Ezra - Additional charters reinforce strength in core operations

Wednesday, September 23, 2009

Ezra announced that it has secured new and renewal charter contracts worth US$152 mn for three Anchor Handling, Towing and Supply Vessels (AHTS). Under the agreements, the vessels will be chartered out for operations in Southeast Asia for periods ranging from 5½ to six years, inclusive of extension options. We believe the group's young deepwater fleet (about 78% of Ezra's fleet is deepwater capable) places them in a strong position for further new contract wins. The AHTS vessels are basic workhorses of the offshore oil & gas support services industry that are deployed throughout the entire oil field life cycle. Ezra has an existing modern fleet of 25 AHTS and 3 crew boats within the Offshore Support Services division (original core business of the group).

With recent signs of recovery from the financial turmoil, the group foresees upward revisions in capital expenditures by global oil majors, driving strong demand for offshore support services. This is in line with our positive view on the O&M/offshore services sector, especially in the subsea space.

Ezra's recent new growth strategy announcement on the subsea market marks a strategic and transformational move to focus on one of the fastest growing segments of the O&M sector. Global subsea spending in the next five years should rise >70% over the previous five years. Subsea spending should total about US$160bn from 2009 to 2013, and 3,222 subsea trees are due to be installed during this period. With its upcoming high specification vessels, enhanced know-how and expertise, and good execution track record, Ezra should be in a strong position to benefit in our view. We maintain our Buy on Ezra for its attractive valuations, strong execution track record, and its move into the high growth subsea market.


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