DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 19 September 2016 Europe/United Kingdom Equity Research Oil & Gas Equipment & Services Oilfield Services & Equipment Research Analysts Phillip Lindsay 44 20 7883 1644 [email protected]Gregory Brown 44 20 7888 1440 [email protected]James Wicklund 214 979 4111 [email protected]Gregory Lewis, CFA 212 325 6418 [email protected]Specialist Sales: Jason Turner 44 20 7888 1395 [email protected]INITIATION Curtain rises on recovery ■ Initiating coverage of European Oilfield Services: The worst downturn for a generation has seen over USD200bn (>40%) of E&P capex removed from the market, spurred widespread restructuring and tested many balance sheets. But it has also been a force for good – the industry needed to change after decades of poor operational performance. Unlike 2009, this downturn has been sufficiently long to spur behavioural change – a leaner, fitter and more returns-focused industry should emerge. This will take time to be reflected in financial performance but valuations suggest the market is prepared to look well beyond the current eye-of-the-storm. ■ A phased recovery: We believe we’re close to the bottom, but growth may be slow initially in 2017, with momentum building in 2018. We see a cycle of reactivation rather than reinvestment as existing capacity is gradually absorbed by growing demand. OFS must navigate a precarious low point in the cycle with limited pricing power, balancing the need for asset utilization with an acceptable level of risk that would not derail the recovery. We think oil companies are poised to deliver improved operational/financial performance. Selectively, OFS companies can share in this upside. ■ Differentiation is key: There’s a lot to play for – we are tracking ~USD140bn of contract opportunities globally. Oil companies today have different needs, looking more to OFS for technical expertise and innovative project solutions, while pursuing new commercial models. Differentiation through front-end expertise, technology, distinctive assets, execution track record, even balance sheet, is more important than ever. OFS needs to change with the times – many companies are rising to the challenge but several are merely waiting for recovery to set in and could be left behind. ■ Top picks – Petrofac and Wood Group: Today we think the traditional investor playbook for EU OFS will not work; stock selection is far more important. Our preferred plays are Petrofac (retreating to a high-quality core with optionality) and Wood Group (best-in-class early-cycle recovery play, attractively valued). Our least preferred stocks are Subsea 7 (P&L challenges, overly capital intensive), and AMEC Foster Wheeler (recent outperformance excessive, headwinds underestimated). Our forecasts are conservative – 5-10% below consensus – but we believe we are approaching the end of the OFS downgrade cycle. We expect investors to be looking through the trough to 2018. Figure 1: Credit Suisse Pan-European and co-covered US Oilfield Services Coverage Outperform Neutral Underperform Petrofac (PFC.L), Preferred, TP 1100p Saipem (SPMI.MI), TP EUR0.45 Subsea 7 (SUBC.OL), Least Preferred, TP NOK75 Wood Group (WG.L), Preferred, TP 850p Hunting (HTG.L), TP 500p Amec Foster Wheeler (AMFW.L), Least Preferred, TP 450p Schoeller-Bleckmann (SBOE.VI), TP EUR70 Aker Solutions (AKSOL.OL), TP NOK35 CGG (GEPH.PA), TP EUR17.5 Technip (TECF.PA), TP EUR65 Core Labs* (CLB.N), TP USD115 Seadrill* (SDRL.N), TP USD1 PGS (PGS.OL), TP NOK27 Tecnicas Reunidas (TRE.MC), TP EUR28 Source: Credit Suisse Research * denotes co-covered stocks. PFC, WG, TEC, PGS, SPM, HTG, AKSO, SUBC, AMFW, and TRE covered by Phillip Lindsay, SBOE and CGG covered by Gregory Brown, CLB and SDRL covered by Gregory Lewis
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
■ Initiating coverage of European Oilfield Services: The worst downturn for a generation has seen over USD200bn (>40%) of E&P capex removed from the market, spurred widespread restructuring and tested many balance sheets. But it has also been a force for good – the industry needed to change after decades of poor operational performance. Unlike 2009, this downturn has been sufficiently long to spur behavioural change – a leaner, fitter and more returns-focused industry should emerge. This will take time to be reflected in financial performance but valuations suggest the market is prepared to look well beyond the current eye-of-the-storm.
■ A phased recovery: We believe we’re close to the bottom, but growth may be slow initially in 2017, with momentum building in 2018. We see a cycle of reactivation rather than reinvestment as existing capacity is gradually absorbed by growing demand. OFS must navigate a precarious low point in the cycle with limited pricing power, balancing the need for asset utilization with an acceptable level of risk that would not derail the recovery. We think oil companies are poised to deliver improved operational/financial performance. Selectively, OFS companies can share in this upside.
■ Differentiation is key: There’s a lot to play for – we are tracking ~USD140bn of contract opportunities globally. Oil companies today have different needs, looking more to OFS for technical expertise and innovative project solutions, while pursuing new commercial models. Differentiation through front-end expertise, technology, distinctive assets, execution track record, even balance sheet, is more important than ever. OFS needs to change with the times – many companies are rising to the challenge but several are merely waiting for recovery to set in and could be left behind.
■ Top picks – Petrofac and Wood Group: Today we think the traditional investor playbook for EU OFS will not work; stock selection is far more important. Our preferred plays are Petrofac (retreating to a high-quality core with optionality) and Wood Group (best-in-class early-cycle recovery play, attractively valued). Our least preferred stocks are Subsea 7 (P&L challenges, overly capital intensive), and AMEC Foster Wheeler (recent outperformance excessive, headwinds underestimated). Our forecasts are conservative – 5-10% below consensus – but we believe we are approaching the end of the OFS downgrade cycle. We expect investors to be looking through the trough to 2018.
Figure 1: Credit Suisse Pan-European and co-covered US Oilfield Services Coverage
Source: Credit Suisse Research * denotes co-covered stocks. PFC, WG, TEC, PGS, SPM, HTG, AKSO, SUBC, AMFW, and TRE covered by Phillip Lindsay, SBOE and CGG covered by Gregory Brown, CLB and SDRL covered by Gregory Lewis
19 September 2016
Oilfield Services & Equipment 2
Key charts
Figure 2: Global E&P capex Figure 3: OFS cost deflation
Source: Company data, Credit Suisse estimates, the BLOOMBERG PROFESSIONAL ™ service
Source: BP, Credit Suisse Research
Figure 4: Global Rig Count Forecast Figure 5: OFS Capital Discipline
Source: Company data, Credit Suisse estimates, Baker Hughes International Source: Credit Suisse Research
Source: Credit Suisse Research, *denotes co-covered stocks. PFC, WG, TEC, PGS, SPM, HTG, AKSO, SUBC, AMFW, and TRE covered by Phillip Lindsay, SBOE and CGG covered by Gregory Brown, CLB and SDRL covered by Gregory Lewis
■ Industry background – The worst downturn for a generation actually masks deep-
rooted problems within the oil & gas industry. Too often in the past, we think the
industry was guilty of poor operational performance, inefficiency, and late / over-budget
projects delivery. High and stable oil prices through last cycle met with industry
complacency; oil & gas has not kept pace with the times – other industries look much
further ahead on project delivery, efficiency, and technology. A creeping cost curve
became reality as several high profile projects (notably offshore) were deemed
uneconomic with oil above USD100/bbl – a reality check. The downturn has been a
brutal one, but in many ways, we think it has been a force for good within the industry.
A leaner, fitter, more functional and collaborative industry is emerging. There are signs
of stabilisation now, and we expect to move towards a gradual recovery in 2017,
momentum building from 2018.
■ Key themes for the recovery cycle – The OFS industry overinvested in the last cycle
for a level of demand that looks unimaginable today. We expect a cycle of reactivation
rather than reinvestment as existing capacity is absorbed by growing demand – new
capital investment won’t be necessary. We think the OFS sector now has a greater
understanding of the demands of the financial sector – there’s more focus on
differentiation, capital intensity and delivering improved returns. The base from which
the sector recovers however is extremely low, and companies must navigate a
precarious low-point of the cycle with limited pricing power. The industry needs to
balance the need to provide utilization to its asset base with a level of risk that doesn’t
potentially derail recovery prospects. Oil companies have lost technical expertise
through restructuring; there’s more responsibility on OFS to deliver better solutions and
value from projects. There’s greater collaboration and changing commercial models
and incentives – this is driving a performance-based culture.
■ Under-investment in front-end project planning is often a root cause of poor project
performance, in our view. Increased man hours are being spent on concept selection,
design scope and development plan optimization. Later-cycle players must be involved
earlier to ensure constructability while minimizing cost / schedule escalation.
Technology differentiation and integration are likely to be more relevant in this cycle.
We think OFS companies that can exercise greater influence over project success are
19 September 2016
Oilfield Services & Equipment 5
likely to be the winners in this next cycle. Inflation threats look limited – there’s simply
too much capacity across the supply chain. However the OFS sector has shed about
40% of its workforce through the downturn and people constraints could be a
bottleneck in a recovery cycle, notwithstanding greater productivity across the industry.
■ E&P capex and activity levels – Well over USD200m / 40% of spending has been
removed from the industry since 2014 – two consecutive years of declining spend
confirm the worst industry downturn since the mid-1980s. We have confidence this
trend will not continue due to a combination of higher oil prices, a rebalancing of oil
demand / supply, improved project economics and rising concerns over future
production. North American E&P should grow capex in 2017, while other oil companies
may well trend down again, but overall we expect a year of stabilization in 2017 in
absolute USD spend (physical activity should be up as oil companies benefit from more
‘bang for buck’), with a growth trend commencing in 2018 and gathering momentum.
US drilling activity bottomed in Q216 and is now demonstrating a gradual recovery,
which we expect to continue – CS assumes US rig count averages 470 in 2016, rising
28% in 2017 and 20% in 2018. Conventional international activity onshore and
marginal / brownfield offshore development should follow next. Despite good initiatives
to improve project economics, we think recovery in higher cost segments like
deepwater will lag.
■ Fishing where the fish are – sector bidding update – Our in-house projects
database has tracked a disappointing USD21bn of awards to market ytd, down 50% on
the comparable period in 2015. Key awards include BP’s Tangguh and Shah Deniz 2,
plus ENI’s Zohr project. Major projects often stall in a downturn – Shell’s Bonga South
West and ADNOC’s Das Island development are good examples of this. However the
global bidding pipeline looks promising with nearly USD140bn of contracts at various
stages in the bidding process. Regionally, the Middle East is the most active, with
large-scale downstream projects like Duqm (Oman), Sitra (Bahrain) and Ras Tanura
Clean Fuels (Saudi Arabia). There are sizable opportunities in Africa, including Mamba
/ Coral in Mozambique, downstream prospects in Algeria, and offshore work in West
Africa. Asia Pacific is active, with offshore developments in India and Indonesia, but
FLNG projects have challenges. The Americas is less active with near-term uncertainty
in Brazil, although US Gulf prospects (like Mad Dog 2 / Vito) look attractive. Europe is
quiet but could see a pick-up in smaller marginal field / tieback developments
(particularly in Norway). We are not actively capturing any renewables work, which
Subsea 7 and others are chasing, or politically-edged projects such as Nordstream II or
Turkish Stream.
■ Financing trends and OFS balance sheet – Many companies have successfully
negotiated refinancings and revised debt covenants and holidays, but often at higher
cost with restrictions. We believe we are close to the bottom-of-the-cycle but rating
agencies continue to downgrade OFS / E&P credit. There’s a lack of liquidity across
the sector and cash flows remain under pressure. Further financial distress and rising
bad debts look likely. Banks are acting with more caution, and while equity markets
have shown support, many issuances to date suggest a lack of enthusiasm. This
financial backdrop and lower appetite for bank lending is also hindering the sector’s
M&A prospects. A simple net-debt-to-EBITDA screen and stress-test under a grey sky
scenario for our coverage clearly illustrates stocks that look over-leveraged – seismic
players CGG, and to a lesser extent, PGS. AMEC Foster Wheeler is also over-
leveraged, but its disposal programme should relieve some pressure. Only half our
coverage pays a dividend, but, for those that do, the average yield is nearly 4%. The
most attractive yield in the sector is Petrofac at nearly 6%, which we believe is
sustainable.
19 September 2016
Oilfield Services & Equipment 6
■ Subsector outlook – The ‘seismic trade’ has worked well coming out of past cyclical
downturns. Exploration spending is unlikely to recover at a similar pace in this recovery
cycle but we think marine seismic has potential to rebalance quickly. Frontier
exploration is out of favour but the market may underestimate how much pent-up
demand there is for seismic data overall. The drilling sector is another classic early
cycle trade but while volumes are likely to pick up through 2017 (notably onshore, US
and internationally), significant oversupply, particularly offshore, suggests poor
profitability. E&C is mixed – offshore (deepwater in particular) continues to struggle
with project economics, despite considerable initiatives to lower break-evens, whereas
onshore looks more attractive. Engineering is seeing more risk transfer but also
greater commercial alignment. Downstream is buoyant, Upstream seeing ‘green-
shoots’, but Subsea remains challenging. Maintenance / brownfield markets should
recover as oil companies play catch-up on deferred expenditure. Equipment will likely
see growing demand for consumable products as short-cycle drilling activity improves
whereas longer-cycle subsea and drilling equipment markets remain lackluster.
■ Forecasts and Valuation – We use a wide framework to forecast including CS
Stock Rating Target Price +/- Segment Investment Case
Aker Solutions NEUTRAL NOK 35 -4% Equipment Headwinds and tailwinds - The potential rebound in the Norwegian MMO market is underestimated by the market, but so is the softness / duration
of the Subsea market downturn. A much improved company but too early to buy for recovery, in our view.
AMEC Foster
Wheeler
UNDERPERFORM GBp 450 -15% EPCM* Too much too soon - the market has warmed to new CEO Jon Lewis; the stock has outperformed peers since his arrival in June. We expect the
November CDM to deliver positive progress on costs, but investors should not underestimate topline pressures, and future mix looks dilutive.
CGG UNDERPERFORM EUR 17.5 -21% Seismic Over leveraged - February's rights issue has provided little headroom to covenants while market conditions have deteriorated further. The
transformation has created a far better quality business mix, but we think the cyclical recovery will be insufficiently strong to delever materially. As
such CGG's premium rating to PGS looks unwarranted.
Core Laboratories NEUTRAL USD 115 6% Equipment High return / high valuation - we believe the market underestimates the lower-for-longer offshore / deepwater cycle; a key market that in the past
has driven attractive incremental margins. CLB's recovery profile is initially more geared into lower quality (Production Enhancement) revenue
lines; the inflection point on better quality Reservoir Description could be a catalyst - too early to buy, in our view.
Hunting NEUTRAL GBp 500 20% Equipment Early cycle - HTG is a play on US unconventionals - an enlarged Well Completion division with more IP should ensure HTG is faster out the blocks
in this cyclical upswing. However recovering pricing will take time and current valuation suggests to us the stock has run too far too soon.
Petrofac OUTPERFORM GBp 1100 36% E&C* Back to core business - Diversification has not worked; a refocused PFC with best-in-class E&C business at its core is a far more attractive
proposition. P&L is stabilising and well underpinned, and valuation vs closest comp (TRE) appears compelling. Non-core asset disposals provide
additional optionality, in our view.
PGS OUTPERFORM NOK 27 63% Seismic Higher risk / higher reward. The rebound in exploration activity may well underperform past cycles, but we think the market underestimates the
level of pent-up demand for multiclient data and production seismic, plus how quickly the contract market could rebalance. Current multiples imply
a far more pessimistic outturn than we see.
Saipem NEUTRAL EUR 0.45 20% E&C Rehabilitation requires patience – long-cycle business slowly moving in the right direction but significant risks remain – pending revenues, litigation
/ arbitration, offshore drilling re-contracting and cash flow. Risk of downgrade to medium-term financial targets.
Schoeller
Bleckmann
OUTPERFORM EUR 70 33% Equipment Best EU play on US unconventionals - Built out Well Completion line in downturn giving faster growth potential in a recovery and greater through-
cycle balance. Niche technology, highly operationally geared. 2018 multiples in line with long-run average but earnings capacity is double our 2018
estimates.
Seadrill UNDERPERFORM USD 1.0 -53% Drilling All drilled out – continues to pay down debt, but much left to do. Sense of urgency illustrated by net leverage - ~10x late by late 2017E.
Fundamentals remain weak – potentially through to the end of the decade, in our view.
Subsea 7 UNDERPERFORM NOK 75 -11% E&C Cycle realities looming -Top-of-the-cycle backlog is about to run out, and concerns about embedded margin and T&Cs on new work, plus
diversification into low-value add wind farm installation. Heavy asset business and harder to extract value from its fleet in an oversupplied offshore
construction market.
Technip OUTPERFORM EUR 65 27% E&C EU bellwether stock - underappreciation of breadth of TEC's business mix and capabilities - deepwater is important, but multiple other avenues for
growth (shallow water, downstream, gas). FMC deal is defensive against a lackluster near-term market, but combination could disproportionately
benefit from its eventual recovery.
Tecnicas
Reunidas
UNDERPERFORM EUR 28 -14% E&C A strong, well-managed and broad-based contracting business with a largely solid execution track record. However, valuation looks challenged,
particularly against weak near-term order intake trends. We prefer PFC.
Wood Group OUTPERFORM GBp 850 23% EPCM Mispriced quality – Well managed, best-in-class engineering and maintenance franchises, robust balance sheet, and more geared into early cycle
recovery than the market appreciates as catch-up spend on deferred maintenance / brownfield modification bolsters growth in Engineering and US
Unconventionals. Restructuring and streamlined structure increase leverage to growing volumes.
Source: Company data, Credit Suisse estimates
ECM – engineering, project management, consultancy, and maintenance. E&C – engineering and construction
19 S
ep
tem
ber 2
01
6
Oilfie
ld S
erv
ices &
Eq
uip
me
nt
9
Figure 11: Pan-European OFS Valuation Summary
Company Ticker Rating Analyst Share YTD Target Pot. Up / Div M.Cap P/E EV/EBITDA EV/Sales P/B
Price Perf price Downside yield USD LC 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E
All OFS customer groups have cut back on E&P capex aggressively in this downturn –
industry spending was down around 25% y-o-y in 2015, and, we expect further declines in
excess of 20% in 2016. We are still several months away from the 2017 budgeting
process, but we are confident this trend will not continue – our best estimate is for a flat
year. As a proxy, we’ve used Credit Suisse global energy coverage capex estimates for
2017/18, which indicate a 1% decline for group spend.
Figure 30: Group capex cuts in the last vs. current
cycle Figure 31: Group capex by OFS customer group
in USD millions, unless otherwise stated in USD millions, unless otherwise stated
Source: Company data, Credit Suisse estimates[the BLOOMBERG PROFESSIONAL™ service
Source: Company data, Credit Suisse estimates, the BLOOMBERG PROFESSIONAL™ service
There are notable differences across OFS customer groups. Short-cycle-dominated, North
American E&P spend is forecast to recover nearly 20% as completion activity picks up and
more rigs are put back to work. Conversely, major IOCs and international E&P operators
are forecast to cut again, by 10% and 11%, respectively. The NOC grouping (which
includes companies such as Petrobras, ONGC, Sinopec and Rosneft, but excludes
several large spending NOCs such as Saudi Aramco and KOC) is forecast to increase
spend by 3% after two years of steep cuts. The significant pipeline of projects in the
Middle East suggests to us that this could underestimate actual NOC spend.
Overall however, several factors give us confidence that we should at least see some
stabilisation in spending levels in 2017.
■ Oil prices – Although Brent we saw a seasonal dip in the summer months to the low
USD40s, oil prices are currently back at around USD50/bbl and significantly up on the
January lows of USD28/bbl. We see a Q4 2016 strengthening with further
improvements into 2017 / 2018 (CS estimate: USD56.25/bbl / USD67.50).
■ Oil demand / supply – The Credit Suisse global oils team believes global supply and
demand effectively rebalanced during the summer of 2016. Brexit and other
macroeconomic headwinds cloud the demand picture somewhat, indicating the market
deficit may not be sustained over the next 12 months. We see a more material deficit
position building from H217.
■ Improved project economics – We think the OFS industry has ‘given up’ all it can in
terms of deflation; oil companies are unlikely to be able to squeeze much more out of
the supply chain. Some deflation is cyclical in nature (rig rates and seismic vessel
rates, for example), but the downturn has been sufficiently long and harsh to drive
structural change – new best practices, new working models, etc. We believe the
industry is now re-focused on development priorities.
-28%
-8%
9%12%
-39%
-19%-23% -24%
-46%
-18%
-10%-14%
17%
-10%
3%
-11%
-55%
-45%
-35%
-25%
-15%
-5%
5%
15%
25%
North American E&P Integrateds NOCs Other E&P
2009 vs 2008 2015 vs 2014 2016E vs 2015 2017E vs 2016E
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
North American E&P Integrateds NOCs Other E&P
19 September 2016
Oilfield Services & Equipment 34
■ Future production concerns – Decline rates at existing fields are increasing and oil
companies are now voicing concerns over sustaining future production. The downturn
has seen weaker investment in the existing well stock and cutbacks on non-essential
maintenance. We see the industry now focused on marginal field development,
brownfield and tieback activity. There is often a grey area between opex and capex
around this type of work, and it can be easier to secure opex budget than capex in a
downturn.
19 September 2016
Oilfield Services & Equipment 35
‘Fishing where the fish are’ In this section, we provide a global summary of bidding activity across key upstream and
downstream developments. Our in-house projects database has tracked a disappointing
USD21bn of awards to market ytd, down 50% on the comparable period in 2015. Awards
have been split roughly 60/40% between offshore and onshore – a marked difference to
the substantial weighting towards onshore projects in both 2015 and 2014. Key awards
include BP’s Tangguh and Shah Deniz 2, plus ENI’s Zohr project.
Major projects often stall in a downturn – Shell’s Bonga South West and ADNOC’s Das
Island development are good examples of this. However the global bidding pipeline looks
promising with nearly USD140bn of contracts at various stages in the bidding process.
Regionally, the Middle East is the most active, with large-scale downstream projects like
Duqm (Oman), Sitra (Bahrain) and Ras Tanura Clean Fuels (Saudi Arabia). There are
sizable opportunities in Africa, including Mamba / Coral in Mozambique, downstream
prospects in Algeria, and offshore work in West Africa. Asia Pacific is active, with offshore
developments in India and Indonesia, but FLNG projects have challenges. The Americas
is less active with near-term uncertainty in Brazil, although US Gulf prospects (like Mad
Dog 2 / Vito) look attractive. Europe is quiet but could see a pick-up in smaller marginal
field / tieback developments (particularly in Norway).
We are not actively capturing any renewables work, which Subsea 7 and others are
chasing, or politically-edged projects such as Nordstream II or Turkish Stream. Overall, we
view the current level of bidding as normal (ie, low) based on positioning in the cycle (ie,
towards the bottom). We’d expect keen pricing for contracts to persist as contractors and
equipment providers look to rebuild decimated backlogs and provide utilisation for their
asset bases, particularly offshore.
Figure 32: Project award seasonality Figure 33: Project awards by region
Source: Company data, Credit Suisse Research, Thomson Reuters, UpstreamOnline, MEED, AOG, data correct as of September 7
th 2016
Source: Company data, Credit Suisse Research, Thomson Reuters, UpstreamOnline, MEED, AOG, data correct as of September 7
th 2016
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
JA
N
FE
B
MA
R
AP
R
MA
Y
JU
N
JU
L
AU
G
SE
P
OC
T
NO
V
DE
C
JA
N
FE
B
MA
R
AP
R
MA
Y
JU
N
JU
L
AU
G
SE
P
OC
T
NO
V
DE
C
JA
N
FE
B
MA
R
AP
R
MA
Y
JU
N
JU
L
AU
G
SE
P
2014 2015 2016
US
Dm
0 20,000 40,000 60,000 80,000 100,000
2014
2015
2016 ytd
Offshore Onshore
19 September 2016
Oilfield Services & Equipment 36
Figure 34: Active and submitted bids by region Figure 35: Top 10 prospects
Source: Company data Credit Suisse Research, Thomson Reuters, UpstreamOnline, MEED, AOG, data correct as of September 7
th 2016
Source: Company data, Credit Suisse Research, Thomson Reuters, UpstreamOnline, MEED, AOG, data correct as of September 7
th 2016
Africa
Eni has received technical bids for the SURF package for the OCTP project off Ghana.
According to Africa Oil and Gas (AOG), 11th August, having missed out on Phase 1,
Saipem is the favourite to secure the 63km subsea gas pipeline portion of the SURF
package, which also includes the associated subsea system, gas treatment facilities on
the FPSO and an onshore receiving facility. Commercial tenders are due in September.
The three consortia bidding on Eni’s Coral South FLNG project have increased the design
capacity of the vessel by 35% while managing to keep costs around USD5.5bn. According
to AOG, the Technip/JGC/Samsung Heavy Industries consortium has beaten the
Saipem/Chiyoda/Hyundai Heavy Industries and KBR/DSME alternatives to win the supply
contract; Technip is also seen as favourite for the SURF contract, with GE the preferred
bidder for the subsea system. The Coral field has around 9tcf of recoverable gas reserves
and is likely to come onstream by 2020.
Eni’s next large LNG development is the Mamba project. Having launched an EPC tender
for two 5mmtpda LNG trains at the Afungi LNG complex in early 2015, the Italian major
has received commercial bids from Technip/Samsung/China Huanqiu C&E,
CB&I/Chiyoda/Saipem and JGC/Fluor, according to oil industry journal Upstream Online,
22 July. Mamba’s initial phase will consist of 21 subsea wells in 1,800m of water tied back
to the LNG trains via four 60km, 22-inch flowlines. We think an investment decision on the
field is unlikely, however, until Eni closes discussions on potential farm-in investment in
the area.
Eni has also issued invitations to tender for a 150kbpd leased FPSO at the Zabazaba
project off Nigeria. The FPSO will initially receive crude from 24 development wells on the
Zabazaba field, before a further 10 wells from the Etan field are tied back in a second
phase. According to AOG, 28th April, Eni has pre-approved Bumi Armada, BW Offshore,
Saipem and SBM/COOEC for the supply of the vessel. AOG also said that in addition to
the FPSO, Eni is also expected to tender for the SURF and SPS packages on the field
with Emas, Heerema, Saipem, Subsea 7 and Technip approached for the SURF work, and
Aker Solutions, FMC, GE and OneSubsea approached for the SPS package. The field will
also require a series of umbilicals for which Aker Solutions, JDR, Nexans, Oceaneering
and Technip are each due to submit bids in September, with award set for H2 2017.
Eni has re-engineered the Loango project as an integrated drilling and production platform.
Initially, Eni planned to develop the field with two 11,000mT production platforms, but after
technical studies reverted to a sole facility to lower costs. According to Upstream Online,
19th August, Saipem and McDermott are amongst those likely to receive invitations to
Africa
27%
Americas
12%
Asia Pacific
26%
Europe
2%
Middle East
33%
0
2000
4000
6000
8000
10000
12000
US
Dm
19 September 2016
Oilfield Services & Equipment 37
tender from Eni, but COOEC and Hyundai Heavy Industries have not qualified. The
winning contractor will have to manage local content, which is likely to cover the local
fabrication of small pieces of equipment and personnel during hook-up and commissioning
work. Technical and commercial offers are likely to be submitted by the close of 2016, with
Eni expected to award a contract in Q2 2017. The integrated facility is expected to have
more than 20 well slots, and will accommodate 70 people. The platform will eventually be
linked by an oil line to four separate wellhead platforms.
BP has made a final investment decision on the Atoll field off Egypt. The field, which
contains 1.5tcf of gas and 31m barrels of condensate, is being fast tracked with three
early-stage production wells expected to be tied back to shore by 2018. Having recently
secured work on BP's other Egyptian upstream developments (East and West Nile Delta),
Subsea 7 and OneSubsea are favourites for the respective SURF and SPS packages
(according to AOG, 23 June). The initial phase of development will seek to produce
300mmcf/d of gas before ramping up in subsequent phases.
BP is also reviewing bids for the SURF and SPS packages on Platina field in Angola.
Originally designed as part of the Block 18 PCC project (with Chumbo and Cesio), BP is
now looking to develop Platina as an eight-well tieback to the Greater Plutonio FPSO.
Having delivered the wells for Greater Plutonio, FMC is considered favourite for the SPS
system, according to AOG, 12th May, while Subsea 7 is likely to beat Saipem to the SURF
package. However, with the development yet to be approved, the project may stall and the
initial number of trees may be cut to lower the initial development cost.
In May, Shell cancelled the outstanding FPSO, SURF and SPS tenders for its oft-delayed
Bonga Southwest field as contractors were unable to remove sufficient cost to make the
field economic. Instead, Shell is now looking to relaunch the project, for the third time, as a
leased FPSO playing host to 48 trees. According to AOG, 26th May, the re-tender will
commence in Q1 2017 and consist of a 48-tree subsea system, a SURF package
including 82km of flowlines, three water injection lines and four production loops as well as
around 70km of umbilicals and a 98km gas export pipeline. According to AOG, in the most
recent tendering round, Subsea 7 was favourite for the SURF package, while HHI was
slated to deliver the FPSO and Nexans had beaten competition for the umbilicals.
Chevron has returned to its deepwater Nsiko FPSO project in Nigeria and has contracted
KBR subsidiary Granherne to update its FEED work. According to AOG, 25th August,
Chevron is looking to bring new production onstream from 2020, but the progress of Nsiko
depends on whether current bidding on Eni’s Zabazaba project comes to a conclusion and
whether bidding on the revised Bonga Southwest field restarts early in 2017. Nsiko was
originally due onstream in 2010 after Doris had performed subsea FEED work, but the
project stalled due to the amount of local content required.
The Mozambique National Petroleum Institute is close to awarding a series of multiclient
seismic and data licensing agreements across Rovuma, South Rovuma, Zambezi Delta,
onshore South Mozambique and in the Mozambique basin, according to Upstream, 19
August. Seven seismic contractors have reportedly bid for the Zambezi Delta work.
WesternGeco, CGG, Spectrum, Polarcus, PGS, Ion Geophysical are competing against
TGS for the 15,000skm of 3D seismic data as well as gravity, magnetic and bathymetric
information on ExxonMobil's blocks Z5-C and Z5-D. CGG and Spectrum are also
reportedly competing for 5,000km of 2D on the Rovuma basin.
Having been put on hold since January 2015, Total has returned to Zinia Phase 2 in
Angola. Initial bids for the SPS and SURF packages came in 30% above Total's
expectations, but now the French IOC has gone back to contractors in an effort to take
advantage of lower supply chain costs, according to AOG, 11th August. The AOG report
said FMC was previously considered favourite for the SPS package, while Subsea 7 was
bidding on the SURF contract. The contract package will also include brownfield
modifications consisting of five new modules on the Zinia platform.
19 September 2016
Oilfield Services & Equipment 38
Figure 36: African prospects Figure 37: African prospects by segment
Source: Company data, Credit Suisse Research, data as of 7th September 2016 Source: Company data, Credit Suisse Research, data as of 7
th September 2016
Figure 38: African prospects by country (USDm) Figure 39: African prospects by operator
Source: Company data, Credit Suisse Research, data as of 7th September 2016 Source: Company data, Credit Suisse Research, data as of 7
th September 2016
Figure 40: Top 10 African prospects
in USD millions, unless otherwise stated
Source: Company data, MEED, Company data, Credit Suisse Research, data as of 7th September 2016
Offshore
Onshore
EPCFloating
SURF / SPS
Midstream
SURFT&I
BrownfieldSPS
Decommissioning
0 5000 10000 15000 20000
Mozambique
Algeria
Angola
Nigeria
Congo-Brazzaville
Ghana
Kenya
Namibia
Equatorial Guinea
Mauritania
ENISonatrach
Tullow
Hess
OphirChevron
Total Petronas
0
2000
4000
6000
8000
10000
12000
Mamba Coral South Nene-Loango Hassi Tiaret PekanUltradeep
SouthLockichar
Biska Etan &Zabazaba
Dalia
19 September 2016
Oilfield Services & Equipment 39
Asia Pacific
In India, ONGC has reportedly launched a USD1.5bn integrated SURF and SPS package
for 35 subsea trees, associated subsea control systems, infield umbilicals and pipelines,
manifolds, pipelines, 400km of subsea flowlines and a 50km export line. The project also
includes 176km of umbilicals and a series of flexible risers and flowlines. According to
Upstream, 3rd
July, a series of partnerships including Technip/FMC, McDermott/GE/L&T,
Saipem/Aker Solutions and Subsea 7/OneSubsea have expressed interest for the project
that will move into a bidding process by year-end. There are additional (smaller) bids for
an FPSO and a fixed platform.
In Australia, Woodside’s Browse project has been postponed. Its original development
plan was to deploy three standalone FLNG vessels that would be nearly identical to Shell’s
Prelude FLNG facility. However, weak LNG markets have stalled the project following
completion of the FEED. We believe that Woodside is now likely to lower the capacity of
the planned FLNG vessel to less than 2mtpa (Prelude is 5.3mtpa) and shorten the length
to 350m (to allow yards outside of South Korea to fabricate the facility). Woodside has also
deferred the Lambert Deep project, a satellite field on Australia’s North West Shelf.
After re-engineering, Hess is moving ahead with Equus in Australia. According to
Upstream, 3rd
June, the redesigned facility will be far smaller than originally planned, but
production capacity will be the same. Wood Group/Samsung Heavy Industries,
McDermott/Keppel and SBM Offshore are expected to bid. The project also includes an
18-tree SPS package, which FMC and OneSubsea are bidding, and there’s a 200km
subsea pipeline.
ConocoPhillips has moved the Caldita-Barossa project into the pre-FEED phase.
According to Upstream, 12th August, Conoco has launched three separate pre-FEED
tenders for the proposed FPSO, SPS, and SURF systems; WorleyParsons, Fluor and KBR
have been invited to tender for the FPSO, while McDermott, Subsea 7 and Technip are
likely to tender for the SURF package. After pre-FEED work is completed in early 2017
Conoco will look to progress the project into the FEED stage. Caldita-Barossa is likely to
be developed with a VLCC-size newbuild FPSO tied back to shore with a 270km pipeline.
CNOOC has launched three tenders for the Wenchang 10-3 field development. According
to Upstream, 19th August, CNOOC has approached Technip, GE and Nexans for a 25km
umbilical, GE, OneSubsea, FMC and Aker Solutions for six subsea trees (four firm, two
options) and a production system, as well as Technip, NOV, GE, Tiangin Nepture Offshore
and Orient Cable for two flexible pipes – a 6-inch condensate flexible and an 8-inch, 22km
gas flowline. The contract marks the first presence of two Chinese flexible manufacturers –
Tiangin and Orient Cable – in the offshore market. The subsea trees will be tied back to a
central equipment platform as part of a development that is scheduled to produce first gas
in 2018, at a peak rate of around 660mcm per year.
19 September 2016
Oilfield Services & Equipment 40
Figure 41: Asia Pacific prospects Figure 42: Asia Pacific prospects by segment
Source: Company data, Credit Suisse Research, data correct as of September 7th 2016 Source: Company data, Credit Suisse Research, data correct as of September 7
th 2016
Figure 43: Asia Pacific prospects (USDm) Figure 44: Asia Pacific prospects by operator
Source:: Company data, Credit Suisse Research, data correct as of September 7th 2016 Source Company data, Credit Suisse Research, data correct as of September 7
th 2016
Figure 45: Top 10 Asia Pacific prospects
in USD millions, unless otherwise stated
Source: Company data, Credit Suisse Research, data correct as of September 7th 2016
Offshore
Onshore
EPCFloating
SURF
Brownfield
Integrated SURF/SPS SPS
SPS & SURF Seismic
FEEDEPIC
0 2000 4000 6000 8000 10000 12000
Indonesia
Malaysia
India
Australia
China
Thailand
Taiwan
Vietnam
ONGC
Chevron
InpexPetronas
ExxonMobil
CNOOC
CPC Corporation
Repsol TalismanHess Others
0
1000
2000
3000
4000
5000
6000
19 September 2016
Oilfield Services & Equipment 41
The Middle East
After awarding Phase 1A of Bul Hanine to McDermott, Qatar Petroleum has launched the
EPC tender for Phase 1B, consisting of topsides for four wellhead platforms, one manifold
platform and more than 100km of subsea pipelines, umbilicals and cables. The package is
worth in excess of USD500m, according to Upstream, 5th August. McDermott, NPCC,
Saipem and Technip are expected to be invited to bid, with the process beginning late in
2016 and award planned for H217. Bul Hanine is being redeveloped to boost recovery
rates and increase recoverable reserves.
The development of a central processing and associated facilities at South Azadegan in
Iran has attracted bids from 16 partnerships, according to Upstream, 26th August. Saipem
has joined with local contractor Jahanpars, while Petrofac is working with Kayson and GS
E&C has joined with Mapna. The USD800m contract includes procurement of equipment
and construction of a central treatment and export plant as well as a fire-fighting facility
nearby and the construction of a permanent camp and warehouses. Pedec has also
launched a pre-qualification tender for construction and commissioning of surface facilities,
including flowlines for 20 wells at the field, which was the largest discovery in Iran since
the 1970s when it was announced in 1999.
Some of the partnerships bidding for South Azadegan are also bidding for the USD800m
Aftab plant, reports Upstream, 2nd
September. The contract for the construction of the
Aftab gas processing facilities was originally tendered in 2014, but was withdrawn after a
lack of interest. The project is the fourth tender of the first phase of Kish, which was
discovered in 2006 and holds around 1bn barrels of condensate. The gas treatment facility
will have a 1bcfd capacity from 12 wells and will feed the IGAT pipeline distribution
network while processing 11kbpd of condensate. The EPC tender was originally due to
close on 16 June 2016, but has been extended because of problems with the plant’s basic
design, according to the report.
In Bahrain, Bapco has received EPC bids for the planned $5bn modernisation of the Sitra
refinery. According to MEED, 28th July, JGC/GS E&C, Technip/Tecnicas
Reunidas/Samsung Engineering, Fluor/Hyundai/Daewoo and CB&I/Petrofac were invited
to bid for the modernising project to upgrade the GCC's oldest refinery and increase
capacity.
In Saudi Arabia, the Farabi Petrochemicals Company has invited bids for a new chemicals
plant in Yanbu. According to MEED, 7th August, Farabi Petrochemicals has prequalified
CTCI, GS E&C, Hanwha E&C, Petrofac, Saipem and Tecnicas Reunidas for the USD1bn
EPC project, which will produce specialty chemicals using diesel feedstock. AMEC Foster
Wheeler has performed the FEED, including technology selection heavy oil treatment.
Saudi Aramco has received technical and commercial bids for about USD3bn of work on
the Ras Tanura refinery Clean Fuels Project according to MEED, 17th August. JGC,
Samsung Engineering, Hyundai Engineering & Construction, Tecnicas Reunidas and GS
Engineering bid for the main processing unit, while Petrofac and L&T bid for the offsite and
utilities package. The project is much delayed, with bids in 2013 coming well over budget,
but this time Aramco has awarded early works and site preparation to a local contractor in
May, suggesting that the project will go ahead, according to the report.
Petrofac and Tecnicas Reunidas are considered frontrunners for Saudi Aramco’s
Uthmaniyah ethanol feed recovery project, worth USD800-900m according to MEED, 17th
August. Several other players reportedly prequalified including GS E&C, JGC, Daewoo
E&C, and Samsung Engineering. The project covers recovery of ethane, propane and
NGLs from sales gas at the plant site, processing associated gas from Ghawar, the
Kingdom’s largest oilfield.
19 September 2016
Oilfield Services & Equipment 42
Saudi Aramco has issued tender documents to its LTA partners (McDermott, Saipem, the
L&T/Emas joint venture and Dynamic Industries) for an EPC job covering four offshore
jackets and three observation platforms to be installed across the Karan, Berri, Hasbah
and Arabiyah fields. The bidding parties were due to submit their commercial proposals in
late August with a view to commencing work early in 2017.
In Kuwait, Technip, Saipem, Amec Foster Wheeler and Tecnicas Reunidas are amongst
20 pre-qualified bidders for the KNPC's molten sulphur-handling facility, according to
MEED, 10 August; the project will be constructed at the Mina al-Ahmadi refinery for a total
cost of around $100m.
KOC has invited a series of E&C contractors including Petrofac, Saipem and Tecnicas to
build a new oil-gathering centre known as GC32, according to MEED, 24th July. The
project will be built near the Burgan oilfield and the scope has recently been expanded to
include a booster station modification, which has driven the cost estimate close to $2bn,
according to MEED. AMEC Foster Wheeler completed FEED for the gathering centre in
late 2014.
After awarding Technip the USD1bn contract to upgrade the Jebel Ali refinery by adding
jet and diesel hydrotreaters in August, Enoc is said to be considering further expansion at
the 120kbd facility, according to MEED, 11th August. As part of its five-year strategy Enoc
will seek to expand capacity at Jebel Ali by a further 50% (to over 200kbd) by the end of
2018 as it looks to supply up to 60% of jet fuel volumes at Dubai's airports by 2050.
Technip's award for the first phase of the expansion is its largest in the GCC since the
USD1.7bn conversion of the Satorp refinery in Saudi Arabia in 2009.
As part of the development of the Duqm project, OTTCO has prequalified a series of
contractors for the USD400m crude storage terminal. According to MEED, 25th August,
Saipem, Daewoo E&C, Larsen & Toubro and Van Oord are amongst the nine contractors
prequalified to bid on the EPC tender which is expected by the end of the year. The first
phase of the development will have a crude storage capacity of 6-10 million barrels, which
could be expanded further. The terminal will be connected via a 440km pipeline to a crude
pipeline from Oman's main offshore oil fields. In March 2016 IPIC and the Oman Oil
Company launched two separate USD2bn EPC tenders for the oil-processing facilities at
the Duqm Refinery.
19 September 2016
Oilfield Services & Equipment 43
Figure 46: Middle East prospects Figure 47: Middle East prospects by segment
Source: Company data, Credit Suisse Research, data correct as of September 7th 2016 Source: Company data, Credit Suisse Research, data correct as of September 7
th 2016
Figure 48: Middle East prospects (USDm) Figure 49: Middle East prospects by operator
Source: Company data, Credit Suisse Research, data correct as of September 7th 2016 Source Company data, Credit Suisse Research, data correct as of September 7
th 2016
Figure 50: Top Middle East prospects
in USD millions, unless otherwise stated
Source: Company data, Credit Suisse Research, data correct as of September 7th 2016
Offshore
OnshoreEPC
Midstream
Brownfield
Decommissioning
0 2000 4000 6000 8000 10000 12000
Abu Dhabi
Saudi Arabia
Kuwait
Oman
Bahrain
Iraq
UAE
Iran
Qatar
Kazakhstan
Saudi Aramco
KOC
ADCO
Bapco
IPIC.Oman Oil Company
Takreer
BP
Zadco
Adma-Opco
Others
0
1000
2000
3000
4000
5000
6000
Duqm Sitra Ras TanuraClean Fuels
Rumalia Ruwais LNG ImportTermianl
Upper Zakum GC32 Fujairahbiofuels
Master GasGathering
System
19 September 2016
Oilfield Services & Equipment 44
Europe
Having spent the past two years in pre-FEED and halving the cost from USD12bn to
around USD6bn, Statoil could move Johan Castberg into the FEED stage by November,
according to Upstream, 31st August. Aker Solutions and Statoil have collaborated during
the pre-FEED stage to simplify a series of components and have switched the
development concept from a semi-submersible unit to an FPSO. Statoil has also reduced
the subsea scope of the project with fewer wells, templates and flowlines, which has
allowed for a smaller turret with fewer risers to connect to the FPSO. During pre-FEED,
Aker Solutions was able to increase the volume of the vessel to 1.1m barrels of storage
without increasing the overall size. Statoil estimates the three Castberg reservoirs hold
450-650m barrels of oil and Statoil is aiming to commence production in 2022. The FPSO
will be designed with spare deck capacity for additional modules so that future discoveries
in the Barents Sea can be tied back to the facility.
BP and Ithaca are expected to take an investment decision on Vorlich, offshore Norway in
2017, reports Upstream, 15th April. KBR subsidiary Granherne has carried out pre-FEED
studies, but the full scale of the development is unlikely to be finalised until the nearby
Cappercaille prospect is drilled. Vorlich was discovered in 2014 and is located 10km north
of Ithaca’s Greater Stella Area development. According to the report, any EPC package is
likely to include a SURF and SPS element in a tieback to the FPF-1 FPSO, which is
currently in transit to the Greater Stella Area.
To improve commercial viability, Dea is considering an integrated SURF and SPS
package for the Zidane gas discovery in the Norwegian North Sea. The USD1.5bn
development is likely to be developed via a tieback to Statoil’s Heidrun TLP, which would
require additional modifications to handle the produced gas. Technip and FMC are
reported to have offered an integrated package, while the Subsea7/OneSubsea
partnership has also bid. The package could be worth up to USD500m, according to
Upstream, 2nd
September. Norwegian MMO contractors Aibel, Kvaerner and Aker
Solutions are preparing bids for the Heidrun modifications.
Statoil has submitted the field development plan on the Utgard tieback and plans to award
contracts in late 2016/early 2017, reports Upstream, 12th August. Utgard will be developed
as a two-well subsea tieback to the existing Sleipner A facility via a 21km pipeline. The two
wells will be controlled remotely from the existing platform. The potential package will also
include a series of topside modifications at Sleipner to handle the additional gas and
condensate production, while processed liquids will be exported to the Kaarsto plant. Dry
gas will be transported via the Gassled pipeline.
After submitting a development plan for Utgard, Statoil has moved onto the Byrding
discovery, having reduced the overall project cost by over 65%. The 11m barrel field had
previously been considered too small to be profitable, but according to Upstream, 19th
August, Statoil has reduced the project scope and cut the budget to around USD122m,
from USD425m. Byrding will now be developed as a tieback through a single, two-pronged
well to be drilled from a vacant slot in the subsea template serving the Fram H-Nord field,
7km away. Production will flow via an existing pipeline to Troll C, which will require a small
amount of modification. Byrding is due onstream by Q3 2017, and is set to stay in
production for 8-10 years.
Marathon Oil has submitted the first draft of its decommissioning plan for the Brae
development to the OGA in the UK. The complex consists of Brae A, Bravo and East Brae,
and acts as a hub for 12 fields, having been in production since 1983. Given their suite of
heavy construction vessels, we think that Heerema, Allseas and Saipem are possible
candidates to perform the lift work but a multitude of companies could potentially be
involved in a decommissioning job of such scale.
19 September 2016
Oilfield Services & Equipment 45
Figure 51: European prospects by field Figure 52: European prospects by segment
Source: Company data, Credit Suisse Research, data correct as of September 7th 2016 Source: Company data, Credit Suisse Research, data correct as of September 7
th 2016
Figure 53: European prospects by country (USDm) Figure 54: European prospects by operator
Source: Company data, Credit Suisse Research, data correct as of September 7th 2016 Source Company data, Credit Suisse Research, data correct as of September 7
th 2016
Figure 55: European prospects by sub-sector (USDm)
Source Company data, Credit Suisse Research, data correct as of September 7th 2016
CulzeanZidane
Captain EOR
ByrdingVega B
EPCSURF
Brownfield
T&I
SPSEPIC
0 500 1000 1500 2000 2500 3000
UK
Norway
Italy
Maersk OilDEA
Chevron
Statoil Edison
0
500
1000
1500
2000
2500
EPC SURF Brownfield SPS T&I
19 September 2016
Oilfield Services & Equipment 46
Americas
ExxonMobil has launched a FEED tender for the largest oil discovery of 2015, Liza, in
Guyana. According to Upstream, 19th August, Modec and SBM Offshore are amongst
those competing for the study that centres on an extended well test FPSO with 60,000bd
capacity in the initial phase before a larger 120-150,000bd unit for the full field
development. Exxon has previously indicated potential recoverable reserves of 800m-to-
1.4bn oil equivalent barrels. In perspective the largest field currently in the Gulf of Mexico
– BP’s Thunderhorse – is a one billion barrel field. Development plans are unclear at this
point, but a field of this scale would represent a major OFS opportunity.
After a multi-year attempt to lower development costs, BP has opened tendering on
Mad Dog 2 in the US Gulf. According to Upstream, 26th July, BP has received bids for the
construction of the semisubmersible from three South Korean yards, Keppel and
Sembcorp in Singapore, a joint venture between Fluor and COOEC, Kiewit Offshore
Services, plus Technip has several potential Chinese partners. BP has previously
announced plans to reduce development costs to below USD10bn for Mad Dog from
USD20bn-plus proposals in 2013/14. At Q216 results, BP indicated the final investment
decision could happen before year-end.
Anadarko is deliberating between spar and semi-submersible development concepts for
the Shenandoah project in the US Gulf of Mexico. The US independent has taken the
project through to the FEED stage where it is evaluating between a spar-based dry-tree
solution provided by Technip and a wet-tree semi-submersible platform proposed by SBM
Offshore. Before taking an investment decision, which is likely in 2017, Anadarko will
continue to appraise the discovery by drilling further appraisal wells throughout 2016.
In Brazil, Aker Solutions and FMC are said to be competing for the 23 remaining subsea
trees on Libra, according to Upstream, 29th July. FMC has been awarded four already
through its long-standing frame agreement for the first-phase development. 10 trees are
required for extended well tests expected to be carried out by the Pioneiro de Libra FPSO
starting in early 2017, while 17 are for the Libra pilot project, expected onstream in 2020.
There’s also a USD300m drill pipe riser intervention services tender on Libra, which could
include five dual-bore risers, and four drill pipe riser systems. According to Upstream, 2nd
August, Weatherford, Aker Solutions and FMC have submitted bids to Petrobras.
For the FPSO on Libra, Petrobras has decided to re-issue the tender for the USD2bn unit
with 180,000bd oil-processing and 42mcf/d of gas-processing capacity. According to
Upstream, 26th August, contractors such as SBM and Bluewater expressed concerns with
the highly detailed and stringent local content requirements (which had 60 separate
categories), although Modec bid without imposing reservations or qualifications. The
dayrate for the vessel could be USD800-900,000/day, and 80% local content provision is
required. The charter period is for over 20 years.
Petrobras has also chosen to rebid the contract for the Sepia FPSO, according to
Upstream, 26th August. Despite the vessel being smaller than that required at Libra,
dayrates could be in excess of USD1m as financing costs are high with Petrobras as the
sole investor (local content provision is sub-70%). The Sepia FPSO is scheduled to be
contracted for 21 years and have the capacity to produce 180,000bpd and 5MMcmd of
gas upon commencement of production, currently scheduled for 2020.
In Canada, Upstream, 12th
August, reported that Petronas will instigate a full review of the
Pacific Northwest LNG facility before committing to a capital investment. The project is still
pending the release of the CEAA’s environmental report that was put on hold in March but
subsequently resumed in June. Bechtel and the Technip/Samsung Engineering/China
Huanqiu, KBR/JGC consortia had previously submitted proposals to build two LNG trains
at Lelu Island as part of an USD8bn EPCC contract, according to the report.
19 September 2016
Oilfield Services & Equipment 47
Figure 56: Americas prospects Figure 57: Americas prospects by segment
Source Company data, Credit Suisse Research, data correct as of September 7th 2016 Source: Company data, Credit Suisse Research, data correct as of September 7
th 2016
Figure 58: Americas prospects by country (USDm) Figure 59: Americas prospects by operator
Source: Company data, Credit Suisse Research, data correct as of September 7th 2016 Source Company data, Credit Suisse Research, data correct as of September 7
th 2016
Figure 60: Americas prospects by sub-sector (USDm)
Source Company data, Credit Suisse Research, data correct as of September 7th 2016
Offshore
Onshore
EPC
Floating
Other Equipment
SPS
0 2000 4000 6000 8000
USA
Brazil
Mexico
Canada
Guyana
Falkland Islands
BP
Petrobras
Pemex
Shell
Premier Oil
0
2000
4000
6000
8000
10000
12000
EPC Floating Other Equipment SPS
19 September 2016
Oilfield Services & Equipment 48
Subsector outlook In this section we discuss the outlook for the OFS’s many sub-sectors – seismic, onshore
drilling, offshore drilling, E&C (onshore and offshore), EPCM / maintenance, and
equipment manufacture.
Seismic
Global CS coverage with seismic exposure – PGS, CGG, Schlumberger
In the traditional OFS investor playbook, ‘the seismic trade’ has worked well coming out of a downturn – for example, PGS doubled in 2009, with share price momentum continuing somewhat into 2010. Seismic is an early-cycle industry that traditionally benefits from an uptick in exploration spending and we’ve noted a clear sentiment change from oil companies and the seismic industry through the Q2 2016 reporting season.
Oil industry exploration successes over the past 10 years have bolstered the industry’s development portfolios. We’d expect greater focus on monetising development portfolios. In addition, oil companies are using low E&P valuations to acquire proven barrels (deemed “organic capex”) through bolt-on M&A, and bypassing riskier exploration. Furthermore, there’s very little appetite for frontier exploration at current oil prices; we don’t see this changing in 2017/18.
All this, however, does not mean exploration cannot also grow – as many have commented, prevailing levels of exploration spend are unsustainable to replace and grow the reserves required to meet future demand. We think the pace of recovery is unlikely to match the ‘gallop’ we saw coming out of 2008/09, but a decent ‘canter’ can be expected.
This downturn has been particularly harsh on seismic – it peaked in 2013, well before other sub-sectors, and 2016 represents the third consecutive year of declining exploration spend for the industry. Key players have had to reduce people / costs by up to 50% and some smaller players have gone bankrupt. Streamer capacity is nearly half the 2013 peak – a rational response from an industry that has seen more than its fair share of irrational behavior in past cycles.
Interestingly, the actual volume of seismic acquired is currently higher than pre-2010 levels as acquisition techniques have continued to improve (according to PGS estimates), but this is nearly 40% below the 2013 peak. We think oil companies will allocate more capital to exploration / seismic spending in 2017. We also see potential for a strong Q4 2016 late sales bump – we note that several players had record or close-to-record late sales in Q4 2009).
Given the industry’s supply response, we think the market has potential to rebalance
quickly in an upturn, with potential for positive EBITDA margins on contract work in 2017
(contract pricing likely to remain at broadly break-even cash cost in H2 2016). Vessel
reactivations, however, can act as a headwind to improving pricing.
Encouragingly, the industry looks structurally different coming out of this cycle – there’s
only one newbuild vessel under construction (PGS’s Ranform Hyperion; scheduled for
delivery Q1 2017). This is in stark contrast to the last cycle (there was a 33% net addition
to the fleet in 2009-2012) and to other heavy-asset industries such as offshore drilling
where the over-capacity situation could outweigh a multi-year demand expansion.
A large proportion of industry capacity has been scrapped or cold stacked; very little is
‘warm’. Of the 300 or so ‘lost’ streamers, we think less than half this number could be
brought back online, and the cost of reactivation should not be underestimated. The
industry has lowered vessel maintenance spend through cannibalising equipment from
stacked vessels. As such, the capital investment required to bring cold-stacked capacity
would require more new equipment and could be as much as USD50m (with lead times up
9-12 months). We’d need a sustained recovery for the economics of a reactivation to stack
up – and given the pain that the industry has endured, we don’t expect a rush.
19 September 2016
Oilfield Services & Equipment 49
Licensing rounds / regional trends – overall licensing round activity has been trending
at normal cycle levels, but levels of interest have been mixed. Norway is conducting its
23rd licensing round exclusively in Barents Sea (more beneficial for TGS / WesternGeco),
and the APA wraparound (for which PGS is well aligned) with bids due in September
2016. Bids for the 29th UKCS round, launched in July, are due in October, while
Greenland continues to hold rounds yearly. Canada is scheduled for another round in
November for the East Coast, whereas Greenland will undergo annual rounds between
now and 2018.
Western US Gulf of Mexico sales (in August 2016) were disappointing but we are
optimistic about the Central US Gulf round in March 2017, given the potential for fast
payback tie-back projects. The fourth phase of Mexico’s Round 1 is scheduled to take
place in December 2016, but interest could again be lacklustre until the deepwater rounds
commence in 2017, with two subsequent rounds proposed by 2019.
Figure 61: Upcoming licence round activity
Source: Company data, TGS-NOPEC Geophysical Company ASA
We see potential for the return of activity in Brazil with a new pre-salt round tentatively
earmarked for mid-2017. Oil company interest may well be high depending on the
prospectivity of the blocks on offer (the most recent rounds offered acreage in the less
prolific basins) and the final fiscal framework. Should the round go ahead, CGG and PGS
would expect to be able to monetise their extensive multiclient libraries. African regions
Angola and Congo are likely to be more opportunistic on the timing of rounds.
Central GoM – March 2017
Western GoM – August 2016
Canada Onshore – at least monthly
Mexico Round 1 (L04) in Dec 16, Round 2 announced for 2017. 2 more round proposed by 2019
Newfoundland & Labrador – Nov 2016
Nova Scotia – Q4 2016 (3
year rolling plan)
Brazil – mid-2017
Australia – Q3 2016 (2016 round launch)
New Zealand – Sep 2016 (bids due)
Indonesia – Aug & Oct 2016 (bids due)
Norway 23rd
Round – May 2016 (blocks
awarded)
Norway APA – Sep 2016 (bids due)
UK 29th Round – Oct 2016 (bids due)
Greenland – Dec 2016, 2017, 2018 (bids due)
Ongoing uncertainty
Several prospective rounds look positive,
but deepwater timing is uncertain
19 September 2016
Oilfield Services & Equipment 50
Onshore and Offshore drilling
Global CS coverage with exposure: Saipem, Seadrill, Noble, Ensco, Diamond, Rowan,
Mapping the current positioning is interesting. Understanding how each of the individual
companies drives the level of returns would help us to gauge where further improvements
can be expected. Within the HOLT framework, this is interpreted neatly within a Dupont-
style analysis – Margins and Asset Efficiency.
The figure below reflects the drivers of returns, in terms of margins and asset efficiency
across our coverage. It positions where the firms are today, defending the levels of CFROI
as expressed by the size of the bubbles.
Figure 101: Drivers of Returns - Margins and Asset Efficiency
Source: HOLT®
Tecnicas Reunidas and AMEC Foster Wheeler are examples of firms trading at the
highest asset efficiency levels amongst this cohort. They are also trading at the highest
levels relative to their own history, indicating strong balance sheet management. However,
margins for AMEC Foster are 140bps below seven-year medians and Tecnicas Reunidas
is at the lowest level of its 14-year history.
At the other end of the spectrum are Subsea 7, CGG and PGS where margins are at
historical highs in contrast to asset turns, where they have reached the lowest levels
relative to history and are nearly the worst of this peer group. Top-line growth is crucial for
these companies to expect cash flows and returns to recover over the next few years.
19 September 2016
Oilfield Services & Equipment 71
Forecasts and valuation In this section, we discuss our approach to forecasting for and valuing the OFS sector.
Approach to forecasting – We use a wide framework in determining forecasts for each
company. The overarching assumptions begin with Credit Suisse's commodity price
assumptions for oil & gas markets, CS rig count assumptions and views / projections for
E&P capex. We analyse growth potential and supply / demand dynamics for each
subsector, and consider how each company could perform against this. We analyse book-
to-bill trends, order backlog and backlog scheduling, and historical and peer group relative
performance. We also use our in-house projects tracker to evaluate contractor positioning,
and consider licence round data and expectations. Within cash flow, we forecast capex
and working capital but tend not to forecast M&A or share buybacks (even if this is a part
of the company's strategy).
Valuation discussion – We think investors will use a range or combination of metrics
when evaluating the relative attractiveness of the OFS sector and its constituent parts.
Current-year EV/EBITDA and PE multiples are unlikely to feature too highly in investors'
approach at the bottom-of-the-cycle, although EV / Sales (for asset-light companies) and
price-to-book or price-to-tangible book (for heavier-asset plays) can often provide an
indication of where stocks might bottom out. With oil prices (and the stock prices) now well
off the bottom, these metrics may become less relevant in a recovery cycle but remain
important in assessing downside risk.
As the recovery cycle progresses, we think the market might focus more on the mid-cycle
earnings potential of the OFS sector. In particular, we think investors are looking towards
the last year of a typical three-year consensus forecast, ie, 2018. In our own models, we
prepare through-cycle analysis – this considers what a company could, on average, earn
through a cycle (we typically model a 5-6-year cycle to 2021/22), and typical through-cycle
multiples. We do not use this analysis to determine target prices, but more as an indication
of where stocks could move to over a longer-term horizon.
Our approach – In this report, we approach the valuation using an equally weighted (50%
each) combination of longer-term discounted cash flows (DCF), and nearer-term multiples
(using a sum-of-the-parts approach) using 2017E and 2018E. In DCF, we've used five-
year average monthly beta values, considered equity market risk premium and risk-free
rates in determining WACC for each stock, and assumed long-term growth across the
sector at 2%. For SOTP we apply EBITDA multiples to each division based on business
quality, comparable companies, historical multiples, cycle phasing and growth
expectations.
Blue sky / Grey sky scenarios – For each stock under our coverage, we provide blue
and grey sky scenarios to our base-case estimates. The forecast variables we use are
principally divisional revenue and divisional margin assumptions. For example, a blue /
grey sky scenario will typically assume a growth premium / discount to our base-case
assumptions. In addition, within our valuation framework, we would also assume higher /
lower long-term growth for our DCF, and higher / lower multiples within our SOTP.
19 S
epte
mber 2
016
Oilfie
ld S
erv
ices &
Eq
uip
me
nt
72
Figure 102: Valuation Summary
Stock Rating Target Price +/- Segment Investment Case
Aker Solutions NEUTRAL NOK 35 -4% Equipment Headwinds and tailwinds - The potential rebound in the Norwegian MMO market is underestimated by the market, but so is the softness / duration
of the Subsea market downturn. A much improved company but too early to buy for recovery, in our view.
AMEC Foster
Wheeler
UNDERPERFORM GBp 450 -15% EPCM* Too much too soon - the market has warmed to new CEO Jon Lewis; the stock has outperformed peers since his arrival in June. We expect the
November CDM to deliver positive progress on costs, but investors should not underestimate topline pressures, and future mix looks dilutive.
CGG UNDERPERFORM EUR 17.5 -21% Seismic Over leveraged - February's rights issue has provided little headroom to covenants while market conditions have deteriorated further. The
transformation has created a far better quality business mix, but we think the cyclical recovery will be insufficiently strong to delever materially. As
such CGG's premium rating to PGS looks unwarranted.
Core Laboratories NEUTRAL USD 115 6% Equipment High return / high valuation - we believe the market underestimates the lower-for-longer offshore / deepwater cycle; a key market that in the past
has driven attractive incremental margins. CLB's recovery profile is initially more geared into lower quality (Production Enhancement) revenue
lines; the inflection point on better quality Reservoir Description could be a catalyst - too early to buy, in our view.
Hunting NEUTRAL GBp 500 20% Equipment Early cycle - HTG is a play on US unconventionals - an enlarged Well Completion division with more IP should ensure HTG is faster out the blocks
in this cyclical upswing. However recovering pricing will take time and current valuation suggests to us the stock has run too far too soon.
Petrofac OUTPERFORM GBp 1100 36% E&C* Back to core business - Diversification has not worked; a refocused PFC with best-in-class E&C business at its core is a far more attractive
proposition. P&L is stabilising and well underpinned, and valuation vs closest comp (TRE) appears compelling. Non-core asset disposals provide
additional optionality, in our view.
PGS OUTPERFORM NOK 27 63% Seismic Higher risk / higher reward. The rebound in exploration activity may well underperform past cycles, but we think the market underestimates the
level of pent-up demand for multiclient data and production seismic, plus how quickly the contract market could rebalance. Current multiples imply
a far more pessimistic outturn than we see.
Saipem NEUTRAL EUR 0.45 20% E&C Rehabilitation requires patience – long-cycle business slowly moving in the right direction but significant risks remain – pending revenues, litigation
/ arbitration, offshore drilling re-contracting and cash flow. Risk of downgrade to medium-term financial targets.
Schoeller
Bleckmann
OUTPERFORM EUR 70 33% Equipment Best EU play on US unconventionals - Built out Well Completion line in downturn giving faster growth potential in a recovery and greater through-
cycle balance. Niche technology, highly operationally geared. 2018 multiples in line with long-run average but earnings capacity is double our 2018
estimates.
Seadrill UNDERPERFORM USD 1.0 -53% Drilling All drilled out – continues to pay down debt, but much left to do. Sense of urgency illustrated by net leverage - ~10x late by late 2017E.
Fundamentals remain weak – potentially through to the end of the decade, in our view.
Subsea 7 UNDERPERFORM NOK 75 -11% E&C Cycle realities looming - Top-of-the-cycle backlog is about to run out, and concerns about embedded margin and T&Cs on new work, plus
diversification into low-value add wind farm installation. Heavy asset business and harder to extract value from its fleet in an oversupplied offshore
construction market.
Technip OUTPERFORM EUR 65 27% E&C EU bellwether stock - underappreciation of breadth of TEC's business mix and capabilities - deepwater is important, but multiple other avenues for
growth (shallow water, downstream, gas). FMC deal is defensive against a lackluster near-term market, but combination could disproportionately
benefit from its eventual recovery.
Tecnicas
Reunidas
UNDERPERFORM EUR 28 -14% E&C A strong, well-managed and broad-based contracting business with a largely solid execution track record. However, valuation looks challenged,
particularly against weak near-term order intake trends. We prefer PFC.
Wood Group OUTPERFORM GBp 850 23% EPCM Mispriced quality – Well managed, best-in-class engineering and maintenance franchises, robust balance sheet, and more geared into early cycle
recovery than the market appreciates as catch-up spend on deferred maintenance / brownfield modification bolsters growth in Engineering and US
Unconventionals. Restructuring and streamlined structure increase leverage to growing volumes.
Source: Company data, Credit Suisse estimates; ECM – engineering, project management, consultancy, and maintenance. E&C – engineering and construction
19 September 2016
Oilfield Services & Equipment 73
Preferred stocks
Petrofac, Outperform, TP GBp1100. We think PFC has made mistakes – strategic and
operational – and a weak H116 book-to-bill hasn’t helped near-term sentiment. However,
PFC is retreating back to a high-quality core E&C business, and a well-underpinned 2017
P&L sees PFC trading at a ~40% 2017E PE discount to closest comp TRE. This looks
compelling in itself, but we see considerable optionality as PFC disposes of its non-core
assets. An improving book-to-bill trend in H216 and 2017 should also bolster confidence in
2018 and beyond. In addition, PFC has the highest dividend yield in our coverage at ~6%.
Wood Group, Outperform, TP GBp850. We view Wood Group as a best-in-class
engineering and maintenance franchise with strong management and a robust balance
sheet. It provides investors with early-cycle exposure to US Unconventionals and
engineering studies, while reorganisation improves efficiency and business development
prospects. Furthermore, the valuation – 2017E/18E PE of 13x/11x – looks undemanding
against recovery prospects, and we view the ~4% dividend yield as solid.
Least preferred stocks
Subsea 7, Underperform, TP NOK75. SUBC is an excellent project manager, but,
despite fleet rationalisation and reorganisation, it remains an inherently capital-intensive
business. We believe it will be challenging to extract value from an asset base that
became increasingly commoditised through the last cycle. Positive book-to-bill and 2016
earnings upgrades have driven significant share price outperformance ytd, but we think
the situation is likely to change materially as positive cycle backlog finally unwinds in Q3.
AMEC Foster Wheeler, Underperform, TP GBp450. We believe sentiment is improving
towards AMFW under the leadership of new CEO Jon Lewis. Restructuring stories are
often good stocks to own, and we expect a positive message on costs at the CMD in
November. However, we think the market should be braced for further backlog
deterioration, material revenue declines in 2017, and a strategy to chase lower-quality
(construction) revenue streams. Disposals should relieve some balance sheet pressure
but are unlikely to de-lever AMFW to an optimum capital structure, in our view. The 2017E
EV/EBITDA of nearly 10x, a premium to peers, and versus historical multiples, suggests
that the stock has got ahead of itself. We believe the market underestimates business
Source: Credit Suisse Research * denotes co-covered stocks. PFC, WG, TEC, PGS, SPM, HTG, AKSO, SUBC, AMFW, and TRE covered by Phillip Lindsay, SBOE and CGG covered by Gregory Brown, CLB and SDRL covered by Gregory Lewis]
Top US pick
U.S. Silica (Outperform, TP USD49.00, a US Focus List stock). This cycle, sand is the
most leveraged OFS sub-segment to the recovery in production and activity in North
America. We expect sand demand in 2018 to eclipse the demand level of 2014. Our rig
count forecast, which drives our sand model, is ~25% below the upper end of the
consensus range. This implies further potential upside for sales, margins, and the stock
price to the degree our forecast proves conservative. Sand stocks should replace land
drillers this cycle as the most levered to a recovery in NAM activity. Our colleague James
Wicklund covers the stock.
19 S
epte
mber 2
016
Oilfie
ld S
erv
ices &
Eq
uip
me
nt
74
Figure 104: Pan-European OFS Valuation Summary
Company Ticker Rating Analyst Share YTD Target Pot. Up / Div M.Cap P/E EV/EBITDA EV/Sales P/B
Price Perf price Downside yield USD LC 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E
Source: Credit Suisse estimates, prices as of 13th September. Exchange rates used: EUR/USD1.12, GBP/USD 1.37, NOK/USD0.12
19 September 2016
Oilfield Services & Equipment 77
Europe/Norway Oil & Gas Equipment & Services
Aker Solutions (AKSOL.OL) Rating NEUTRAL [V] Price (13 Sep 16, Nkr) 36.54 Target price (Nkr) 35.00 Market Cap (Nkr m) 9,940.5 Enterprise value (Nkr m) 11,019.4 *Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
EBIT 1,122 987 585 545 Net interest (212) 0 0 0 Cash taxes paid (742) 0 0 0 Change in working capital 1,022 (2,466) (584) 35 Other cash and non-cash items 581 633 672 665 Cash flow from operations 1,771 (847) 672 1,244 CAPEX (841) (710) (596) (583) Free cashflow to the firm 1,025 (1,450) 115 699 Acquisitions (3) 0 0 0 Divestments 3 0 0 0 Other investment/(outflows) (457) (207) (119) (117) Cash flow from investments (1,298) (916) (715) (700) Net share issue/(repurchase) (6) 0 0 0 Dividends paid (394) 0 0 0 Issuance (retirement) of debt 98 0 0 0 Cashflow from financing (323) 0 0 0 Changes in net cash/debt 653 (1,763) (42) 544 Net debt at start 489 (164) 1,599 1,641 Change in net debt (653) 1,763 42 (544) Net debt at end (164) 1,599 1,641 1,097
Balance sheet (Nkr m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 17,191 15,156 14,966 15,273 Total assets 27,728 25,751 25,378 25,492 Liabilities Total current liabilities 17,078 14,594 13,980 13,881 Total liabilities 21,097 18,613 17,999 17,900 Total equity and liabilities 27,728 25,751 25,378 25,492
Net debt/equity (%) (2.5) 22.4 22.2 14.5 Dividend payout ratio (%) 0.0 0.0 0.0 0.0
Company Background
Norwegian based provider of products, systems and services, primarily to the offshore oil and gas industry. Aker Solutions is a leading manufacturer of subsea trees and umbilicals as well as an international engineering house and maintenance provider.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (Nkr) 62.00
We assume Subsea blue sky revenues +7.5% from base case, with margins +1% for 2017 and beyond (we dilute impact for 2016). For Field Development, we assume blue sky revenues +5.0% and margins +0.5% from base case for 2017 and beyond (we dilute the
impact for 2016). In our SOTP, we assume Subsea / Field Development multiples 1.5 / 1.0pts higher than our base case, whereas the DCF assumes +0.25% vs base case for long-term growth
Our Grey Sky Scenario (Nkr) 17.00
We assume Subsea grey sky revenues -7.5% from base case, with margins -1% for 2017 and beyond (we dilute impact for 2016). For Field Development, we assume grey sky revenues -5.0% and margins -0.5% from base case for 2017 and beyond (we dilute the impact for 2016). In our SOTP, we assume Subsea / Field Development multiples 1.5 / 1.0pts lower than base case, whereas the DCF assumes -0.25% lower vs base case for long-term growth
Share price performance
The price relative chart measures performance against the OBX INDEX which
closed at 532.5 on 13/09/16
On 13/09/16 the spot exchange rate was Nkr9.28/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 118: Aker Solutions in PEERs
Source: Credit Suisse PEERs
19 September 2016
Oilfield Services & Equipment 87
Europe/United Kingdom Oil & Gas Equipment & Services
Amec Foster Wheeler (AMFW.L) Rating UNDERPERFORM Price (13 Sep 16, p) 531.00 Target price (p) 450.00 Market Cap (£ m) 2,070.8 Enterprise value (£ m) 3,136.3 *Stock ratings are relative to the coverage universe in each
EBIT 374 330 307 336 Net interest (48) (71) (71) (71) Cash taxes paid (79) (57) (54) (61) Change in working capital (42) 28 11 (25) Other cash and non-cash items (64) (201) (54) (54) Cash flow from operations 141 30 138 125 CAPEX (15) (11) (10) (10) Free cashflow to the firm 129 21 131 117 Acquisitions (6) 0 0 0 Divestments 11 0 0 0 Other investment/(outflows) 57 (36) (19) (19) Cash flow from investments 47 (47) (29) (29) Net share issue/(repurchase) 6 0 0 0 Dividends paid (167) (82) (79) (75) Issuance (retirement) of debt (75) 0 0 0 Cashflow from financing (319) (100) (79) (75) Changes in net cash/debt (159) (117) 31 21 Net debt at start 824 983 1,100 1,069 Change in net debt 159 117 (31) (21) Net debt at end 983 1,100 1,069 1,049
Balance sheet (£ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 1,872 1,893 1,921 2,082 Total assets 5,572 5,191 5,092 5,128 Liabilities Total current liabilities 2,261 2,247 2,146 2,154 Total liabilities 3,964 3,950 3,849 3,857 Total equity and liabilities 5,572 5,191 5,092 5,128
Net debt/equity (%) 61.1 88.6 86.0 82.5 Dividend payout ratio (%) 42.8 40.9 40.0 40.0
Company Background
A UK based provider of engineering, project management, operations and construction services to the oil and gas, clear energy, environment and infrastructure and mining industries.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (p) 687.00
For Americas / NECIS / AMEASE we assume blue sky revenues 5% / 3% / 5% higher than our base case scenario with margins for each division of +1% for 2017 and beyond (2016 impact is diluted). In our SOTP, we assume multiples 1.0 / 1.0 / 1.0 pts higher than our base case for Americas, NECIS and AMEASE respectively. We flex DCF
for long-term growth by +0.25%.
Our Grey Sky Scenario (p) 244.00
For Americas / NECIS / AMEASE we assume grey sky revenues 5% / 3% / 5% lower than our base case scenario with margins for each division of -1% for 2017 and beyond (2016 impact is diluted). In our SOTP, we assume multiples 1.0 / 1.0 / 1.0 pts lower than our base case for Americas, NECIS and AMEASE respectively. We flex DCF for long-term growth by -0.25%.
Share price performance
The price relative chart measures performance against the FTSE ALL SHARE
INDEX which closed at 3643.4 on 13/09/16
On 13/09/16 the spot exchange rate was £.85/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 128: AMEC Foster Wheeler in PEERs
Source: Credit Suisse PEERs
19 September 2016
Oilfield Services & Equipment 98
Europe/France
CGG (GEPH.PA) Rating UNDERPERFORM [V] Price (06 Sep 16, €) 22.22 Target price (€) 17.50 Market Cap (€ m) 491.8 Enterprise value (€ m) 2,489.6 *Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
EBIT (1,158) (161) 1 128 Net interest (166) (160) (151) (151) Cash taxes paid - - - - Change in working capital (44) 165 (37) (66) Other cash and non-cash items 1,776 377 539 523 Cash flow from operations 408 221 352 433 CAPEX (430) (453) (409) (437) Free cashflow to the firm 282 87 260 320 Acquisitions (19) 0 0 0 Divestments 46 0 0 0 Other investment/(outflows) (20) 0 0 0 Cash flow from investments (423) (453) (409) (437) Net share issue/(repurchase) - 368 0 0 Dividends paid 0 0 0 0 Issuance (retirement) of debt 232 0 0 0 Cashflow from financing 63 368 0 0 Changes in net cash/debt (80) 419 (58) (4) Net debt at start 2,420 2,499 2,080 2,138 Change in net debt 80 (419) 58 4 Net debt at end 2,499 2,080 2,138 2,142
Balance sheet (US$ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 1,772 1,521 1,494 1,573 Total assets 5,513 5,199 5,092 5,102 Liabilities Total current liabilities 1,055 1,044 1,038 1,054 Total liabilities 4,155 3,876 3,869 3,886 Total equity and liabilities 5,513 5,199 5,092 5,102
Net debt/equity (%) 184.0 157.1 174.8 176.0 Dividend payout ratio (%) -0.0 -0.0 -0.0 -0.0
Company Background
European based provider of seismic acquisition, seismic equipment, data and processing to the global oil and gas industry.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (€) 34.00
By division, we assume blue sky revenue growth at 7.5% / 5% / 5% above our base case and blue sky margins 4 / 0.5 / 2 ppts above our base case for Contractual Data Acquisition, GGR and Equipment respectively. On valuation, our SOTP, we assume multiples 1.0 / 0.25 / 1.5pts higher than our base case for Acquisition / GGR / Equipment. We flex DCF for long-term growth by +0.25%
Our Grey Sky Scenario (€) 5.00
By division, we assume grey sky revenue decline at 7.5% / 5% / 5% below our base case and grey sky margins 4 / 0.5 / 2 ppts below our base case for Contractual Data Acquisition, GGR and Equipment respectively. On valuation, our SOTP, we assume multiples 1.0 / 0.25 / 1.5pts lower than our base case for Acquisition / GGR / Equipment. We flex DCF for long-term growth by -0.25%.
Share price performance
The price relative chart measures performance against the CAC 40 INDEX
which closed at 4530.0 on 06/09/16
On 06/09/16 the spot exchange rate was €1/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 139: CGG in PEERs
Source: Credit Suisse PEERs
19 September 2016
Oilfield Services & Equipment 108
Americas/United States Oil & Gas Equipment & Services
Core Laboratories (CLB) Rating NEUTRAL Price (13-Sep-16,US$) 108.25 Target price (US$) 115.00 52-week price range 133.97 - 89.25 Market cap (US$ m) 4,774.51 Enterprise value (US$ m) 4,980.90 *Stock ratings are relative to the coverage universe in each
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 September 2016
Oilfield Services & Equipment 110
Europe/United Kingdom Oil & Gas Equipment & Services
Hunting Plc (HTG.L) Rating NEUTRAL Price (13 Sep 16, p) 415.50 Target price (p) 500.00 Market Cap (£ m) 619.6 Enterprise value (£ m) 687.3 *Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
EBIT 16 (85) 12 61 Net interest (3) (3) (4) (3) Cash taxes paid - - - - Change in working capital - - - - Other cash and non-cash items 128 176 44 20 Cash flow from operations 142 88 52 78 CAPEX (72) (16) (16) (24) Free cashflow to the firm 120 80 44 66 Acquisitions 0 0 0 0 Divestments 1 0 0 0 Other investment/(outflows) (11) (4) (3) (4) Cash flow from investments (82) (19) (19) (28) Net share issue/(repurchase) 1 0 0 0 Dividends paid (40) (6) 0 (5) Issuance (retirement) of debt (29) 0 0 0 Cashflow from financing (79) (6) 0 (5) Changes in net cash/debt 20 31 33 45 Net debt at start 135 115 85 51 Change in net debt (20) (31) (33) (45) Net debt at end 115 85 51 6
Balance sheet (US$ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 564 488 537 625 Total assets 1,496 1,360 1,347 1,380 Liabilities Total current liabilities 177 147 154 178 Total liabilities 328 299 305 329 Total equity and liabilities 1,496 1,360 1,347 1,380
Net debt/equity (%) 9.9 8.0 4.9 0.6 Dividend payout ratio (%) 260.7 -0.0 0.0 40.0
Company Background
Hunting PLC is an industrial holding company for a group of companies that manufactures and distributes products that are used in the extraction of oil and gas.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (p) 705.00
For well construction, completion and intervention blue sky revenues we assume revenues +7.5 / 10.0 / 5.0%. For well construction, completion and intervention blue sky margins 1.5 / 2.0 / 1.0pts higher from our base case for 2017 and beyond (diluted impact for 2016). In our SOTP we assume multiples 1.0 / 2.0 / 0.5pts higher for
well construction, well completion and well intervention respectively. We flex DCF for long-term growth by +0.25%
Our Grey Sky Scenario (p) 364.00
For well construction, completion and intervention grey sky revenues we assume revenues -7.5 / 10.0 / 5.0%. For well construction, completion and intervention grey sky margins -1.5 / 2.0 / 1.0pts lower from our base case for 2017 and beyond (diluted impact for 2016). In our SOTP we assume multiples 1.0 / 2.0 / 0.5pts lower for well construction, well completion and well intervention respectively. We flex DCF for long-term growth by -0.25%
Share price performance
The price relative chart measures performance against the FTSE 100 IDX
which closed at 6665.6 on 13/09/16
On 13/09/16 the spot exchange rate was £.85/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
Source: Company data, Credit Suisse estimates. *(loss) / profit from operations is derived from EBITA less other gains, losses and impairments
19 September 2016
Oilfield Services & Equipment 119
PEERs
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 150: Hunting in PEERs
Source: Credit Suisse PEERs
19 September 2016
Oilfield Services & Equipment 120
Europe/United Kingdom Oil & Gas Equipment & Services
Petrofac (PFC.L) Rating OUTPERFORM [V] Price (13 Sep 16, p) 808.00 Target price (p) 1100.00 Market Cap (£ m) 2,795.0 Enterprise value (£ m) 3,363.2 *Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
EBIT 102 462 648 644 Net interest (47) (87) (78) (78) Cash taxes paid - - - - Change in working capital 602 (58) (180) (190) Other cash and non-cash items 12 132 84 92 Cash flow from operations 669 448 474 468 CAPEX (169) (279) (180) (128) Free cashflow to the firm 585 365 384 378 Acquisitions - - - - Divestments 43 5 0 0 Other investment/(outflows) (192) (79) (38) (38) Cash flow from investments (318) (352) (218) (166) Net share issue/(repurchase) - - - - Dividends paid (223) (223) (224) (229) Issuance (retirement) of debt 42 0 0 0 Cashflow from financing (220) (223) (224) (229) Changes in net cash/debt 47 (130) 33 72 Net debt at start 733 686 816 784 Change in net debt (47) 130 (33) (72) Net debt at end 686 816 784 711
Balance sheet (US$ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 5,502 5,699 5,585 5,867 Total assets 8,547 8,840 8,721 8,960 Liabilities Total current liabilities 4,914 5,183 4,846 4,856 Total liabilities 7,315 7,642 7,284 7,271 Total equity and liabilities 8,547 8,840 8,721 8,960
Net debt/equity (%) 55.7 68.1 54.5 42.1 Dividend payout ratio (%) 2485.8 70.2 48.4 50.0
Company Background
Petrofac designs, builds, operates and maintains oil and gas facilities. It has a large onshore engineering and construction business operating primarily in the Middle East and North Africa as well as a large operations business in the North Sea.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (p) 1756.00
In E&C we assume blue sky revenues +7.5% from base with margins +1% for 2017 and beyond (diluted impact for 2016). For EPS we assume blue sky revenues +5% and margins +0.5% from our base case from 2017. For IES we assume revenues +7.5% from
our base case and margins +2.0% from our base case. In our SOTP we assume multiples +1.5/1.0pts higher than base in E&C and EPS. For IES we assume 75% of book value. We flex DCF for LT growth by +0.25%
Our Grey Sky Scenario (p) 631.00
In E&C we assume grey sky revenues -7.5% from base with margins -1% for 2017 and beyond (diluted impact for 2016). For EPS we assume blue sky revenues -5% and margins -0.5% from our base case from 2017. For IES we assume revenues -7.5% from our base case and margins -2.0% from our base case. In our SOTP we assume multiples +1.5/1.0pts higher than base in E&C and EPS. For IES we assume 25% of book value. We flex DCF for LT growth by -0.25%
Share price performance
The price relative chart measures performance against the FTSE ALL SHARE
INDEX which closed at 3643.4 on 13/09/16
On 13/09/16 the spot exchange rate was £.85/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 160: Petrofac in PEERs
Source: Credit Suisse PEER
19 September 2016
Oilfield Services & Equipment 131
Europe/Norway Oil & Gas Equipment & Services
Petroleum Geo Services (PGS.OL) Rating OUTPERFORM [V] Price (13 Sep 16, Nkr) 16.60 Target price (Nkr) 27.00 Market Cap (Nkr m) 3,977.0 Enterprise value (Nkr m) 13,311.8 *Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
EBIT (430) (150) (55) 34 Net interest 58 0 0 0 Cash taxes paid (25) 0 0 0 Change in working capital 115 14 (13) (16) Other cash and non-cash items 770 388 412 480 Cash flow from operations 488 252 343 498 CAPEX (469) (450) (383) (369) Free cashflow to the firm 447 192 280 420 Acquisitions - - - - Divestments 89 0 0 0 Other investment/(outflows) (47) 0 0 0 Cash flow from investments (427) (450) (383) (369) Net share issue/(repurchase) - - - - Dividends paid (20) 0 0 0 Issuance (retirement) of debt (64) 193 0 0 Cashflow from financing (34) 193 0 0 Changes in net cash/debt 66 (208) (40) 129 Net debt at start 1,038 972 1,180 1,219 Change in net debt (66) 208 40 (129) Net debt at end 972 1,180 1,219 1,091
Balance sheet (US$ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 470 588 562 710 Total assets 2,914 3,042 2,929 2,939 Liabilities Total current liabilities 298 349 369 393 Total liabilities 1,450 1,692 1,712 1,736 Total equity and liabilities 2,914 3,042 2,929 2,939
Net debt/equity (%) 66.4 87.4 100.2 90.6 Dividend payout ratio (%) -0.0 -0.0 -0.0 -0.0
Company Background
Norwegian based provider of seismic services to the global oil and gas industry.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (Nkr) 51.00
In Marine Contract, we assume blue sky revenues +10% from our base case scenario with margins +2% for 2017 and beyond For Multi-Client Pre-funding, Late-Sales, and Imaging we assume blue sky revenues +5.0% and margins +0.5% from our base case scenario for 2017 and beyond (diluted impact for 2016). In our SOTP, we assume multiples 1.0 pt higher than our base case for
Marine Contract / Multi-Client and flex long term growth by +.25% in our DCF
Our Grey Sky Scenario (Nkr) 10.00
In Marine Contract, we assume grey sky revenues -10% from our base case with margins -2% for 2017 and beyond (diluted impact for 2016). For Multi-Client Pre-funding, Late-Sales and Imaging we assume grey sky revenues -5.0% and margins -0.5% from our base case for 2017 and beyond. In our SOTP, we assume multiples 0.25 pts lower than our base case for Marine Contract / Multi-Client and flex long term growth by -.25% in our DCF
Share price performance
The price relative chart measures performance against the OBX INDEX which
closed at 532.5 on 13/09/16
On 13/09/16 the spot exchange rate was Nkr9.28/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
Total liabilities and shareholders equity 3563 2914 3042 2929 2939 3030 3162
Source: Company data, Credit Suisse estimates
19 September 2016
Oilfield Services & Equipment 141
PEERs
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 172: PGS in PEERs
Source: Credit Suisse PEERs
19 September 2016
Oilfield Services & Equipment 142
Europe/Italy Oil & Gas Equipment & Services
Saipem (SPMI.MI) Rating NEUTRAL [V] Price (13 Sep 16, €) 0.38 Target price (€) 0.45 Market Cap (€ m) 3,805.3 Enterprise value (€ m) 6,601.6 *Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
EBIT (254) 603 537 525 Net interest 191 0 0 0 Cash taxes paid 127 0 0 0 Change in working capital 322 485 485 485 Other cash and non-cash items (893) (348) (216) (190) Cash flow from operations (507) 740 806 820 CAPEX (550) (403) (407) (506) Free cashflow to the firm (1,002) 337 440 415 Acquisitions - - - - Divestments 185 0 0 0 Other investment/(outflows) (30) (13) (12) (12) Cash flow from investments (395) (416) (419) (518) Net share issue/(repurchase) - 3,436 - - Dividends paid (17) 0 0 0 Issuance (retirement) of debt 818 0 0 0 Cashflow from financing 354 436 0 0 Changes in net cash/debt (955) 3,760 387 302 Net debt at start 4,492 5,447 1,687 1,299 Change in net debt 955 (3,760) (387) (302) Net debt at end 5,447 1,687 1,299 997
Balance sheet (€ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 7,564 7,310 7,258 7,385 Total assets 16,319 15,908 15,620 15,642 Liabilities Total current liabilities 9,458 5,658 5,102 4,862 Total liabilities 12,800 8,700 8,144 7,904 Total equity and liabilities 16,319 15,908 15,620 15,642
Net debt/equity (%) 154.8 23.4 17.4 12.9 Dividend payout ratio (%) -0.0 0.0 0.0 0.0
Company Background
Saipem is an integrated engineering, construction and drilling company with operations both on and offshore
Blue/Grey Sky Scenario
Our Blue Sky Scenario (€) 0.82
For blue sky we assume revenues +7.5 / 5.0 / 5.0 / 5.0% higher from our base case for offshore E&C, Onshore E&C, Offshore Drilling and Onshore Drilling, respectively. For blue sky margin we assume multiples +2.0 / 1.0 / 1.5 / 1.0% higher from our base scenario for 2017 (diluted impact in 2017). In our SOTP we assume multiples 2.0 / 1.5 / 1.0 / 1.5pts higher than our base case and flex DCF for long
term growth by +.25%
Our Grey Sky Scenario (€) 0.20
For grey sky we assume revenues -7.5 / 5.0 / 5.0 / 5.0% higher from our base case for offshore E&C, Onshore E&C, Offshore Drilling and Onshore Drilling, respectively. For grey sky margin we assume multiples -2.0 / 1.0 / 1.5 / 1.0% higher from our base scenario for 2017 (diluted impact in 2017). In our SOTP we assume multiples 2.0 / 1.5 / 1.0 / 1.5pts lower than our base case and flex DCF for long term growth by -.25%
Share price performance
The price relative chart measures performance against the FTSEUROFIRST
300 INDEX which closed at 1332.9 on 13/09/16
On 13/09/16 the spot exchange rate was €1/Eu 1.- Eu.89/US$1
Figure 173: New orders and book-to-bill Figure 174: Backlog evolution
Source: Company data Source: Company data
Figure 175: Key contracts being bid (USDm) Figure 176: Current bids by region (USDm)
Source: MEED, Upstream, Credit Suisse Research, data correct as of September 7th 2016 Source: MEED, Upstream, Credit Suisse Research, data correct as of September 7
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries .
Total Shareholders equity 4178 3519 7208 7477 7738 8065 8468
Total liabilities and shareholders equity 17594 16319 15908 15620 15642 16126 16928
Source: Company data, Credit Suisse estimates
19 September 2016
Oilfield Services & Equipment 152
PEERs
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 182: Saipem in PEERs
Source: Credit Suisse Research
19 September 2016
Oilfield Services & Equipment 153
Europe/Austria Oil & Gas Equipment & Services
Schoeller Bleckmann Oilfield
Equipment (SBOE.VI) Rating OUTPERFORM Price (13 Sep 16, €) 52.65 Target price (€) 70.00 Market Cap (€ m) 842.4 Enterprise value (€ m) 866.7 *Stock ratings are relative to the coverage universe in each
EBIT 4 (38) 27 64 Net interest (4) (3) (4) (4) Cash taxes paid - - - - Change in working capital 57 60 (2) (23) Other cash and non-cash items 46 51 40 33 Cash flow from operations 103 70 61 70 CAPEX (23) (11) (22) (33) Free cashflow to the firm 81 59 39 37 Acquisitions - - - - Divestments 5 0 0 0 Other investment/(outflows) (0) (95) (7) (10) Cash flow from investments (18) (106) (29) (42) Net share issue/(repurchase) - - - - Dividends paid (24) (8) (8) (8) Issuance (retirement) of debt - - - - Cashflow from financing (25) (8) (8) (8) Changes in net cash/debt 62 (72) 24 20 Net debt at start 36 (26) 45 22 Change in net debt (62) 72 (24) (20) Net debt at end (26) 45 22 2
Balance sheet (€ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 391 280 313 366 Total assets 741 693 709 753 Liabilities Total current liabilities 87 86 87 90 Total liabilities 290 282 289 299 Total equity and liabilities 741 693 709 753
Net debt/equity (%) (5.8) 11.0 5.1 0.4 Dividend payout ratio (%) (42.0) (26.1) 49.1 18.9
Company Background
Schoeller-Bleckmann Oilfield Equipment AG (SBO) is the global market leader for high-precision components for the oil service industry. The group manufactures drilling motors and drilling tools and offers to its customers full-scale repair.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (€) 99.00
For High Precision Components, we assume blue sky revenues +5% from our base case scenario with margins +1% for 2017 and beyond (diluted impact for 2016). For Oilfield Equipment/Well Completion, we assume blue sky revenues +7.5% and margins
+2.0% from our base case scenario for 2017 and beyond (diluted impact for 2016). In our SOTP, we assume multiples 1.5 pts higher than our base case for HPC. We flex DCF long-term growth by +0.25%
Our Grey Sky Scenario (€) 50.00
For High Precision Components, we assume grey sky revenues -5% from our base case scenario with margins -1% for 2017 and beyond (diluted impact for 2016). For Oilfield Equipment/Well Completion, we assume grey sky revenues -7.5% and margins -2.0% from our base case scenario for 2017 and beyond (diluted impact for 2016). In our SOTP, we assume multiples 1.5 pts lower than our base case for HPC. We flex DCF long-term growth by -0.25%
Share price performance
The price relative chart measures performance against the VIENNA SE
AUSTRIAN TRADED IDX Index which closed at 2356.4 on 13/09/16
On 13/09/16 the spot exchange rate was €1/Eu 1.- Eu.89/US$1
Source: Company data, Thomson Reuters, Credit Suisse estimates.
19 September 2016
Oilfield Services & Equipment 155
Schoeller Bleckmann in charts
Figure 183: Indexed US rig count vs. previous
cycles Figure 184: CS North American rig count forecast
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
Other non-current liabilities 101 78 37 44 50 57 62
Total non-current liabilities 199 203 196 202 208 215 221
Shareholders equity 456 450 412 420 454 516 599
Minority interest 0 0 0 0 0 0 0
Total liabilities and shareholders equity 800 741 693 709 753 825 917
Source: Company data, Credit Suisse estimates
19 September 2016
Oilfield Services & Equipment 162
PEERs
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 193: Schoeller Bleckmann in PEERs
Source: Credit Suisse Research
19 September 2016
Oilfield Services & Equipment 163
Americas/United States Oil & Gas Equipment & Services
Seadrill (SDRL) Rating UNDERPERFORM [V] Price (13-Sep-16,US$) 2.15 Target price (US$) 1.00 52-week price range 7.72 - 1.63 Market cap (US$ m) 1,093.16 Enterprise value (US$ m) 9,512.77 *Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 September 2016
Oilfield Services & Equipment 165
Europe/Norway Oil & Gas Equipment & Services
Subsea 7 S.A. (SUBC.OL) Rating UNDERPERFORM Price (13 Sep 16, Nkr) 84.70 Target price (Nkr) 75.00 Market Cap (Nkr m) 27,728.0 Enterprise value (Nkr m) 25,257.6 *Stock ratings are relative to the coverage universe in each
EBIT 601 462 38 77 Net interest (9) (2) (3) (2) Cash taxes paid (208) (155) (28) (45) Change in working capital 64 (348) (32) (26) Other cash and non-cash items 601 258 365 333 Cash flow from operations 1,049 215 339 338 CAPEX (639) (400) (250) (268) Free cashflow to the firm 899 85 209 195 Acquisitions - - - - Divestments 4 0 0 0 Other investment/(outflows) 81 (4) (4) (4) Cash flow from investments (554) (404) (254) (272) Net share issue/(repurchase) (16) 0 0 0 Dividends paid 0 0 0 0 Issuance (retirement) of debt (1) 0 0 0 Cashflow from financing (96) 0 0 0 Changes in net cash/debt 428 (189) 85 66 Net debt at start 6 (423) (234) (319) Change in net debt (428) 189 (85) (66) Net debt at end (423) (234) (319) (385)
Balance sheet (US$ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 2,026 1,784 1,969 1,999 Total assets 7,854 7,813 7,951 7,997 Liabilities Total current liabilities 1,774 1,373 1,440 1,378 Total liabilities 2,508 2,107 2,175 2,112 Total equity and liabilities 7,854 7,813 7,951 7,997
Net debt/equity (%) (7.9) (4.1) (5.5) (6.5) Dividend payout ratio (%) 0.0 0.0 0.0 0.0
Company Background
Subsea 7 is a provider of subsea to surface engineering and construction services, primarily to the offshore oil and gas industries using its fleet of offshore construction and support vessels.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (Nkr) 118.00
For SURF & Conventional we assume blue sky revenues +5% from our base case scenario with margins +1.5% for 2017 and beyond (diluted impact for 2016). For i-tech services, we assume blue sky revenues +2.5% and margins +1.0% from our base case for 2017 and beyond (diluted impact for 2016). In our SOTP, we assume
multiples 1.5 / 1.0 higher than our base case for SURF & Conventional/ i-tech services. We flex DCF for long-term growth by +.25%
Our Grey Sky Scenario (Nkr) 36.00
For SURF & Conventional we assume grey sky revenues -5% from our base case scenario with margins -1.5% for 2017 and beyond (diluted impact for 2016). For i-tech services, we assume grey sky revenues -2.5% and margins -1.0% from our base case for 2017 and beyond (diluted impact for 2016). In our SOTP, we assume multiples 1.5 / 1.0 lower than our base case for SURF & Conventional/ i-tech services. We flex DCF for long-term growth by -.25%
Share price performance
The price relative chart measures performance against the OBX INDEX which
closed at 532.5 on 13/09/16
On 13/09/16 the spot exchange rate was Nkr9.28/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
Total Shareholders Equity 5562 5346 5707 5776 5884 6037 6253
Total liabilities and shareholders equity 8624 7854 7813 7951 7997 8132 8451
Source: Company data, Credit Suisse estimates
19 September 2016
Oilfield Services & Equipment 174
PEERs
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 203: Subsea 7 in PEERs
Source: Credit Suisse PEERs
19 September 2016
Oilfield Services & Equipment 175
Europe/France Oil & Gas Equipment & Services
Technip (TECF.PA) Rating OUTPERFORM Price (13 Sep 16, €) 51.30 Target price (€) 65.00 Market Cap (€ m) 6,275.9 Enterprise value (€ m) 4,159.9 *Stock ratings are relative to the coverage universe in each
EBIT 802 873 634 566 Net interest (157) (71) (73) (78) Cash taxes paid - - - - Change in working capital 562 (62) (965) (57) Other cash and non-cash items (164) (6) 49 68 Cash flow from operations 1,043 734 (355) 499 CAPEX (282) (241) (230) (237) Free cashflow to the firm 846 541 (539) 310 Acquisitions (2) 0 0 0 Divestments 24 0 0 0 Other investment/(outflows) (44) (11) (9) (8) Cash flow from investments (303) (252) (239) (245) Net share issue/(repurchase) 94 0 0 0 Dividends paid (95) (230) (235) (235) Issuance (retirement) of debt (113) 0 0 0 Cashflow from financing (114) (230) (235) (235) Changes in net cash/debt 813 252 (829) 19 Net debt at start (1,125) (1,938) (2,190) (1,362) Change in net debt (813) (252) 829 (19) Net debt at end (1,938) (2,190) (1,362) (1,381)
Balance sheet (€ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 8,546 8,726 7,451 7,361 Total assets 15,536 15,670 14,359 14,246 Liabilities Total current liabilities 8,907 8,720 7,260 7,048 Total liabilities 10,991 10,804 9,344 9,132 Total equity and liabilities 15,536 15,670 14,359 14,246
Net debt/equity (%) (42.6) (45.0) (27.2) (27.0) Dividend payout ratio (%) 39.2 42.6 61.1 70.3
Company Background
Technip is a broad based services provider of project management, engineering and construction for the energy industry. It has notable positions in subsea, offshore and onshore sectors.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (€) 108.00
For Subsea, we assume blue sky revenues +7.5% from our base case scenario with margins +2% for 2017 and beyond (diluted impact for 2016). For Onshore / Offshore, we assume blue sky revenues +2.5% and margins +1.0% from our base case scenario for 2017 and beyond (diluted impact for 2016). In our SOTP, we
assume multiples 1.0pt higher than our base case for Subsea and Onshore / Offshore respectively. For DCF we flex long-term growth by +0.25%
Our Grey Sky Scenario (€) 36.00
For Subsea, we assume grey sky revenues -7.5% from our base case scenario with margins -2% for 2017 and beyond (diluted impact for 2016). For Onshore / Offshore, we assume grey sky revenues -2.5% and margins -1.0% from our base case scenario for 2017 and beyond (diluted impact for 2016). In our SOTP, we assume multiples 1.0pt lower than our base case for Subsea and Onshore / Offshore respectively. For DCF we flex long-term growth by -0.25%
Share price performance
The price relative chart measures performance against the CAC 40 INDEX
which closed at 4387.2 on 13/09/16
On 13/09/16 the spot exchange rate was €1/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
Figure 219: Cumulative Integrated FEED Study Awards
Source: Technip
16
0
2
4
6
8
10
12
14
16
18
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
No.
of
FE
ED
Stu
die
s
Months after Establishing JV/Alliance
19 September 2016
Oilfield Services & Equipment 190
PEERs
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 220: Technip in PEERs
Source: Credit Suisse PEERs
19 September 2016
Oilfield Services & Equipment 191
Europe/Spain Oil & Gas Equipment & Services
Tecnicas Reunidas (TRE.MC) Rating UNDERPERFORM Price (13 Sep 16, €) 32.50 Target price (€) 28.00 Market Cap (€ m) 1,816.3 Enterprise value (€ m) 1,319.1 *Stock ratings are relative to the coverage universe in each
EBIT 86 182 177 187 Net interest 2 (1) (1) (1) Cash taxes paid - - - - Change in working capital (111) (11) (89) (91) Other cash and non-cash items 5 (29) (29) (31) Cash flow from operations (18) 141 58 64 CAPEX (30) (25) (24) (25) Free cashflow to the firm (33) 122 40 45 Acquisitions (2) 0 0 0 Divestments 2 0 0 0 Other investment/(outflows) (8) (2) (2) (2) Cash flow from investments (38) (27) (26) (27) Net share issue/(repurchase) (1) 0 0 0 Dividends paid (75) (75) (75) (75) Issuance (retirement) of debt 0 0 0 0 Cashflow from financing 136 (75) (75) (75) Changes in net cash/debt (132) 40 (42) (38) Net debt at start (601) (469) (509) (467) Change in net debt 132 (40) 42 38 Net debt at end (469) (509) (467) (429)
Balance sheet (€ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 3,268 3,638 3,500 3,567 Total assets 3,613 3,991 3,861 3,935 Liabilities Total current liabilities 2,997 3,313 3,122 3,129 Total liabilities 3,216 3,532 3,341 3,348 Total equity and liabilities 3,613 3,991 3,861 3,935
Net debt/equity (%) (118.1) (110.7) (89.8) (73.1) Dividend payout ratio (%) 125.8 54.5 55.5 52.7
Company Background
A Spainish contractor providing engineering, procurement, and construction of industrial and power facilities with a principal focus on the onshore oil and gas market.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (€) 45.00
For O&G, we assume blue sky revenues +7.5% from our base case with margins +1.5% for 2017 and beyond (diluted impact for 2016). For Power, and for Infrastructure, we assume blue sky revenues +5% and margins +0.5% from our base case for 2017 and beyond (diluted impact for 2016). In our SOTP, we assume multiples 1.0 /
0.5 / 0.5 higher than our base case for Oil & Gas, Power and Infrastructure. We flex DCF for long-term growth by +0.25%
Our Grey Sky Scenario (€) 17.00
For O&G, we assume grey sky revenues -7.5% from our base case with margins -1.5% for 2017 and beyond (diluted impact for 2016). For Power, and for Infrastructure, we assume grey sky revenues -5% and margins -0.5% from our base case for 2017 and beyond (diluted impact for 2016). In our SOTP, we assume multiples 1.0 / 0.5 / 0.5 lower than our base case for Oil & Gas, Power and Infrastructure. We flex DCF for long-term growth by -0.25%
Share price performance
The price relative chart measures performance against the MADRID SE INDEX
which closed at 879.2 on 13/09/16
On 13/09/16 the spot exchange rate was €1/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries.
Total liabilities and shareholders equity 2439 3613 3991 3861 3935 4069 4295
Source: Company data, Credit Suisse estimates
19 September 2016
Oilfield Services & Equipment 200
PEERs
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage.
Figure 231: Tecnicas Reunidas in PEERs
Source: Credit Suisse PEERs
19 September 2016
Oilfield Services & Equipment 201
Europe/United Kingdom Oil & Gas Equipment & Services
Wood Group (WG.L) Rating OUTPERFORM Price (13 Sep 16, p) 688.50 Target price (p) 850.00 Market Cap (£ m) 2,623.4 Enterprise value (£ m) 2,863.9 *Stock ratings are relative to the coverage universe in each
EBIT 361 239 302 342 Net interest (18) (21) (21) (20) Cash taxes paid - - - - Change in working capital 47 42 (17) (31) Other cash and non-cash items 76 147 110 100 Cash flow from operations 466 407 374 390 CAPEX (36) (44) (52) (69) Free cashflow to the firm 430 363 322 321 Acquisitions (238) (7) 0 0 Divestments 2 14 0 0 Other investment/(outflows) (23) (31) (41) (44) Cash flow from investments (296) (68) (94) (113) Net share issue/(repurchase) 0 0 0 0 Dividends paid (106) (126) (130) (137) Issuance (retirement) of debt 85 (239) 0 0 Cashflow from financing (39) (389) (154) (161) Changes in net cash/debt 33 (50) 126 116 Net debt at start 327 294 344 218 Change in net debt (33) 50 (126) (116) Net debt at end 294 344 218 102
Balance sheet (US$ m) 12/15A 12/16E 12/17E 12/18E
Assets Total current assets 2,057 2,097 2,175 2,314 Total assets 4,714 4,740 4,808 4,956 Liabilities Total current liabilities 1,496 1,495 1,494 1,551 Total liabilities 2,293 2,291 2,291 2,347 Total equity and liabilities 4,714 4,740 4,808 4,956
Net debt/equity (%) 12.1 14.1 8.7 3.9 Dividend payout ratio (%) 36.1 50.1 48.0 45.5
Company Background
Wood Group is a international energy services company and leading independent engineering house. It primarily operates within the energy industry but also supports the renewables, power and water industries.
Blue/Grey Sky Scenario
Our Blue Sky Scenario (p) 1373.00
For Engineering / PSN / Turbine activities we assume blue sky revenues +10 / 7.5 / 5% from our base case scenario for 2017 and beyond (2016 impact is diluted). For margins we assume +2 / 1 / 0.5% for Engineering, PSN and Turbine activities respectively for
2017 and beyond (2016 impact is diluted). In our SOTP we assume multiples 1.5 / 1.0 / 0.5 pts higher from our base case, respectively. We flex DCF for long-term growth by +0.25%.
Our Grey Sky Scenario (p) 527.00
For Engineering / PSN / Turbine activities we assume grey sky revenues -10 / 7.5 / 5% from our base case scenario for 2017 and beyond (2016 impact is diluted). For margins we assume -2 / 1 / 0.5% for Engineering, PSN and Turbine activities respectively for 2017 and beyond (2016 impact is diluted). In our SOTP we assume multiples 1.5 / 1.0 / 0.5 pts lower from our base case, respectively. We flex DCF for long-term growth by -0.25%.
Share price performance
The price relative chart measures performance against the FTSE ALL SHARE
INDEX which closed at 3643.4 on 13/09/16
On 13/09/16 the spot exchange rate was £.85/Eu 1.- Eu.89/US$1
Source: Credit Suisse HOLT®. CFROI and HOLTare trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries .
Important Global Disclosures Phillip Lindsay and Gregory Brown each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiv eness of a stock’s total return potential with in an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform whe re an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 Ju ly 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
19 September 2016
Oilfield Services & Equipment 219
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 53% (50% banking clients) Neutral/Hold* 29% (24% banking clients) Underperform/Sell* 18% (44% banking clients) Restricted 0% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Aker Solutions (AKSOL.OL)
Method: We value Aker Solutions using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.5, WACC of 8.75% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 7.3x / 7.5x for 2017/18e. The net result drives a target price of NOK35, which is consistent with our Neutral rating.
Risk: Upside risks to our NOK35 target price and Neutral rating include higher than expected oil prices leading to higher E&P capex and subsequent recovery in subsea markets as well as stronger than expected win rates for subsea and MMO markets, and higher margin / returns. Downside risks include lower E&P capex as a result of a further fall in oil price, project execution issues, corporate governance issues given the ownership structure and competitive pressures from vertically integrated peers such as Technip / FMC Technologies
Target Price and Rating Valuation Methodology and Risks: (12 months) for Amec Foster Wheeler (AMFW.L)
Method: We value Amec Foster Wheeler using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.41, WACC of 8.46% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 7.5x / 6.9x for 2017/18e. The net result drives a target price of GBP4.50, which is consistent with our Underperform rating.
Risk: Risks to our GBP4.50 target price and underperform rating include higher than expected oil prices leading to greater than expected E&P capex, particularly offshore, better than expected win rates and higher margin and returns. We also see a risk that planned disposals may achieve a higher than expected valuation.
Target Price and Rating Valuation Methodology and Risks: (12 months) for CGG (GEPH.PA)
Method: We value CGG using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 2.5, WACC of 8.9% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 5x / 4x for 2017/18e. The net result drives a target price of EUR17.5, which is consistent with our Underperform rating.
Risk: The upside risks to our EUR17.5 target price and Underperform rating include higher than expected commodity prices leading to greater than anticipated E&P spend and license round activity. A faster recovery in marine pricing could also lead to an early replacement cycle for equipment.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Core Laboratories (CLB.N)
Method: Our $115 Target Price and Neutral rating for CLB is based on a DCF analysis using a 7.5% WACC and long-term growth rate of 1.5%.
Risk: Risks that could prevent CLB from reaching our $115 target price and Neutral rating are those specific to the company and those that relate to the oil and gas industry. Industry specific risks include (1) oil prices, (2) global oil demand, (3) global economy, (4) global E&P CAPEX spending, (5) interest rate risk, (6) environmental and government laws/regulations, (7) geopolitical risks, (8) foreign exchange risk, (9) increased competition. Company specific risks include (1) guidance revisions, (2) increased competition, (3) loss of customers or key contracts, (4) inability to protect or obtain patents or licenses, (5) customer concentration, (6) inability to maintain the dividend, (7) maintaining compliance with debt covenants, (8) loss of a key supplier, (9) availability of credit to fund future growth, (10) customer and
19 September 2016
Oilfield Services & Equipment 220
counterparty risk, (11) obsolete technology or products, (12) loss of business due to declining oil prices, global oil demand or E&P CAPEX spending, (13) loss of key employees.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Hunting Plc (HTG.L)
Method: We value Hunting using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.2, WACC of 7.7% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 16x / 10x for 2017/18e. The net result drives a target price of GBp500, which is consistent with our Neutral rating.
Risk: Upside risks to our GBp500 target price and Netural rating include a faster recovery in commodity prices leading to increased drilling activity in North America and elsewhere, and a subsequent improvement in pricing. Downside risks include additional weakness in oil prices which would result in lower demand for sophisticated technologies. Other downside risks include rising DSOs, risks to hydraulic fracturing for environmental and political reasons and market share erosion.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Petrofac (PFC.L)
Method: We value Petrofac using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.25, WACC of 9.4% and long-term growth of 2%. For SOTP we apply PE multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 9.0x / 8.5x for 2017/18e. The net result drives a target price of GBp1100, which is consistent with our Outperform rating.
Risk: Downside risks to our Outperform rating with GBp1100 target price are primarily related to cost overruns or material project delays for which there is no contingency. Risks also include lower than expected E&P and downstream capital expenditure, a slower pace of contract awards from NOCs and further delays in disposing of the IES book.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Petroleum Geo Services (PGS.OL)
Method: We value PGS using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 2.0, WACC of 8.6% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 4.6x / 3.6x for 2017/18e. The net result drives a target price of NOK27, which is consistent with our Outperform rating.
Risk: Downside risks to our NOK27 target price and Outperform rating include lower oil prices than currently forecast, leading to lower exploration investment and weaker marine pricing. Downside risks also include an unlikely banking covenant breach and the reactivation of marine vessels causing a headwind to marine pricing.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Saipem (SPMI.MI)
Method: We value Saipem using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.25%, WACC of 8.08% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 5.0x / 4.5x for 2017/18e. The net result drives a target price of EUR0.45, which is consistent with our Neutral rating.
Risk: Upside risks to our target price of EUR0.45 and Neutral rating include strong execution of legacy backlog, better than expected order intake trends, a favourable outcome in the ongoing Algerian corruption probe, a more benign competitive market, a more resilient offshore drilling cycle and a positive resolution to contractual issues and improved working capital / cash positions. Downside risks include any issues with legacy backlog, the inability to re-contract idle drilling rigs and an unfavourable outcome to ongoing legal issues.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Schoeller Bleckmann Oilfield Equipment (SBOE.VI)
Method: We value Schoeller Bleckmann using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 0.9%, WACC of 6.9% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 12.2x / 8.5x for 2017/18e. The net result drives a target price of EUR70, consistent with our Outperform rating.
Risk: The downside risks to our EUR70 target price and Outperform rating include a further contraction in North American onshore drilling, market share erosion and a weaker pricing environment
Target Price and Rating Valuation Methodology and Risks: (12 months) for Seadrill (SDRL.N)
Method: Our $1 target price and Underperform rating for SDRL is based on 10x multiple of our 2017 EBITDA (earnings before interest, tax, depreciation and amortization). We believe SDRL trades at a discount to its peers supporting our Underperform rating.
19 September 2016
Oilfield Services & Equipment 221
Risk: Risks of SDRL not achieving our $1 target price and Underperform rating are company specific risks: (1) declining UDW day rates; (2) Hemen Holdings (Fredriksen Family) is the majority owner (23.2% stock ownership); (3) nonaccretive or ill-timed acquisitions; (4) availability of credit to fund future growth; (5) customer and counterparty risk; (6) loss of customers; (7) accidents, (8) environmental and government regulations where rigs operate; (9) lack of available crew; (10) antitakeover provisions that make it difficult to replace the board of directors; (11) failure of shipyards to deliver newbuildings and industry specific risks: (1) oil prices, (2) global oil demand, (3) global GDP, (4) global E&P capex spending, (5) interest rate risk, (6) environmental and government regulations, (7) oversupply of offshore drilling rigs, (8) increased competition, (9) inclement weather, and (10) geopolitical risks.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Subsea 7 S.A. (SUBC.OL)
Method: We value Subsea 7 using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.45, WACC of 9.71% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 5.9x / 5.0x for 2017/18e. The net result drives a target price of NOK75, which is consistent with our Underperform rating.
Risk: Risks to our NOK75 target price and underperform rating include a sharp recovery in oil price, greater than expected resilience to brownfield/life of field competition, a stronger contract win rate and higher E&P capital expenditures by oil and gas companies vs. our current expectations.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Technip (TECF.PA)
Method: We value standalone Technip using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.2, WACC of 7.9% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 6.5x / 7.3x for 2017/18e. The net result drives a target price of EUR65, which is consistent with our Outperform rating.
Risk: Downside risks to our target price of EUR65 and our Outperform rating include project complications and execution issues impacting current backlog, issues with Yamal project financing, an unfavourable outcome from legal proceedings in Algeria, project award delays impacting book to bill and future backlog levels, competitive intensity increasing and the failure to ccomplete the proposed merger with FMC Technologies.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Tecnicas Reunidas (TRE.MC)
Method: We value Tecnicas Reunidas using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.25, WACC of 9.2% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 4.75x / 4.75x for 2017/18e.The net result drives a target price of EUR28, which is consistent with our Underperform rating.
Risk: The risks to our Underperform rating and EUR28 target price are related to order backlog and project execution. Should oil prices recover beyond our expectation we should expect a stronger orderbook momentum, and potential favourable changes to project T&Cs. Stronger project execution could also lead to unforeseen bonus payments, however, any issues are likely to incur significant costs.
Target Price and Rating Valuation Methodology and Risks: (12 months) for Wood Group (WG.L)
Method: We value Wood Group using an equally weighted combination of DCF and SOTP, using 2017e and 2018e. For DCF we assume a beta of 1.33, WACC of 8.20% and long-term growth of 2%. For SOTP we apply EBITDA multiples to each division based on business quality, comparable companies, historical multiples, cycle phasing and growth expectations. For the group, this results multiples of 7.8x / 6.8x for 2017/18e. The net result drives a target price of GBP8.50, which is consistent with our Outperform rating.
Risk: Downside risks to our GBP8.50 target price and Outperform rating include market share erosion by late-cycle competitors in engineering, greater competitive threats for the North Sea PSN business, pricing pressures and protracted contract negotiations with customers, lower than expected capital expenditure by oil comnpanies and a subsequent slower pace of contract awards
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.
See the Companies Mentioned section for full company names The subject company (PGS.OL, SBOE.VI, TRE.MC, AKSOL.OL, PFC.L, SPMI.MI, HTG.L, SDRL.N, GEPH.PA, WG.L, TECF.PA, CLB.N, BHI.N, HAL.N, SLB.N, SPN.N, HCLP.N, SLCA.N, TTI.N, FET.N, FI.N, OIS.N, CBI.N, 600583.SS, FLR.N, OII.N, 2386.HK, SIEGn.DE, JEC.N, KBR.N, TENR.MI, NBR.N, PDS.N, ATW.N, 2883.HK, DO.N, NE.N, PACD.N, RDC.N, RIG.N, RWEG.F) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (SPMI.MI, GEPH.PA, CLB.N, HAL.N, SLB.N, SPN.N, HCLP.N, 600583.SS, TENR.MI, PDS.N, ATW.N, 2883.HK, DO.N, NE.N, RIG.N, RWEG.F) within the past 12 months. Credit Suisse provided non-investment banking services to the subject company (SIEGn.DE) within the past 12 months
19 September 2016
Oilfield Services & Equipment 222
Credit Suisse has managed or co-managed a public offering of securities for the subject company (GEPH.PA, CLB.N, HAL.N, HCLP.N, DO.N, RIG.N) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (SPMI.MI, GEPH.PA, CLB.N, HAL.N, SLB.N, SPN.N, HCLP.N, 600583.SS, TENR.MI, PDS.N, ATW.N, 2883.HK, DO.N, NE.N, RIG.N, RWEG.F) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (PGS.OL, SBOE.VI, TRE.MC, AKSOL.OL, PFC.L, SPMI.MI, HTG.L, SDRL.N, GEPH.PA, WG.L, TECF.PA, CLB.N, 3337.HK, BHI.N, HAL.N, SLB.N, SPN.N, WFT.N, HCLP.N, TTI.N, FET.N, FI.N, OIS.N, CBI.N, 600583.SS, MDR.N, FLR.N, OII.N, 2386.HK, SIEGn.DE, JEC.N, KBR.N, TENR.MI, VLLP.PA, HP.N, NBR.N, PTEN.OQ, PDS.N, ATW.N, 2883.HK, DO.N, ESV.N, NE.N, PACD.N, RDC.N, RIG.N, RWEG.F) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (SIEGn.DE) within the past 12 months As of the date of this report, Credit Suisse makes a market in the following subject companies (BHI.N, HAL.N, SLB.N, SPN.N, SLCA.N, OIS.N, FLR.N, OII.N, JEC.N, KBR.N, HP.N, NBR.N, PTEN.OQ, ATW.N, DO.N, ESV.N, NE.N, RDC.N, RIG.N). Please visit https://credit-suisse.com/in/researchdisclosure for additional disclosures mandated vide Securities And Exchange Board of India (Research Analysts) Regulations, 2014 Credit Suisse may have interest in (ONGC.BO) As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SUBC.OL, HCLP.N, 2883.HK). Credit Suisse beneficially holds >0.5% long position of the total issued share capital of the subject company (HCLP.N). Credit Suisse beneficially holds >0.5% short position of the total issued share capital of the subject company (MDR.N). Credit Suisse has a material conflict of interest with the subject company (SLB.N) . Credit Suisse is acting as financial advisor to Cameron International (CAM) on its announced acquisition by Schlumberger (SLB).
For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683. For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=247248&v=5d1shiy6g23vhlwyvru30g2uj .
Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. Credit Suisse Securities (Europe) Limited (Credit Suisse) acts as broker to (WG.L). The following disclosed European company/ies have estimates that comply with IFRS: (PFC.L, SPMI.MI, SDRL.N, WG.L, TECF.PA, SIEGn.DE, TENR.MI, VLLP.PA, RWEG.F). Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (SDRL.N, GEPH.PA, CLB.N, HAL.N, SLB.N, HCLP.N, 600583.SS, OII.N, PDS.N, 2883.HK, DO.N, RIG.N, RWEG.F) within the past 3 years. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. This research report is authored by: Credit Suisse Securities (USA) LLC .....................................................James Wicklund ; Gregory Lewis, CFA ; Neesha Khanna ; Joseph Nelson Credit Suisse International ....................................................................................................................................... Phillip Lindsay ; Gregory Brown To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse International ....................................................................................................................................... Phillip Lindsay ; Gregory Brown
Important Credit Suisse HOLT Disclosures With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be d irectly related to the specific views disclosed in this report. The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. The adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur.
Additional information about the Credit Suisse HOLT methodology is available on request. The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variable may also be adjusted to produce alternative warranted prices, any of which could occur. CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks or registered service marks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse.
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.
19 September 2016
Oilfield Services & Equipment 224
This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk.
Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.