Oilfield technology group Plexus Holdings (POS) has signed a licensing agreement with the $6.9bn Yantai Jereh Oilfield Services Group (Jereh), which promises to significantly increase the exposure of the Aberdeen-based company's product offering to markets with exponential growth opportunities.
| What's new: |
|---|
| ■ Licensing agreement with China's Jereh |
| ■ Launch confirmed for POS-GRIP Python subsea wellhead system |
| ■ Contract for Solaris Well, offshore Norway |
In return for a 5 per cent stake in Plexus (worth around £8m), Jereh has been granted exclusive rights to fabricate and supply Plexus products in China and other Asian markets, in addition to Brazil, India and the Middle East. Plexus is entitled to a range of royalties from Jereh in respect of the various POS-GRIP wellhead equipment applications.
The tie-up has already resulted in a collaborative agreement with China Oilfield Services, majority-owned by Chinese state-owned energy giant Cnooc and Red Sea Technologies, a major oilfield services company in South East Asia.
The Jereh deal followed news that the group's POS-GRIP Python subsea wellhead system is now due to be launched in September at SPE Offshore Europe - the continent's biggest oil and gas trade show. During the second quarter, Plexus also signed further big-ticket contract wins with industry partners Total, Centrica and Maersk Oil. The Total contract is particularly significant as it is linked to the extreme high pressure/high temperature Solaris Well, offshore Norway.
Numis says...
Buy. A very positive announcement from Plexus. It is anticipated that Jereh will aggressively pursue sales opportunities in the volume onshore and offshore production well market. Several licence-agreement arrangements are already under way. These early initiatives may include Jereh accelerating such opportunities by purchasing sets of Plexus' POS-GRIP wellhead systems manufactured in Aberdeen, which would generate early cash flow for Plexus and Jereh under the agreement. Jereh operates in more than 60 countries and is listed on the Shenzhen stock exchange. According to Infield analysis, China and wider Asia is in the process of implementing an offshore capex programme for 2012-18 of approximately $146bn. Plexus' shares currently trade a third below Numis' target price of 352p a share.
Cenkos says...
Buy. Jereh is a top-tier global oilfield services operator serving the world's largest independent and national oil companies, such as Chevron, Cnooc, ConocoPhillips, Exxon, PetroChina, Saudi Aramco, Sinopec, Shell and Total. The agreement will position Jereh as China's first and only subsea wellhead equipment supplier (upon the Plexus 'Python' subsea well head launch in September). It also opens up the massive onshore market. At this stage, it is hard to quantify the scope of opportunity to Plexus (and Jereh for that matter) but suffice to say this is nothing short of a quantum leap for the company. Cenkos anticipates cash profits of £10.1m for the June year-end, against £9m in 2014.
