60
40
Base; 32
20
Bollsta; 10
0
May-14
Share Price: NOK 64
Target Price: NOK 25 (30)
Boll/Bred.; 0
Nov-14
May-15
Nov-15
May-16
Key figures (USDm)
Revenues
Håkon Johansen
Fondsfinans AS
TEL: +47 23 11 30 18
[email protected]
2015E
1,103
2016E
1,100
2017E
1,046
Q214
273
Q215E
305
EBITDA
585
516
558
528
397
107
150
343
187
184
141
37
19
58
PTP
330
191
153
83
-16
16
46
EPS, rep
4.52
1.77
2.16
1.18
-0.24
0.10
0.67
CFPS
Knut Erik Løvstad
Fondsfinans AS
TEL: +47 23 11 30 40
[email protected]
2014
1,184
EBIT
EPS, adj.
Prepared by analyst:
2013
1,194
Dividend per share
4.71
2.41
1.72
1.18
-0.24
0.10
0.67
-0.41
-0.65
-1.30
0.58
3.87
-2.52
-0.06
0.00
0.00
3.30
0.00
0.00
0.00
0.00
8.9 %
0.0 %
0.0 %
0.0 %
0.0 %
EV/EBITDA
73%
5.3
0%
4.0
0%
3.3
0%
3.5
0%
4.6
EV/EBIT
P/E
P/B
ROE
ROCE
NIBD/EBITDA
9.1
7.9
1.7
22%
17%
1.0
11.0
4.9
0.6
12%
8%
2.4
10.0
3.9
0.4
8%
6%
3.4
13.0
7.2
0.4
5%
4%
2.9
50.2
-35.0
0.4
-1%
1%
3.2
Dividend yield (%)
Payout ratio
Source: Fondsfinans Research, Fred-Olsen Energy
FONDSFINANS AS, HAAKON VII’S GATE 2, P.O. BOX 1782 VIKA, NO-0122 OSLO, TEL: +47 23 11 30 00, FAX: +47 23 11 30 03, [email protected]
This report was prepared by an analyst engaged by Fondsfinans AS, the Norwegian affiliate of Fondsfinans Inc., who is not registered as a research analyst with FINRA or subject to FINRA rules governing research.
See page 11 of this report for Important Disclosure Information.
Investment case: Value destruction
Several rigs at risk of
being idle...
Fred. Olsen Energy (FOE) has for some time created good ROCE on its old
asset base. Those days are gone. The backlog is rapidly coming to an end, and
new contracts are hard to secure in a fast deteriorating rig market. We would
therefore expect that several of the rigs would become idle as the current
contracts expire.
Based on today’s backlog, FOE will have four rigs without contracts by end-15,
with another four expiring during 2016. This means that eight out of eleven rigs
are at risk of being without employment by year-end 2016. And even if some
work can be secured, it will be at very different levels than current backlog.
..which will have a huge
negative impact...
..leading to risk of equity
being wiped out
We have therefore looked more closely at our sum-of-the-parts (SOTP)
valuation, which is based on discounted free cash flow for each of the rigs during
their expected lifetime. We have provided two additional scenarios to our base
case, which is illustrated in the graph below, and clearly shows the value
destruction that is taking place in FOE, caused by the deteriorating rig market
combined with the huge capex investments made by the company at the wrong
time in the cycle.
While our base case scenario assumes a NAV value of NOK 32/share, we fear
that there is a real chance that the equity value of FOE could be wiped out
altogether.
Share Price & Valuation Scenarios
Capex
180
Rig
Built
2014
Blackford
Bideford
1974
1975
210
110
1,575
825
24
13
2015
Borgland
Byford
Belford
1976
1973
2000
160
190
130
1,200
1,425
975
18
22
15
800
6,000
91
650
750
4,875
5,625
74
85
Sub-total
1,400
10,500
159
TOTAL
2,200
16,500
250
160
140
120
100
80
60
Sub-total
40
Base; 32
20
Bollsta; 10
0
May-14
Boll/Bred.; 0
Nov-14
May-15
Nov-15
May-16
Newbuilds
Bolette
Bollsta
2014
2015
SPS & Newbuild Capex
USDm
NOKm
NOK/share
Source: Fondsfinans Research, Bloomberg, Company Data
Scrapping is long
overdue and the rig mkt
is vastly oversupplied...
..but FOE decides to
spend NOK 250/share
in capex instead
SELL
Target NOK 25 (30)
Page 2
We expect a wave of relatively new rigs rolling off contracts to experience serious
challenges in obtaining work short-to-medium term, and therefore at risk of
becoming idle. FOE, with its fleet of very old assets, of which many were
originally built in the mid-1970s, there comes a time when scrapping is long
overdue, and that time is approaching relentlessly.
The company is resisting though, and has recently invested large amounts of
fresh capital into these old assets by taking them through 5-year Special Periodic
Surveys (SPS), as seen above, with total capex of USD 800m (NOK 90/share).
In addition, the company has/is investing USD 1.4bn (NOK 160/share) in two
newbuilds. This means that FOE has/will have capex of USD 2.2bn (NOK
250/share) during 2014 & 2015, while the value and future earnings potential of
these assets are highly uncertain. Those investment decisions should perhaps
have been avoided, given the rapid deterioration of the market we have seen
during the past 12 - 15 months.
We therefore reiterate our SELL rating and lower our target price to NOK 25 (30),
but we see a risk that the equity value could be wiped out completely.
21 May 2015
Fondsfinans Research
Fred-Olsen Energy - Company update
Valuation Scenarios & Assumptions
Quickly deteriorating
position
With dividends suspended, a rising debt burden, day-rates in free-fall, many rigs
at risk of becoming idle due to severe difficulties of finding additional
employment, the situation for FOE is deteriorating quickly.
Net int. bearing debt
approaching USD 2bn
All the capex related to the SPS and the newbuilds, has transformed the balance
sheet from having a conservative capital structure to becoming much more
leveraged. We expect the interest bearing debt to approach ~USD 2bn by yearend 2015.
Implied value too high
The implied value given today’s share price in FOE is ~USD 300m per rig
(assuming the cold stacked rig Borgny Dolphin and the accommodation rig
Borgholm Dolphin are valued at zero). If we further assume that the newbuilds
are worth USD 600m each (which probably is too high), the remaining old rigs of
FOE are still valued at more than USD 200m each.
We therefore believe the market’s implied value of FOE today is too high, and we
have therefore in the following highlighted a few scenarios.
Base case at NOK 32/share
Base case suggest half
today’s share price
Our base case value for FOE shows a value of NOK 32/share, which is only half
today’s share price. We therefore see significant downside risk in today’s share
price.
The details for the valuation are as follows:
Valuation (base case)
VALUATION
Built/
upgraded
Water
Depth
NPV
SOTP
NPV
Contract
Impl. Val.
2000
1975/99
1976/99
1977
1976
1973/98
1975/00
1974/08
1975/02
2014
2015
10,000ft
1,500ft
1,500ft
2,300ft
1,500ft
1,500ft
Ten.sup.
7,000ft
Flotel
12,000ft
10,000ft
82
176
278
0
126
153
119
172
2
587
636
2,331
14
112
204
0
29
75
31
145
12
198
372
1,191
131
209
314
0
131
183
183
209
52
601
601
2,613
-510
-260
-1,277
-510
-260
-1,277
-510
-260
-1,277
Net Asset Value
No shares
284
66
-856
66
566
66
NAV per share (USD)
NAV per share (NOK)
Current share price (NOK)
4.3
32
-12.9
-97
8.5
Belford Dolphin
Bideford Dolphin
Borgland Dolphin
Borgny Dolphin
Bredford Dolphin
Byford Dolphin
Borgsten Dolphin
Blackford Dolphin
Borgholm Dolphin
Bolette Dolphin
Bollsta Dolphin
Total Value of Fixed Assets
Newbuild CAPEX
SPS yard-stay CAPEX
Net interest bearing debt
64.0
Source: Fred. Olsen Energy, Fondsfinans Research
Fondsfinans Research
21 May 2015
Page 3
Base case assumptions
are not overly cautious
The assumptions behind the above SOTP valuation based on discounting the
NPV for each rig are as follows:
-
All current contracts are honored
-
2 – 3 quarters of idle time for rigs coming off contracts in 2015/2016, and
with full utilisation from 1Q17.
-
Day rates of USD 225 – 250,000 for rigs operating in Norway and ~USD
175,000/day for rigs outside of Norway without contracts from 2015 –
2017.
-
Day-rates are raised by ~25% from 2018 to come back to a more
normalised return for the remaining life-time of the units.
-
Discount rate of 9.5%.
-
All the old rigs have another 10 – year lifespan.
-
The idle unit Borgny and the accommodation unit Borgholm (which is
likely to be stacked) are assumed to have zero value.
Despite the base case suggesting a fair value at only half today’s share price, we
are concerned that our assumptions behind the base case might even be too
optimistic. We have therefore in the following highlighted the assumptions behind
the two scenarios illustrated in the graph above, yielding much lower valuations.
Bollsta Dolphin contract at risk which could wipe out most of equity value?
Further delay in delivery
of Bollsta...
We believe there is a risk that the newbuild rig Bollsta Dolphin, which is to be
delivered in 3Q15 might be further delayed. The delivery of the rig from Hyundai
Heavy Industries has already been delayed 6 months, and the management of
FOE did not seem overly confident at the 1Q15 presentation that the rig would be
delivered according to the current schedule in 3Q15.
The rig has a 5 – year contract with Chevron at a day-rate of USD 560,000/day.
Chevron is supposed to use the rig at the Rosebank field development northwest
of the Shetland Island, where they are the operator. However, the fate of the
project is not yet decided due to uncertainty with regards to the return on the
project. One of the license partners, OMV, recently stated that a decision with
regards to this project has now been further delayed from end-2015 to end-2016.
..might put Chevron
contract at risk..
It is therefore possible that Chevron would like to get out of this contract,
especially given the very high day-rate. If the rig is delivered in 3Q15, Chevron
might not have a very good case, but if the rig is further delayed by 3 – 6 months,
they may have an opening in their contract to cancel or at least re-negotiate the
day-rate.
Although FOE would have built in penalties related to delays from the yard in the
contract, we do not believe those penalties would compensate for the potential
loss/re-negotiation of the contract.
In order to account for this uncertainty, we have assumed that the day-rate is renegotiated to USD 400,000/day, which is still quite a generous day-rate given
that the latest fixtures in the market have been below USD 300,000/day.
...which would wipe out
much of the equity
value
Page 4
That assumption alone would wipe out another NOK 22/share, and the remaining
equity value of FOE would fall to NOK 10/share.
21 May 2015
Fondsfinans Research
Fred-Olsen Energy - Company update
Bredford Dolphin idle as well?
With Bredford being
stacked as well...
In addition to the re-negotiation of the Bollsta Dolphin contract, we further believe
that the rig Bredford Dolphin will be stacked when the current contract expires at
the end of 3Q15 (which management confirmed if it does not obtain work).
If that happens it may never return to the market, meaning the value is less than
the current NPV of the backlog as FOE also will use part of that value in stacking
costs in the hope that it will find employment in the future.
..the equity value is
vaporised completely
If we add that assumption as well, the equity value of FOE would be wiped out
completely.
We certainly believe there is a high risk that these occurrences could happen.
Norway - Demand for 2015 & 2016
Norway - Supply for 2015 & 2016
2
1
Tender; 2
Probable;
1
Firm
Potential
Rig name
West Navigator
Transocean Barents
Transocean Spitsbergen
West Venture
Transocean Searcher
Deepsea Atlantic
Borgland Dolphin
Bredford Dolphin
Transocean Barents
Island Innovator
Transocean Arctic
Songa Trym
Leiv Eiriksson
Transocean Winner
COSLPioneer
Songa Delta
Songa Dee
Dayrates
(USDk)
562
509
441
368
561
525
442
562
387
355
545
425
420
374
340
Rig
2015
2016
type
2Q 3Q 4Q 1Q 2Q 3Q 4Q
Drillship 0 0 0 0 0 0 0
Semi-sub 1 10 0 0 0 0 0
Semi-sub 1 10 0 0 0 0 0
Semi-sub 1 1 0 0 0 0 0
Semi-sub 1 1 0 0 0 0 0
Semi-sub 1 1 0 0 0 0 0
Semi-sub 1 1 10 10 10 10 10
Semi-sub 1 1 0 0 0 0 0
Semi-sub 1 1 0 0 0 0 0
Semi-sub 1 1 1 10 10 10 10
Semi-sub 1 1 1 1 0 0 0
Semi-sub 1 1 1 1 10 10 10
Semi-sub 1 1 1 1 10 10 10
Semi-sub 1 1 1 1 1 1 0
Semi-sub 1 1 1 1 1 1 0
Semi-sub 1 1 1 1 1 1 10
Semi-sub 1 1 1 1 1 1 1
Source: Fondsfinans Research, IHS Petrodata
UK - Demand for 2015 & 2016
UK - Supply for 2015 & 2016
8
Possible; 2
4
Pretender; 4
Firm
Probable;
6
Potential
Rig name
Ocean Princess
Ocean Guardian
Transocean Prospect
West Phoenix
Sedco 714
Ocean Valiant
WilHunter
Stena Spey
Paragon MSS1
Byford Dolphin
Sedco 711
Transocean John Shaw
Ocean Valiant
Sedco 714
Sedco 704
WilHunter
Byford Dolphin
Stena Spey
Sedco 712
Dayrates
(USDk)
350
464
430
385
275
346
361
414
Private
430
362
385
346
397
2015
Rig
type
2Q 3Q 4Q
Semi-sub 0 0 0
Semi-sub 1 1 0
Semi-sub 1 1 0
Semi-sub 1 1 0
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
Semi-sub 1 1 1
2016
1Q 2Q 3Q 4Q
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
10 0 0 0
10 0 0 0
0 0 0 0
10 10 10 10
0 0 0 0
10 10 10 10
1 0 0 0
1 0 0 0
1 0 0 0
1 0 0 0
1 0 0 0
1 1 0 0
1 1 1 10
1 1 1 10
1 1 1 1
Source: Fondsfinans Research, IHS Petrodata
Fondsfinans Research
21 May 2015
Page 5
Backlog Drilling
RIG
2015
2016
2017
2018
2019
2020
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Norway
Bideford Dolphin
Statoil @ USD 441k per day
Borgland Dolphin
Consortium @ USD 488k per day
Bredford Dolphin
Consortium @ USD 411k per day
UK
Byford Dolphin
BP @ USD 345.5k per day
Borgsten Dolphin (tender support)
Total @ USD 202k per day
Borgholm Dolphin (flotel)
BG @ USD 240k per day
Bollsta Dolphin
Chevron @ USD 560k per day
Borgny Dolphin
Idle @ USD 0k per day
Blackford Dolphin
Nexen @ USD 428k per day
Africa
Belford Dolphin
Anadarko @ USD 495k per day
Bolette Dolphin
Anadarko @ USD 488k per day
On contract
Option
Free
SPS / Yard stay
Construction
NAV- and NPV based valuation
VALUATION
We find limited support
from earnings to back
up asset values
Built/
upgraded
Water
Depth
NPV
SOTP
NPV
Contract
Impl. Val.
2000
1975/99
1976/99
1977
1976
1973/98
1975/00
1974/08
1975/02
2014
2015
10,000ft
1,500ft
1,500ft
2,300ft
1,500ft
1,500ft
Ten.sup.
7,000ft
Flotel
12,000ft
10,000ft
82
176
278
0
126
153
119
172
2
587
636
2,331
14
112
204
0
29
75
31
145
12
198
372
1,191
131
209
314
0
131
183
183
209
52
601
601
2,613
-510
-260
-1,277
-510
-260
-1,277
-510
-260
-1,277
Net Asset Value
No shares
284
66
-856
66
566
66
NAV per share (USD)
NAV per share (NOK)
Current share price (NOK)
4.3
32
-12.9
-97
8.5
Belford Dolphin
Bideford Dolphin
Borgland Dolphin
Borgny Dolphin
Bredford Dolphin
Byford Dolphin
Borgsten Dolphin
Blackford Dolphin
Borgholm Dolphin
Bolette Dolphin
Bollsta Dolphin
Total Value of Fixed Assets
Newbuild CAPEX
SPS yard-stay CAPEX
Net interest bearing debt
64.0
Source: Fondsfinans Research, Fred-Olsen Energy
Page 6
21 May 2015
Fondsfinans Research
Fred-Olsen Energy - Company update
Credit Information
Credit Metrics
Credit Metrics (x)
Gross debt / EBITDA 12m
Net debt / EBITDA 12m
EBITDA / Net Interest expense
EBIT / Net Interest expense
Debt / Equity
Equity / Total Assets
Net debt / Market Cap.
Market Cap. / EV
Current ratio
Quick Ratio
2012
1.48
1.06
17.75
10.85
1.09
0.48
0.26
0.79
0.87
0.74
2013
1.36
0.98
15.59
9.13
1.13
0.47
0.23
0.81
0.65
0.53
2014
2.82
2.43
10.28
3.72
1.65
0.38
1.60
0.38
0.79
0.62
2015E
3.62
3.41
10.74
3.54
1.73
0.37
3.36
0.23
0.69
0.55
2016E
3.20
2.91
8.90
2.38
1.44
0.41
2.72
0.27
0.79
0.65
Q214
3.00
2.54
11.08
4.99
1.74
0.37
0.11
0.90
0.74
0.59
Q314
3.16
2.80
10.14
2.78
1.73
0.37
0.14
0.88
0.89
0.70
Q414
2.82
2.43
10.28
2.87
1.65
0.38
0.23
0.81
0.79
0.62
Q115
2.50
2.23
11.27
3.37
1.55
0.39
0.29
0.77
0.63
0.48
Q215E
2.61
2.37
12.98
4.43
1.54
0.39
0.34
0.74
0.73
0.58
Debt overview
Type
Crncy
Princ.
Outst.
amount
amount
Maturity Covenants
Group debt
FOE04 NOK1,400m SR Unsecured Bond
USD
181
181
May-16
Yes
FOE05 NOK 1,100m SR Unsecured Bond
USD
142
142
Feb-19
Yes
"New" credit facility USD 2Bn
USD
2,000
1,133
~Jul-20
Total Debt
USD
2,323
1,455
Covenants
Covenants*
Free cash
Interest coverage ratio
Leverage
Requirement
≥ USD 30m
> 2.5
< 4.5
Description
USD 65m for bank loans and USD 30m for bonds
EBIT / Interest expense (12m rolling)
NIBD / EBITDA (12m rolling)
Free cash ≥ USD 30m
Interest coverage ratio ˃2.5
500
10.0
400
8.0
300
6.0
200
4.0
100
2.0
0.0
0
Q213
Q114
Q414
Q315E
Q213
Q216E
Leverage < 4.5
Q114
Q414
Q315E
Q216E
Equity Ratio
5.0
60%
4.0
50%
40%
3.0
30%
2.0
20%
1.0
10%
0.0
Q213
Q114
Fondsfinans Research
Q414
Q315E
Q216E
0%
Q213
21 May 2015
Q114
Q414
Q315E
Q216E
Page 7
Financials
Income Statement
2013
2014
2015E
2016E
2017E
Q413
Q114
Q214
Q314
Q414
Q115
Q215E
Q315E
Q415E
Q116E
Q216E
Figures in USDm
1,149
1,112
1,042
1,034
984
288
259
257
310
286
272
287
256
227
257
260
Reimbursables
Operating revenues
46
72
61
66
62
10
19
17
25
11
12
18
16
15
16
16
Other revenues
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Total revenues
1,194
1,184
1,103
1,100
1,046
298
278
273
335
298
284
305
272
242
273
276
-566
-597
-485
-507
-588
-172
-158
-151
-160
-130
-115
-138
-125
-108
-115
-123
-44
-71
-60
-65
-61
-9
-18
-16
-25
-11
-12
-18
-16
-14
-16
-16
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-609
-668
-545
-571
-650
-181
-176
-167
-185
-141
-127
-155
-141
-122
-131
-139
Opex
Reimbursables
Other opex
Total OPEX (ex. DA)
EBITDA
Depreciations and amortization
Impairment
Operating profit
Interest income
585
516
558
528
397
117
102
107
151
157
157
150
131
120
142
137
-242
-329
-374
-387
-360
-60
-63
-88
-92
-87
-91
-92
-92
-99
-99
-99
0
0
0
0
0
0
0
0
-43
0
0
0
0
0
0
0
343
187
184
141
37
57
39
19
15
71
66
58
39
21
43
38
2
3
1
1
2
1
1
1
1
0
0
0
0
0
0
0
-38
-50
-52
-59
-54
-9
-11
-15
-12
-12
-12
-11
-13
-16
-16
-15
22
52
20
0
0
4
-5
11
0
46
20
0
0
0
0
0
Net finance
-13
5
-31
-59
-53
-5
-15
-3
-12
34
9
-11
-13
-16
-16
-15
Pre-tax profit
330
191
153
83
-16
52
25
16
4
104
75
46
26
5
27
23
Taxes
-6
-1
-9
-11
-9
-5
-2
-1
0
-1
-1
Interest expenses
Other
-18
-30
-8
-3
1
Minorities
1
-1
-1
-1
-1
1
0
0
0
0
0
0
0
0
0
0
Discontinued operations
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
312
160
143
79
-16
46
23
7
-8
96
70
44
25
4
25
22
2013
2014
2015E
2016E
2017E
Q413
Q114
Q214
Q314
Q414
Q115
Q215E
Q315E
Q415E
Q116E
Q216E
103
190
32
222
546
115
177
27
203
522
73
154
29
117
373
79
179
29
155
443
79
178
29
412
699
103
190
32
222
546
109
179
38
399
724
110
164
36
226
535
113
211
37
175
535
115
177
27
203
522
120
182
29
152
484
92
194
29
149
464
82
173
29
52
336
73
154
29
117
373
82
174
29
110
396
83
188
29
113
413
Rigs, machinery and equipment
Goodwill
Other LT assets
Total non-current assets
2,476
16
27
2,519
2,902
13
31
2,946
3,543
12
31
3,586
3,244
12
31
3,287
2,972
12
31
3,015
2,476
16
27
2,519
2,596
17
27
2,640
2,823
16
27
2,866
2,796
15
28
2,839
2,902
13
31
2,946
2,990
12
31
3,033
3,100
12
31
3,143
3,620
12
31
3,663
3,543
12
31
3,586
3,466
12
31
3,509
3,389
12
31
3,432
Total assets
3,066
3,469
3,959
3,729
3,714
3,066
3,364
3,401
3,374
3,469
3,516
3,607
3,999
3,959
3,905
3,845
Equity and debt:
Shareholders' equity
Non-controlling interests (Minorities)
Total equity
1,437
0
1,437
1,308
0
1,308
1,450
1
1,451
1,529
2
1,530
1,513
2
1,515
1,437
0
1,437
1,460
0
1,460
1,242
0
1,243
1,234
1
1,234
1,308
0
1,308
1,377
0
1,377
1,421
0
1,421
1,446
1
1,446
1,450
1
1,451
1,476
1
1,477
1,497
1
1,498
Short term interest bearing libilities
Other current liabilities
Total current liabilities
131
711
842
96
566
662
191
354
544
191
371
562
191
371
562
131
711
842
176
406
582
176
548
725
96
504
599
96
566
662
191
575
766
191
446
637
191
398
589
191
354
544
191
393
584
191
398
589
Long-term interest bearing debt
Other non-current liabilities
Total non-current liabilities
662
125
787
1,360
139
1,499
1,829
135
1,964
1,502
135
1,637
1,502
135
1,637
662
125
787
1,191
131
1,322
1,300
134
1,434
1,410
131
1,541
1,360
139
1,499
1,239
135
1,374
1,414
135
1,549
1,829
135
1,964
1,829
135
1,964
1,709
135
1,844
1,622
135
1,757
3,066
3,469
3,959
3,729
3,714
3,066
3,364
3,401
3,374
3,469
3,516
3,607
3,999
3,959
3,905
3,845
2013
2014
2015E
2016E
2017E
Q413
Q114
Q214
Q314
Q414
Q115
Q215E
Q315E
Q415E
Q116E
Q216E
299
242
-60
16
497
118
372
85
-205
370
144
374
-247
48
319
79
387
-14
0
453
-15
360
0
0
345
46
60
-13
45
137
24
63
5
11
102
7
88
41
-17
118
-8
135
14
-126
15
96
87
26
-73
135
70
91
-100
48
108
45
92
-113
0
23
25
92
-17
0
100
5
99
-16
0
88
26
99
11
0
135
22
99
-10
0
111
Rig capex
Rigs sold
Other investments
CF from investments
-212
1
0
-211
-941
0
0
-941
-995
2
0
-993
-88
0
0
-88
-88
0
0
-88
-63
1
0
-62
-495
0
0
-495
-181
0
0
-181
-134
0
0
-134
-131
0
0
-131
-159
2
0
-157
-202
0
0
-202
-612
0
0
-612
-22
0
0
-22
-22
0
0
-22
-22
0
0
-22
Debt raised
Debt repayed
Issuance of equity
Dividend paid
Other
CF from financing
115
-191
0
-226
0
-302
1,934
-1,183
0
-223
0
528
685
-95
0
0
0
590
100
-427
0
0
0
-327
0
0
0
0
0
0
0
-50
0
0
0
-50
632
-63
0
0
0
569
152
-32
0
-223
0
-102
1,150
-1,089
0
0
0
61
0
0
0
0
0
0
0
0
0
0
0
0
175
0
0
0
0
175
510
-95
0
0
0
415
0
0
0
0
0
0
0
-120
0
0
0
-120
100
-187
0
0
0
-87
Net profit
Balance Sheet
Assets:
Inventories
Account receivables
Other current assets
Cash and short-term deposits
Total current assets
Equity and liabilities
Cash Flow
Cash earnings
Depreciation & amortization
∆ Working capital
Other items
CF from operations
Currency effects on cash
-11
-1
-2
0
0
-7
0
-1
0
0
-2
0
0
0
0
0
Net cash flow
-27
-43
-86
38
257
17
177
-167
-58
5
-51
-4
-97
66
-7
2
Source: Fondsfinans Research, Fred-Olsen Energy
Page 8
21 May 2015
Fondsfinans Research
Fred-Olsen Energy - Company update
Segments
REVENUES PER SEGMENT
Offshore Drilling
Engineering & Fabrication
Eliminations
Total revenues
2013
1,153
51
-9
1,194
2014
1,158
92
-66
1,184
2015E
1,082
55
-34
1,103
2016E
1,077
23
0
1,100
2017E
1,022
24
0
1,046
Q413
281
25
-8
298
Q114
267
48
-38
278
Q214
266
24
-16
273
Q314
331
14
-9
335
Q414
295
6
-3
298
Q115
280
38
-34
284
Q215E
296
9
0
305
Q315E
267
5
0
272
Q415E
238
3
0
242
Q116E
269
4
0
273
Q216E
266
9
0
276
OPEX PER SEGMENT*
Offshore Drilling
Engineering & Fabrication
Eliminations
Total opex
2013
-560
-58
9
-609
2014
-638
-77
47
-668
2015E
-527
-51
32
-545
2016E
-550
-21
0
-571
2017E
-627
-22
0
-650
Q413
-158
-31
8
-181
Q114
-163
-44
32
-176
Q214
-157
-19
9
-167
Q314
-178
-10
3
-185
Q414
-139
-4
3
-141
Q115
-124
-35
32
-127
Q215E
-148
-8
0
-155
Q315E
-137
-4
0
-141
Q415E
-119
-3
0
-122
Q116E
-127
-4
0
-131
Q216E
-130
-9
0
-139
*Operating expenses excluding depreciation and amortization
EBITDA PER SEGMENT
Offshore Drilling
Engineering & Fabrication
Eliminations
Total EBITDA
2013
592
-7
0
585
2014
521
15
-19
516
2015E
556
4
-1
558
2016E
527
2
0
528
2017E
395
2
0
397
Q413
123
-6
0
117
Q114
104
4
-6
102
Q214
108
5
-7
107
Q314
153
4
-6
151
Q414
156
2
0
157
Q115
156
2
-1
157
Q215E
149
1
0
150
Q315E
131
0
0
131
Q415E
120
0
0
120
Q116E
141
0
0
142
Q216E
136
1
0
137
EBITDA PER RIG
Belford Dolphin
Bideford Dolphin
Borgland Dolphin
Borgny Dolphin
Bredford Dolphin
Byford Dolphin
Borgsten Dolphin
Bolette Dolphin
Blackford Dolphin
Borgholm Dolphin
Bollsta Dolphin
EBITDA rigs
Net reimbursables
EBITDA (Offshore Drilling)
2013
110
70
119
43
66
86
33
-31
16
35
0
548
2
550
2014
89
52
69
-4
77
63
40
59
31
36
-3
509
1
511
2015E
44
81
79
-5
51
33
40
89
103
28
-18
525
1
526
2016E
-3
82
99
-6
3
56
8
87
102
-2
98
526
1
527
2017E
10
10
93
-6
18
19
29
85
13
-2
125
394
1
395
Q413
27
17
30
11
21
22
10
-13
-24
16
0
117
1
118
Q114
22
22
27
11
19
0
10
-14
-10
10
0
96
1
97
Q214
22
1
27
-3
20
21
10
24
-11
2
0
114
0
114
Q314
22
7
26
-11
20
21
10
26
26
9
0
158
0
158
Q414
22
21
-11
-1
18
21
10
22
26
15
-3
141
0
141
Q115
22
19
4
-1
18
-4
10
22
25
14
-3
127
0
127
Q215E
22
20
24
-1
18
-4
10
22
26
15
-3
149
0
149
Q315E
-7
20
25
-1
18
21
10
22
26
0
-3
130
0
131
Q415E
6
22
25
-1
-3
21
10
22
26
0
-9
119
0
120
Q116E
18
20
25
-1
-3
21
10
22
25
0
5
141
0
141
Q216E
-7
20
24
-1
-3
21
4
22
25
0
31
136
0
136
AVG DAYRATES ($'000)
Belford Dolphin
Bideford Dolphin
Borgland Dolphin
Borgny Dolphin
Bredford Dolphin
Byford Dolphin
Borgsten Dolphin
Bolette Dolphin
Blackford Dolphin
Borgholm Dolphin
Bollsta Dolphin
Average dayrates
2013
480
387
533
244
385
340
202
0
270
229
0
341
2014
489
459
509
123
427
346
202
366
436
242
0
360
2015E
441
440
490
0
308
346
202
488
428
120
140
340
2016E
242
446
498
0
124
300
183
488
428
0
560
363
2017E
237
246
505
0
259
172
172
488
172
0
560
312
Q413
480
383
528
247
434
346
202
0
0
242
0
358
Q114
489
463
522
247
433
346
202
0
419
242
0
374
Q214
489
466
518
247
436
346
202
488
467
242
0
390
Q314
489
459
506
0
429
346
202
488
428
242
0
399
Q414
489
448
488
0
411
346
202
488
428
240
0
393
Q115
489
432
488
0
411
346
202
488
428
240
0
391
Q215E
489
436
488
0
411
346
202
488
428
240
0
392
Q315E
496
436
488
0
411
346
202
488
428
0
0
412
Q415E
288
455
496
0
0
346
202
488
428
0
560
408
Q116E
288
438
496
0
0
346
202
488
428
0
560
406
Q216E
227
443
496
0
0
346
202
488
428
0
560
399
AVG OPEX PER DAY ($'000)
Belford Dolphin
Bideford Dolphin
Borgland Dolphin
Borgny Dolphin
Bredford Dolphin
Byford Dolphin
Borgsten Dolphin
Bolette Dolphin
Blackford Dolphin
Borgholm Dolphin
Bollsta Dolphin
Total
2013
154
175
180
114
184
87
80
84
185
51
0
129
2014
220
195
195
90
195
97
81
189
119
55
8
131
2015E
166
195
195
15
154
100
81
220
120
30
49
120
2016E
75
200
200
15
108
102
82
226
123
5
191
121
2017E
195
197
206
16
195
103
83
231
126
5
194
141
Q413
158
175
180
118
188
91
80
140
260
55
0
145
Q114
220
195
195
115
195
86
81
160
115
55
0
142
Q214
220
195
195
115
195
100
81
195
120
55
0
147
Q314
220
195
195
115
195
100
81
180
120
55
0
146
Q414
220
195
195
15
195
100
81
220
120
55
30
130
Q115
220
195
195
15
195
100
81
220
120
55
30
130
Q215E
220
195
195
15
195
100
81
220
120
55
30
130
Q315E
150
195
195
15
195
100
81
220
120
5
35
119
Q415E
75
195
195
15
30
100
81
220
120
5
100
103
Q116E
75
200
200
15
30
102
82
226
123
5
165
111
Q216E
75
200
200
15
30
102
82
226
123
5
200
114
AVERAGE UTILIZATION (%)
Belford Dolphin
Bideford Dolphin
Borgland Dolphin
Borgny Dolphin
Bredford Dolphin
Byford Dolphin
Borgsten Dolphin
Bolette Dolphin
Blackford Dolphin
Borgholm Dolphin
Bollsta Dolphin
Total
2013
95%
95%
95%
95%
95%
95%
84%
0%
64%
62%
0%
87%
2014
95%
74%
75%
32%
95%
78%
95%
71%
47%
64%
0%
73%
2015E
64%
95%
84%
0%
71%
55%
95%
95%
94%
45%
0%
78%
2016E
24%
95%
94%
0%
47%
78%
55%
95%
94%
0%
82%
74%
2017E
94%
91%
91%
0%
94%
90%
94%
95%
94%
0%
96%
93%
Q413
95%
95%
95%
95%
95%
95%
95%
0%
0%
95%
0%
95%
Q114
95%
95%
95%
95%
95%
25%
95%
0%
0%
67%
0%
83%
Q214
95%
45%
95%
33%
95%
95%
95%
95%
0%
33%
0%
76%
Q314
95%
60%
95%
0%
95%
95%
95%
95%
94%
65%
0%
88%
Q414
95%
95%
15%
0%
95%
95%
95%
95%
95%
90%
0%
86%
Q115
95%
95%
50%
0%
95%
15%
95%
95%
94%
90%
0%
80%
Q215E
95%
95%
95%
0%
95%
15%
95%
95%
94%
90%
0%
85%
Q315E
15%
95%
95%
0%
95%
95%
95%
95%
94%
0%
0%
85%
Q415E
50%
95%
95%
0%
0%
95%
95%
95%
94%
0%
0%
88%
Q116E
95%
95%
95%
0%
0%
95%
95%
95%
94%
0%
40%
88%
Q216E
0%
95%
94%
0%
0%
95%
65%
95%
94%
0%
96%
91%
Source: Fondsfinans Research, Fred-Olsen Energy
Fondsfinans Research
21 May 2015
Page 9
Analyst: Knut Erik Løvstad, Tel. + 47 23 11 30 40
Håkon Johansen, Tel. + 47 23 11 30 18
Fred.Olsen Energy
Date:
Next result:
Recommendation:
Target (NOK):
Target (USD)
Price (NOK):
Price (USD):
Book equity per share:
Equity ratio:
12 month high/low:
21 May 2015
SELL
25
3.3
64.00
8.53
21
39%
175 / 53
Sector:
Shares outstanding:
Market cap (USDm):
Net int.-bearing debt (USDm):
Enterprise value (USDm):
Offshore
66.3
566
1,277
1,843
Income statement (USDm)
2012
2013
2014
2015E
2016E
2017E
Q214
Q314
Q414
Q115
Q215E
Contract revenues
Other revenues
Total revenues
1,140
41
1,181
1,149
46
1,194
1,112
72
1,184
1,042
61
1,103
1,034
66
1,100
984
62
1,046
257
17
273
310
25
335
286
11
298
272
12
284
287
18
305
Operating expenses
EBITDA
-583
598
-609
585
-668
516
-545
558
-571
528
-650
397
-167
107
-185
151
-141
157
-127
157
-155
150
Depreciation & Amortization
Operating profit
-233
366
-242
343
-329
187
-374
184
-387
141
-360
37
-88
19
-92
15
-87
71
-91
66
-92
58
Net financial items
Pre-tax profit
-48
318
-13
330
5
191
-31
153
-59
83
-53
-16
-3
16
-12
4
34
104
9
75
-11
46
Taxes
Minorities
Discontinued operations
Net profit (reported)
-14
0
0
303
-18
1
0
312
-30
-1
0
160
-8
-1
0
143
-3
-1
0
79
1
-1
0
-16
-9
0
0
7
-11
0
0
-8
-9
0
0
96
-5
0
0
70
-2
0
0
44
2012
2013
2014
2015E
2016E
2017E
Q214
Q314
Q414
Q115
Q215E
480
396
531
242
361
326
222
489
459
509
123
427
346
202
366
436
242
365
441
440
490
0
308
346
202
488
428
120
371
242
446
498
0
124
300
183
488
428
0
299
237
246
505
489
466
518
247
436
346
202
488
467
242
386
489
459
506
489
448
488
489
432
488
489
436
488
353
204
365
480
387
533
244
385
340
202
0
361
229
367
429
346
202
488
428
242
405
411
346
202
488
428
240
397
411
346
202
488
428
240
395
411
346
202
488
428
240
395
96%
94%
96%
95%
88%
96%
62%
95%
95%
95%
95%
95%
95%
84%
64%
95%
84%
24%
95%
94%
94%
91%
91%
95%
60%
95%
95%
95%
15%
95%
95%
50%
95%
95%
95%
64%
62%
93%
71%
55%
95%
95%
94%
45%
77%
47%
78%
55%
95%
94%
94%
90%
94%
95%
94%
95%
45%
95%
33%
95%
95%
95%
95%
94%
90%
89%
95%
74%
75%
32%
95%
78%
95%
71%
47%
64%
78%
65%
92%
33%
79%
95%
95%
95%
95%
94%
65%
89%
95%
95%
95%
95%
95%
90%
82%
95%
15%
95%
95%
94%
90%
74%
95%
15%
95%
95%
94%
90%
82%
2012
66.3
211.3
2013
66.3
225.4
2014
66.3
81.2
2015E
66.3
64.0
2016E
66.3
64.0
2017E
66.3
64.0
Q214
66.3
170.4
Q314
66.3
143.6
Q414
66.3
81.2
Q115
66.3
65.4
Q215E
66.3
64.0
EPS reported
EPS adjusted
Op. CF - net capex per share
CFPS
4.70
4.58
0.00
0.00
4.52
4.71
4.30
-0.41
1.77
2.41
-8.61
-0.65
2.16
1.72
-10.19
-1.30
1.18
1.18
5.50
0.58
-0.24
-0.24
3.87
3.87
0.10
0.10
-0.96
-2.52
-0.12
-0.12
-1.80
-0.87
1.44
1.44
0.07
0.07
1.05
0.61
-0.76
-0.77
0.67
0.67
-2.70
-0.06
EV/EBITDA
EV/EBIT
P/E, rep.
P/E, adj.
P/B
ROE
ROCE
5.2
8.5
8.1
8.1
1.8
44%
37%
5.3
9.1
7.9
7.9
1.7
22%
17%
4.0
11.0
4.9
4.9
0.6
12%
8%
3.3
10.0
3.9
5.0
0.4
8%
6%
3.5
13.0
7.2
7.2
0.4
5%
4%
4.6
50.2
-35.0
-35.0
0.4
-1%
1%
Sensitivity EPS, adj.
2016E
2017E
BASE ESTIMATE
+ 5% Revenue growth
+ 1% EBITDA margin
1.18
0.29
0.11
-0.24
0.22
0.11
2012
2,325
534
2,859
1,366
878
614
2013
2,519
546
3,066
1,437
787
842
2014
2,946
522
3,469
1,308
1,499
662
2015E
3,586
373
3,959
1,450
1,964
544
2016E
3,287
443
3,729
1,529
1,637
562
2017E
3,015
699
3,714
1,513
1,637
562
Book equity / share
Equity ratio
Net interest bearing debt
Net int. bear. debt / EBITDA
20.6
47.8 %
636
1.1
21.7
46.9 %
571
1.0
19.7
37.7 %
1,252
2.4
21.9
36.7 %
1,902
3.4
23.1
41.0 %
1,537
2.9
22.8
40.8 %
1,281
3.2
Cash flow statement
Cash flow from operations
Cash flow from investments
Cash flow from financing
Free cash flow
2012
0
0
0
0
2013
497
-211
-302
-27
2014
370
-941
528
-43
2015E
319
-993
590
-86
2016E
453
-88
-327
38
2017E
345
-88
0
257
Segment information
Contracted Day Rates
Belford Dolphin
Bideford Dolphin
Borgland Dolphin
Borgny Dolphin
Bredford Dolphin
Byford Dolphin
Borgsten Dolphin
Bolette Dolphin
Blackford Dolphin
Borgholm Dolphin
Average dayrates
Utilization rates (%)
Belford Dolphin
Bideford Dolphin
Borgland Dolphin
Borgny Dolphin
Bredford Dolphin
Byford Dolphin
Borgsten Dolphin
Bolette Dolphin
Blackford Dolphin
Borgholm Dolphin
Average utilization
Key figures and valuation
No. of shares, avg m
Price (NOK)
Balance Sheet Data
Non-current assets
Current assets
Total assets
Equity
Non-current liabilities
Current liabilities
Page 10
21 May 2015
259
172
172
488
172
0
265
2015-05-18
10 largest shareholders
Name
No. shares
%
17.314
26.1 %
Bonheur Asa
Ganger Rolf Asa
17.314
26.1 %
2.170
3.3 %
Clearstream Banking S.A.
Folketrygdfondet
2.447
3.7 %
Euroclear Bank S.A./N.V. ('Ba')
1.474
2.2 %
Schroder International Selec Tion
1.159
1.7 %
J.P. Morgan Chase Bank N.A. Londo
1.060
1.6 %
Bnp Paribas Sec. Services S.C.A
0.929
1.4 %
Nordnet Bank Ab
0.913
1.4 %
J.P. Morgan Chase Bank N.A. Londo
0.857
1.3 %
45.637
68.8 %
Total 10 largest
20.663
31.2 %
Others
Total
66.300
100.0 %
Fondsfinans Research
Definitions of ratings
Buy
Neutral
Low risk: with a potential of min 5%. Medium risk: with a potential of min 10%. High risk: with a
potential of min 20%.
Low risk: -5% to +5%. Medium risk: -10% to +10%. High risk: -20% to + 20%.
Sell
Low risk: min -5%. Medium risk: min -10%. High risk: min -20%.
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 20.05.15:
Companies in each recommendation category that have been
investment banking clients over the past 12 months:
Recommendation
Buy
Neutral
Sell
Total
Recommendation
Buy
Neutral
Sell
Total
No
40
10
13
63
Percent
63 %
16 %
21 %
100 %
No
1
1
0
2
Percent
3%
10 %
0%
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 companies 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.
Fondsfinans is under supervision of The Financial Supervisory Authority of Norway.
The recommendation has not been changed from SELL. The previous recommendation was issued 06.05.15
Ownership per 05.05.15 in Fred-Olsen Energy ASA:
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):
0, corresponding to 0% 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):
0, corresponding to 0% of the company share capital.
Fondsfinans may hold shares in Fred-Olsen Energy ASA as a result of daily trading/market making. Information on such holdings is not
given when of non-significant value.
Fondsfinans does not act as market maker in Fred-Olsen Energy ASA.
Fondsfinans has not acted as corporate adviser, lead manager in IPO etc. during the past 12 months.
This report was issued and distributed 21.05.15.
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