Ezra Holdings (Ezra) announced last week that a pipe-lay vessel (Lewek Centurion) of its subsea division has been contracted for some 60km of pipeline installation work. The new customer is Cecon, and Ezra sees this as a potential platform for both contractors to develop further joint project opportunities going forward. The subsea, umbilicals, risers and flowlines (SURF) market is currently in a growth phase, and a number of subsea units are expected to be incorporated in the coming years. Still, we expect time is required for large project awards to be dished out; this especially after uncertainty in the Eurozone has weighed on sentiment. As at mid Apr, Ezra’s subsea backlog stood at more than US$1.1b vs US$850m in end Nov 2012. Maintain HOLD with S$1.10 fair value estimate.
Pipeline installation work for Lewek Centurion
Ezra Holdings (Ezra) announced last week that a pipe-lay vessel (Lewek Centurion) of its subsea division, EMAS AMC, has been contracted for work in the North Sea for some 60km of pipeline installation work, which is scheduled for execution in Aug or Sep 2013. The new customer is Cecon, an independent subsea installation contractor. According to Cecon’s announcement, the pipe-lay works were originally planned to be performed by the DPLLV “Sampson”, but following delays on other contracts in Mexico, Cecon has since decided to perform the work using an alternative vessel. Though this is just a vessel charter for now, Ezra sees this as a potential platform for both contractors to develop further joint project opportunities going forward.
Opportunities in the SURF market and strategic positioning
The subsea, umbilicals, risers and flowlines (SURF) market is currently in a growth phase, and a number of subsea units are expected to be incorporated in new and existing grids in the coming years. The number of competitors is limited, although some of the main players, such as Subsea 7 and Technip, are major operators in the world wide pipe-laying segment. In order to compete, Ezra and other relatively smaller players have to rely on their cost base and flexibility to achieve shorter delivery times and gain a strong tendering position compared to the majors. Advanced documentation and engineering systems, along with the use of trusted subcontractors and a mix of chartered-in/own vessels should help achieve this.
Longer time for project awards
Still, we expect time is required for large project awards to be dished out; this especially after uncertainty in the Eurozone has weighed on sentiment. We would also continue monitoring Ezra’s construction vessel utilisation rates. As at mid Apr, Ezra’s subsea backlog stood at more than US$1.1b vs US$850m in end Nov 2012. Maintain HOLD with S$1.10 fair value estimate.
Ezra Holdings (Ezra) announced last week that a pipe-lay vessel (Lewek Centurion) of its subsea division, EMAS AMC, has been contracted for work in the North Sea for some 60km of pipeline installation work, which is scheduled for execution in Aug or Sep 2013. The new customer is Cecon, an independent subsea installation contractor. According to Cecon’s announcement, the pipe-lay works were originally planned to be performed by the DPLLV “Sampson”, but following delays on other contracts in Mexico, Cecon has since decided to perform the work using an alternative vessel. Though this is just a vessel charter for now, Ezra sees this as a potential platform for both contractors to develop further joint project opportunities going forward.
Opportunities in the SURF market and strategic positioning
The subsea, umbilicals, risers and flowlines (SURF) market is currently in a growth phase, and a number of subsea units are expected to be incorporated in new and existing grids in the coming years. The number of competitors is limited, although some of the main players, such as Subsea 7 and Technip, are major operators in the world wide pipe-laying segment. In order to compete, Ezra and other relatively smaller players have to rely on their cost base and flexibility to achieve shorter delivery times and gain a strong tendering position compared to the majors. Advanced documentation and engineering systems, along with the use of trusted subcontractors and a mix of chartered-in/own vessels should help achieve this.
Longer time for project awards
Still, we expect time is required for large project awards to be dished out; this especially after uncertainty in the Eurozone has weighed on sentiment. We would also continue monitoring Ezra’s construction vessel utilisation rates. As at mid Apr, Ezra’s subsea backlog stood at more than US$1.1b vs US$850m in end Nov 2012. Maintain HOLD with S$1.10 fair value estimate.
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