FPSO: Perspectives from the equity market

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Erik Tonne, Analyst with Artic Securities, shares with us the investor view on the FPSO-sector and its perspectives from the equity market.

Simon Davies, Director, Oil & Gas, Structured Asset and Export Finance for ANZ, will be exploring the the critical factors to create a bankable FPSO project at the 12th Annual FPSO Congress. Visit www.fpsoasia.com or enquiry@iqpc.com.sg

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FPSO: Perspectives from the equity market

  1. 1. FPSO: Perspectives from the equity market September 2010Erik Tønneerik.tonne@arcticsec.no+47 21 01 32 26+47 48 40 32 26
  2. 2. Agenda/key topics highlighted in this presentation Market development: Is the situation in the market picking up? How do investors and analysts look at the FPSO-sector? What are their evaluation criteria? Is the market willing to finance new developments? Is the financing situation on the road to recovery? What are the main concerns for investors in financing FPSO-projects and how can you achieve a win-win deal with project financiers? 2
  3. 3. Underlying market development: Growth has been good and steady, and willlikely continue to be soFPS (installedbase) 280 260 SPARs CAGR, number of 240 units 1999-2009 222 225 220 TLPs 214 16 18 15 200 Production Semi’s +9% 190 22 22 22 18 0 176 14 FPSOs 166 13 20 40 41 16 0 149 12 18 40 14 0 137 9 18 127 6 15 40 112 117 3 13 37 12 0 36 2 11 3 14 11 36 10 0 93 35 80 2 34 8 32 33 7 1 80 25 65 137 144 144 57 1 30 60 0 50 0 6 26 116 34 43 0 4 0 5 22 100 108 2 37 0 21 83 89 40 31 0 0 18 76 0 0 0 0 0 0 0 0 19 0 20 0 21 0 10 3 16 3 67 70 20 0 0 0 0 0 0 11 1 13 1 1 1 1 10 2 11 2 12 46 53 36 1 0 2 0 5 1 6 1 7 1 9 3 4 4 12 6 13 6 13 7 13 19 21 22 24 28 31 0 1 2 4 5 6 6 6 8 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 CAGR of 9% last 10 years Underlying rationale for floating production solutions is strong – deeper, further from shore, more marginal fields etc. FPSOs are cost-efficient and versatile solutions (for the oil companies at least) FPSOs continue to dominate as the most widely used floating production solution We expect floating production to continue to see We expect floating production to continue to see healthy / strong growth rates for the foreseeable future healthy / strong growth rates for the foreseeable future 3Source: IMA; Arctic Securities
  4. 4. Recent market development: A strong upswing in FPSO contract-awards… 6 Projects awarded H2/09 19 Projects awarded so far in 2010: Order intake, new Floating Production Units (FPUs) ordered 1. Aseng to SBM 2. Papa Terra to BWO/Quip 1. Kitan to Bluewater 18 3. Chim Sao to EOC (redeployment) 4. TGT to Bumi Armada 2. Guara to MODEC 16 5. Aquila to Saipem 3. OSX-1 to OSX (old Nexus) 16 6. Baleia Azul to SBM 4. Goliath EPC-contract to (redeployment) Hyundai 5. Athena LoI to BWO 14 6. Huntington LoI to SEVAN (redeployment) 12 7. Tupi Nordeste to SBM- 12 consortium 11 11 11 11 11 8. Sidon/Tiro to TeekayNr of FPU orders 10 10 9. TSB to BWO 10. Aruana to Teekay 10 9 9 9 (redeployment) 8 8 8 11. Pagerungan Utara to BLT (redeployment) 8 7 7 7 12.-19. Eight pre-salt FPSO- hulls (LoI to Engevix/GVA/ 6 6 6 Cosco) 6 5 5 4 4 4 4 4 4 3 3 3 3 3 2 2 2 0 0 0 Jun-Sep 97 Oct 97 - Feb 98 Dec 99 - Mar 00 Dec 04 - Mar 05 Dec 06 - Mar 07 Aug - Dec 08 Nov 98 - Feb 99 Apr - Sep 00 Feb - Jun 01 Feb - Jun 03 Dec 07 - Mar 08 Aug 09 - Dec 09 Jan 10 - Jun 10 Mar - Jun 98 Jul - Oct 98 Mar - Jul 99 Jul - Oct 01 Apr - Jul 02 Aug - Nov 99 Oct 00 - Jan 01 Nov 01 - Mar 02 Aug 02 - Jan 03 Jul - Oct 03 Apr - Jul 04 Apr - Jul 05 Apr - Jul 06 Apr - Jul 07 Apr - Jul 08 Jan - Apr 09 Apr - Jul 09 Jul - Aug 10 Nov 03 - Mar 04 Aug - Nov 04 Aug - Oct 05 Nov 05 - Mar 06 Aug - Nov 06 Aug - Nov 07 Even if excluding the eight pre-salt hulls for Petrobras, we are at 11 contracts YTD, representing a decent Even if excluding the eight pre-salt hulls for Petrobras, we are at 11 contracts YTD, representing a decent level. More to come with e.g. CLOV, OSX-2 and Frøy so far not announced level. More to come with e.g. CLOV, OSX-2 and Frøy so far not announced 4 Source: IMA; Arctic Securities
  5. 5. …Resulting in the order backlog (nr. of units under construction) at yardsturning again Floating Production Systems on order/under construction, Quarterly since Q3/96 80 If excluding the 8 pre-salt hulls, order backlog would have been at 41 units, still 70 67 confirming the turn (though 65 more modestly) 60 60 60 57 56 49 49 50 46 46 43 41 41 40 37 36 37 37 38 39 38 37 37 37 39 40 35 Average = 39 33 34 34 35 34 31 32 30 30 27 23 21 21 22 20 17 10 0 Q3/96 Q1/97 Q2/97 Q3/97 Q1/98 Q3/98 Q4/98 Q1/99 Q3/99 Q4/99 Q2/00 Q3/00 Q1/01 Q3/01 Q4/01 Q2/02 Q3/02 Q1/03 Q2/03 Q4/03 Q1/04 Q3/04 Q4/04 Q2/05 Q3/05 Q4/05 Q1/06 Q3/06 Q4/06 Q1/07 Q3/07 Q4/07 Q1/08 Q3/08 Q4/08 Q1/09 Q3/09 Q4/09 Q1/10 Q3/10 During Q1/10, order backlog increased again for the first time in eight quarters, following a steady drop We expect order backlog to come up further: Demand is pent-up, and backlog should continue to build as FIDs (Final Investment Decisions) gain momentum 5Note: Excludes storage-only units, MOPUs and LNG RVs (shuttle/regas vessels)Source: IMA; Arctic Securities
  6. 6. Demand-side remains strong! In spite of many awards since Aug-09, number of projects in the Bid/final design phase remains steady Implying oil companies continue to move on projects, gradually progressing them to FID and contract-award Number of FPSO-projects in the bid/ final design phase (see next two slides for details) Number of projects in the Bid/Final Design phase describes projects that are close to FID and contract- Nr of units award 35 33 33 In spite of 25 awards since Aug-09, this number 32 remains fairly steady 31 30 This implies the number of projects progressing from “Planning” to “Bid/Final design” remains high; i.e. 25 25 demand-side remains strong We also believe it’s positive that this number 20 remained fairly steady through the financial turmoil, demonstrating oil companies continued to mature 15 projects In short, we believe the demand-side is pent-up, and 10 that conditions are now increasingly in place for more contract awards again 5 The oil price is steady (enabling planning) on back of healthy demand 0 Input-costs (steel, yard-capacity etc) have come Oct-08 Dec-08 Sep-09 Nov-09 Current down Access to financing for smaller E&Ps and FPSO-Of which operators has improved 1 1 1 1 2FLNG units 6 Source: IMA; Press; Arctic Securities
  7. 7. Industry majors are increasingly positive – both amongst oil companies andmajor contractors We’re noticing more positive signals from most (all) of the companies, We’re noticing more positive signals from most (all) of the companies, especially within subsea, field development and floating production especially within subsea, field development and floating production 7Source: Technip (Mar/Apr-10); Arctic Securities
  8. 8. Industry survey: Industry-players are more optimistic, reflecting highertendering-levels and improved market-conditionsIndustry sees on average 12 contracts in 2010 and 15 contracts in 2011 Industry-players significantly more On average, the players expect a further optimistic compared to last year’s survey increase in number of awards during 201130 30 “How many FPSO-lease contracts do you expect will 25 “How many FPSO-lease contracts do you expect25 be awarded across the industry by year-end?” 25 will be awarded across the industry next year?” 2320 2010-results 20 2010-results 2009-results 2009-results 16 1515 15 12 10 10 1110 10 7 7 5 5 5 5 0 0 Low Average High Low Average High Competitive pressure reduced. Some players even Major input costs have dropped further since last year. comment being in single-source discussions for projects Companies’ answers for 2010 vary significantly30 0 How many bidders are there on average -125 -1 involved in projects you are tendering for? -220 2010-results -3 -3 -3 -3 -4 2009-results -415 -5 2010-results -610 8 -7 2009-results 6 5 -7 5 4 -8 3 1 How have input prices developed over the past -9 12 months? (%-change) 0 - 10 Low Average High Yard costs Major topside Other costs equipment costs 8Note: Survey conducted in Q2/09 and Q2/10 respectively. Participants: MODEC, PROD, Maersk, FOP, SEVAN, BWO (10 only), SBM (09 only)Source: Companies; Arctic Securities
  9. 9. High-end of the lease segment consolidates with BWO-PROD combining. Competitive pressure should be further reduced, boding well for returns Company Number of lease FPSOs in operation or under construction 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 SBM MODEC Prosafe Production BW Offshore Combining to Limited one entity financial Bluewaterbidding capacity Maersk Mainly N.Sea Petrojarl (Teekay) Sevan FPSO Financial Saipem capacity? Bumi Armada Fred. Olsen Production Likely to take Rubicon one more project only? Sea Production Tanker Pacific (TPOT) Single unit owners Contracted FPSOs in operation Contracted FPSOs in operation (operations only) Contracted units under construction/conversion Construction on speculation Idle To conclude, we believe it’s fair to say the market is picking up and that bargaining position for To conclude, we believe it’s fair to say the market is picking up and that bargaining position for the remaining players has improved and continues to do so! the remaining players has improved and continues to do so! 9 Note: Does not include turnkey FPSOs, i.e. only includes FPSOs owned and operated by the FPSO-companies Source: Companies; IMA; Arctic Securities
  10. 10. Agenda/key topics highlighted in this presentation Market development: Is the situation in the market picking up? How do investors and analysts look at the FPSO-sector? What are their evaluation criteria? Is the market willing to finance new developments? Is the financing situation on the road to recovery? What are the main concerns for investors in financing FPSO-projects and how can you achieve a win-win deal with project financiers? 10
  11. 11. Few (equity) investors have a detailed understanding of the FPSO-segment Hard to place all in one group. Many are generalists. Investment strategies and exposures vary - across industries, geographies and asset classes Some are oil services “specialists” – even these sometimes have detailed knowledge of the floating production business Available time to dedicate to detailed analysis of selected companies is limited Valuation approaches are usually “simple”: Valuation metrics (multiples), relative to other segments, look at potential for earnings-upgrades/re-valuation. Some do modeling/DCF-analyses/more detailed work History matters… Opinions and momentum can turn rapidly – from loved by everyone to hated by everyone (usually infectious) 11Source: Arctic Securities
  12. 12. The floating production segment has spooked investors – for obvious reasons A string of disappointments… Shares have been a disaster – even in companies perceived to be “solid” and steady-performing businesses BWO listed at NOK 25 May-06, currently at NOK 8.0 PROD listed at NOK 36 Feb-08, currently at NOK 13.0 Add to this; Aker Floating Production, Sevan… - not a joyride for shareholders Leading established players – e.g. SBM – have also disappointed with significant delays to EPC- contracts (rigs, Yme, Deep Panuke), and are trading at historically low P/B-levels Speculative entrants (mainly originated out of Norway) didn’t help the situation Very hard to point to any success-stories. Massive value destruction Nexus, Petroprod, FPSOcean, MPF, Nortechs/Songa Floating Production The financial community helped fuel the hype… “Floating Production is the new deepwater drilling” “If we assume two new contracts won per year at 15% IRR…” …and failed to recognize fundamental aspects of the business No upside through e.g. rate-fluctuations – i.e. rate locked once capex is agreed upon/contract signed A lot went wrong operationally (poor contracts, too low contingencies, supply-chain tightness  A lot went wrong operationally (poor contracts, too low contingencies, supply-chain tightness  delays & overruns etc.), and a lot of investors got burned delays & overruns etc.), and a lot of investors got burned 12Source: Arctic Securities
  13. 13. Norwegian FPSO-peers: By far the worst segment during the recent meltdown… 140 120 100 80 60 40 20 0 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Drillers NOR Subsea NOR Supply NOR FPSO NOR Seismic NOR 13Source: Factset; Arctic Securities
  14. 14. …and clearly the laggard since the market started improving again 370 320 270 220 170 120 70 Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 Drillers NOR Subsea NOR Supply NOR FPSO NOR Seismic NOR Hard to get investors’ enthusiasm up when the segment Hard to get investors’ enthusiasm up when the segment has underperformed all other oil services segments has underperformed all other oil services segments 14Source: Factset; Arctic Securities
  15. 15. Adjusting for worst performers (AKFP & SEVAN), some of the FPSO-peers have performed more in line with other oil services segments since the market started coming up again370 BWO up strongly lately on back of350 APL-sale330310290270250230 FOP in line with210 drillers and supply190170150130 PROD, SBM and MODEC under-110 performing907050 Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 Drillers NOR Subsea NOR Supply NOR Seismic NOR BWO PROD FOP SBMO MODEC A key question investors are asking themselves is: “Why should II invest in this, when there are so A key question investors are asking themselves is: “Why should invest in this, when there are so many other alternatives” many other alternatives” 15 Source: Factset; Arctic Securities
  16. 16. Creating value for shareholders…? Shareholders care about this… it’s more or less the only thing they care about! Shareholders care about this… it’s more or less the only thing they care about! 16Source: Vitae Energy; Arctic Securities
  17. 17. Sector shake-out: A lot of players have disappeared. Speculative newcomers likely gone for quite some time… Norwegian FPSO-segment – March-09 Norwegian FPSO-segment – Today1. AKFP 1. AKFP2. BWO 2. BWO3. FLNG 3. FLNG4. FPSO (FPSOcean) 4. FPSO (FPSOcean) - bankrupt5. FOP 5. FOP6. MPF – bankrupt 6. MPF – bankrupt7. NEXUS 7. NEXUS – NEXUS I sold to OSX8. PetroProd 8. PetroProd - bankrupt9. PROD 9. PROD10.SEAP (Sea Production) 10.SEAP (Sea Production) – OTC/Rubicon/Ashmore11.SEVAN 11.SEVAN12.SFLO (Songa Floating Production, 12.SFLO (Songa Floating Production, ex. Nortechs ex. Nortechs FPSO) FPSO) – Bankrupt Of the remaining players, equity more or less wiped out in AKFP and the company lacks funding for additional Of the remaining players, equity more or less wiped out in AKFP and the company lacks funding for additional projects. FLNG needs significant further funding. PROD will not bid actively before year-end 2010 and SEVAN likely projects. FLNG needs significant further funding. PROD will not bid actively before year-end 2010 and SEVAN likely lacks equity to take on new significant capex commitments for some time lacks equity to take on new significant capex commitments for some time 17 Source: Vitae Energy; Arctic Securities
  18. 18. Analysts and investors have moved from “euphoric” to sober. Maybe a bit toosober… From To Trusting companies’ input on capex, time, Strongly fearing capex overruns – running targeted IRR in contracts sensitivity analyses, incorporating cost overruns and delays in estimates Assuming all contracts will be fully utilized, including options, and potentially beyond NPV-analysis of firm contracts alone – that options viewed as potential upside only High residual values / redeployment Modest residual values opportunities Assigning no value to growth / system value, Including a high system value / value of not even for large players expected further growth (“2 new contracts per year”) Assuming “super-returns” will never materialize Believing in potential “super-returns” due to the strong and appealing deepwater story Increasing WACCs (“after DW drilling comes production”) Low WACCs (abundant cheap financing) 18Note: Does not necessarily apply to all analysts, but expresses our view on the perceived shift in attitudeSource: Arctic Securities
  19. 19. So, with a ”bad” track-record, but a positive market-outlook, what are theinvestors telling us? ”The FPSO-sector is ”I’m stuck with still un-investable” stocks in the worst segment in all of oil services” “The segment has been a disaster” “We need to be able to believe in stronger IRRs to invest in this sector – how is the industry going to be credible on this when they weren’t “How is it possible that capable of extracting stronger margins everything else in oil in the last super-cycle?” services rallies and this segment is lagging so significantly?” On a more positive note: We are starting to notice increased interest again from investors. Partially as a On a more positive note: We are starting to notice increased interest again from investors. Partially as a result of the segment having lagged so significantly and partially as a result of the BWO-PROD situation – result of the segment having lagged so significantly and partially as a result of the BWO-PROD situation – potentially creating a larger and significantly more interesting entity for investors potentially creating a larger and significantly more interesting entity for investors 19Source: Arctic Securities
  20. 20. Established players have heard the message and started to increasinglyaddress investors’ concernsIt remains to be seen whether this will result in tangible, profitable projects ”Target good return FPSO projects” ”Will not agree to undue contractual risk” Our take: Credibility needs to be restored (also for industry majors). We are however more Our take: Credibility needs to be restored (also for industry majors). We are however more positive than we have been for quite some time and believe this is about to happen! Investor positive than we have been for quite some time and believe this is about to happen! Investor interest is increasing interest is increasing 20Source: BW Offshore; Arctic Securities
  21. 21. Agenda/key topics highlighted in this presentation Market development: Is the situation in the market picking up? How do investors and analysts look at the FPSO-sector? What are their evaluation criteria? Is the market willing to finance new developments? Is the financing situation on the road to recovery? What are the main concerns for investors in financing FPSO-projects and how can you achieve a win-win deal with project financiers? 21
  22. 22. Oil Services/Equity markets have started improving again… Philadelphia OSX since Sept-00, indexed300 Global financial turmoil & steep oil price drop250 Macondo200150100 Markets bottom out and start 50 recovering 0 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Improving equity markets indicated increased risk appetite again. However; At this stage of the Improving equity markets indicated increased risk appetite again. However; At this stage of the recovery, it’s our perception that investors are looking more for rebound opportunities in established recovery, it’s our perception that investors are looking more for rebound opportunities in established names (less risky), rather than being willing to venture into financing new developments names (less risky), rather than being willing to venture into financing new developments 22Source: Factset; Arctic Securities
  23. 23. Debt markets are also improving Low default rates and high liquidity Credit crunch, increased Strong PIIGS secured record low spreads volatility and low liquidity recovery 250 1400 1200 200 1000 HY Spreads (basis points)IG Spreads (basis points) 150 800 600 100 400 50 200 0 0 aug. 05 feb. 06 jul. 06 jan. 07 jul. 07 des. 07 jun. 08 nov. 08 mai. 09 okt. 09 apr. 10 sep. 10 High-Yield (RHS) Investment Grade (LHS) 23 Source: Bloomberg; Arctic Securities Credit Research
  24. 24. US High-Yield issue volumes YTD already above full-year 2009-level andsignificant increase from the low level seen in 2008 US High-Yield Volume issued (in USDbn) 180 160 140 120 USDbn 100 80 60 40 20 0 2005 2006 2007 2008 2009 YTD 1H 2005 1H 2006 1H 2007 1H 2008 1H 2009 1H 2010 2010 Companies issued about USD 120 billion of junk bonds in the first half of the year, up from USD 63 billion over the same period in 2009, according to data compiled by Bloomberg. 24Source: Bloomberg; Arctic Securities Credit Research
  25. 25. Risk aversion is decreasing / price of ”insurance” coming down90 1400 VIX reflects a market-estimate of future volatility (“fear80 index”), based on the weighted average of the implied 1200 volatilities for a wide range of70 strikes 10006050 80040 60030 40020 20010 0 0 aug. 05 feb. 06 jul. 06 jan. 07 jul. 07 des. 07 jun. 08 nov. 08 mai. 09 okt. 09 apr. 10 sep. 10 High-Yield (RHS) VIX (LHS) 25 Source: Bloomberg; Arctic Securities Credit Research
  26. 26. At USD 70/bbl, fundamentals still look strong. Oil companies increase E&P- spending again  Should ease financing-burden somewhat E&P spending 1998-2010e per E&P spending 1998-2010e (top 23 companies) barrel produced, split by company type 200,000 30 14,000 175,000 12,000 25 E&P capex per barrel produced (USD) Aggregated production (mboepd) 150,000 10,000E&P spending (USDm) 20 125,000 8,000 100,000 15 6,000 75,000 10 4,000 50,000 5 2,000 25,000 - 0 - 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E Average supermajors Average majors (ex STL) Average Independents STL Petrobras Supermajors Majors Independents Total production same cos Strong rebound in E&P-spending in 2010 (provided oil co’s use budgets) First indications for 2011 point to +5-10% further increase from 2010-level A sharp decline in oil price (down another 10-15 USD/bbl) likely required A sharp decline in oil price (down another 10-15 USD/bbl) likely required to “de-rail” the current upswing. Our oil analysts do not believe this is a likely scenario to “de-rail” the current upswing. Our oil analysts do not believe this is a likely scenario 26 Source: Companies; Arctic Securities
  27. 27. Is the (equity) market willing to fund new developments? Established players with track-record and firm contracts/existing operations can still raise Top tier equity funding at acceptable terms. SBM e.g. successfully raised EUR 181m Nov-09 through a players (SBM, book building process (price set at/near closing price for the day). MODEC recently raised MODEC, BWO, more equity, but directed at main shareholders PROD) Increasing equity requirements pose challenges (for all players) BWO able to raise debt-funding for PROD-deal at decent terms More challenging. Few players can raise equity unless at (significant) discount Needs to be backed by main owners + likely commitments from banks on the debt-side Mid segment Track-record must be in place, so should a plan for tangible return on capital to investors High-yield market potentially becoming increasingly possible again Impossible? Newcomers / At least extremely challenging. Speculative projects are likely gone for a long time speculative In addition to equity markets reluctance, banks are not willing to commit. Though not FPSO, projects Master Marine is a good example: Construction project on track (time and cost), 3Y firm contract in place with ConocoPhillips, still unable to raise remaining bank-funding More advanced and structured financing required. Up-front payments/milestones from oil companies More advanced and structured financing required. Up-front payments/milestones from oil companies likely a way to go. More EPC-contracts. It makes more sense for the oil companies to come up with the likely a way to go. More EPC-contracts. It makes more sense for the oil companies to come up with the funding than for the FPSO-companies (lower funding cost) funding than for the FPSO-companies (lower funding cost) 27Source: Arctic Securities
  28. 28. Agenda/key topics highlighted in this presentation Market development: Is the situation in the market picking up? How do investors and analysts look at the FPSO-sector? What are their evaluation criteria? Is the market willing to finance new developments? Is the financing situation on the road to recovery? What are the main concerns for investors in financing FPSO-projects and how can you achieve a win-win deal with project financiers? 28
  29. 29. What are the main concerns for (equity) investors and how can you achieve a win-win situation with financiers?Main concern: Receive decent return on invested capital Both categories of investors: Secure decent yield on invested capital Debt side: Avoid downside risk Equity side: Focused on upside potential. This relates to 1) valuation/pricing and 2) shareholder return policyCompanies need to: Define a credible strategy for how investors shall receive a satisfactory ROI Vs. debt-investors: Convincing risk mitigation (contract coverage/backlog, strong contract-counterparties, guarantees, debt/value etc.) Vs. equity-investors: Focus on shareholder (cash) return policy. Investors want to avoid “value traps”. Look to Fredriksen. Why is implicit value per DW rig in SDRL USD 1bn+, vs. USD ~470m in RIG, USD ~580m in PDE etc.? In general, FPSO-sector is likely more debt-friendly than equity-friendly (capped upside) 29Source: Arctic Securities
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