PACC Offshore Services Holdings - OCBC Investment 2016-06-06: Waiting for Shell Prelude tender results

PACC Offshore Services Holdings - OCBC Investment 2016-06-06: Waiting for Shell Prelude tender results PACC OFFSHORE SVCS HLDG LTD POSH U6C.SI 

PACC Offshore Services Holdings: Waiting for Shell Prelude tender results 

  • Bidding for floatel work 
  • Seeking work for POSH Arcadia 
  • Overall outlook still dim 

Results of floatel tender for Shell’s Prelude to be known soon 

  • According to Upstream, PACC Offshore Services Holdings (POSH) is one of three companies bidding for a contract to supply a newbuild semi- submersible accommodation and maintenance vessel for work off Australia. This is for Shell’s massive Prelude FLNG project – a floatel is required to assist in the hook-up and commissioning of the FLNG vessel, and the tender is being coordinated by Technip, one of Shell’s main EPC contractors. 
  • Besides the POSH Arcadia, GranEnergia is contending with its CSS Venus vessel, and Prosafe with its Safe Notos vessel. 
  • Results of the tender are expected to be known by the middle of this month. 

Operations for charter only to start in Mar 2017 

  • However, even if POSH were to secure this contract, operations for the charter may only begin in Mar 2017. It is also for a relatively short period of six months, with three separate options covering one month each. As per our earlier report, we had conservatively assumed that the vessel would only start revenue contributions in 2017, despite its expected delivery middle of this year. 
  • As for POSH Xanadu, (SSAV similar to POSH Arcadia), recall that it had earlier secured a one year contract renewal with Petrobras in Mar this year. 

Participating in landmark projects 

  • The Shell Prelude FLNG project will be the world’s largest offshore facility, and in Jan this year, it was announced that POSH Terasea (POSH’s JV with Terasea Pte Ltd, which is in turn a JV between Seabridge Marine Services and Ezion) will project manage, tow, and position the platform from South Korea to the Prelude offshore gas field in Australia. 

Outlook still dim 

  • Looking ahead, pressure on charter rates and vessel utilization will continue to weigh on the group. 
  • The offshore accommodation segment has been supporting earnings for the group, but it is insufficient to offset weakness in other areas such as the OSV segment. 
  • It may also take some time before POSH can see a boost in earnings from POSH Arcadia, unless it secures work prior to Mar 2017. 
  • Maintain HOLD with S$0.35 fair value estimate; we may turn buyers at S$0.32 or lower.

Low Pei Han CFA OCBC Securities | 2016-06-06
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.35 Same 0.35