- Free cash flow is set to improve in 2024 and 2025.
- 61 per cent discount to net asset value (NAV).
- Deleveraging transfers economic value to shareholders.
This oil services company has a robust order book and has upgraded cash profit guidance, yet is rated on less than five times current year cash profit to enterprise valuation. Utilisation rates at the world leading operator of liftboats are surging as oil and gas companies recycle their booming profits and nowhere more so than in the group’s Middle East core region.
Having secured a tighter interest margin on its borrowings, and with free cash flow improving, there is reason to expect balance sheet deleveraging could improve the risk profile and transfer more of the economic value in the group from debt holders to shareholders. The process should have a material positive impact on the share price.
A cost reduction programme cut more than $20mn of annual costs from the business by streamlining the organisational structure. Excessive layers of management and support personnel were removed, plus there was a renegotiation of key supplier contracts, and the business has shifted focus from the North Sea to the Middle East to capitalise on higher levels of future demand in its core markets.
The leaner business is certainly delivering, as highlighted by the recovery in profits and the strong growth analysts are predicting.
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