Last week, STX OSV announced that it has secured two contracts worth a total of NOK1.2bn (USD200m). As these contracts already form part of our total contract win projections for FY12F (NOK13bn), we are not making changes to our forward estimates. Of noteworthy was the contract win for an Offshore Subsea Construction Vessel for DOF, which features an innovative moon pool design developed by STX OSV. We think this is further testament to the group’s ability to stay ahead of the curve for product development and garner customers’ orders. Meanwhile, we are optimistic on the OSV market given the improving industry fundamentals. Maintain BUY with fair value estimate of S$2.25.
Contract wins worth USD200m
Last week, STX OSV announced that it has secured two contracts worth a total of NOK1.2bn (USD200m). The contracts were for the construction of (i) one Subsea Support Vessel for Island Offshore (NOK500m) and (ii) one Offshore Subsea Construction Vessel (OSCV) for DOF (NOK650m). As these contracts already form part of our total contract win projections for FY12F (NOK13bn), we are not making changes to our forward estimates.
Market acceptance of new design
The second contract – OSCV for DOF – will feature an innovative moon pool design recently developed by STX OSV. This follows the completion of a three-year R&D program between STX OSV, Marintek (Norwegian Marine Technology Research Institute) and DOF, focusing on safe design and operation of moon pools. Compared to vessels with conventional moon pool design, the new OSCV can operate in wider range of weather conditions in a safer manner. What is also significant about this contract is that it is secured under relatively difficult operating environment – a further testament to its ability to stay ahead of the curve in terms of product development and gaining customers’ orders.
Positive outlook
As mentioned in our sector report (“A busy first quarter in 2012” dated 21 Mar 2012), the outlook for the oil and gas industry is generally positive. The rig market is bolstered by increasing fleet size, rising day rates and higher utilization. We also expect demand for offshore vessels (i.e. PSV, AHTS and OSCV) to catch up. In this aspect, we believe that STX OSV is well-positioned. First, the recent oil discoveries in North Sea should lead to increasing demand for high-spec offshore vessels capable of operating in harsh environment. Secondly, its new yard in Brazil (operational in 2014) will provide it with the shipbuilding capacity to meet the strict local content requirements. Maintain BUY with unchanged fair value estimate of S$2.25.
Last week, STX OSV announced that it has secured two contracts worth a total of NOK1.2bn (USD200m). The contracts were for the construction of (i) one Subsea Support Vessel for Island Offshore (NOK500m) and (ii) one Offshore Subsea Construction Vessel (OSCV) for DOF (NOK650m). As these contracts already form part of our total contract win projections for FY12F (NOK13bn), we are not making changes to our forward estimates.
Market acceptance of new design
The second contract – OSCV for DOF – will feature an innovative moon pool design recently developed by STX OSV. This follows the completion of a three-year R&D program between STX OSV, Marintek (Norwegian Marine Technology Research Institute) and DOF, focusing on safe design and operation of moon pools. Compared to vessels with conventional moon pool design, the new OSCV can operate in wider range of weather conditions in a safer manner. What is also significant about this contract is that it is secured under relatively difficult operating environment – a further testament to its ability to stay ahead of the curve in terms of product development and gaining customers’ orders.
Positive outlook
As mentioned in our sector report (“A busy first quarter in 2012” dated 21 Mar 2012), the outlook for the oil and gas industry is generally positive. The rig market is bolstered by increasing fleet size, rising day rates and higher utilization. We also expect demand for offshore vessels (i.e. PSV, AHTS and OSCV) to catch up. In this aspect, we believe that STX OSV is well-positioned. First, the recent oil discoveries in North Sea should lead to increasing demand for high-spec offshore vessels capable of operating in harsh environment. Secondly, its new yard in Brazil (operational in 2014) will provide it with the shipbuilding capacity to meet the strict local content requirements. Maintain BUY with unchanged fair value estimate of S$2.25.
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