Rig market NES - Bjørn Thoresen 17032016

Transcription

Rig market NES - Bjørn Thoresen 17032016
Offshore rigs
Selected market topics – Swedbank Nordic Energy Summit 2016
Financial Analysts
Bjørn Thoresen (bjorn.thoresen@swedbank.no / +47 23 23 82 49)
Magnus Olsvik (magnus.olsvik@swedbank.no) / + 47 23 23 82 36)
Agenda
1. Grim picture
2. Market dynamics that are working right now
3. Outlook
4. Closer look at NCS
5. Light at the end of the tunnel?
Utilization is lowest in decades and still falling sharply
Already worse than early 90s downturn
Floater rigs utilization
100%
90%
80%
70%
60%
50%
Jan-85
Jan-90
Jan-95
Tota l uti liz atio n flo ater ri gs %
Source: ODS Petrodata
Jan-00
Jan-05
Jan-10
Jan-15
Ma rke te d u tili zati on flo a te r rig s %
3
2016 E&P budgets reflect pressing need to preserve cash
USD 300bn cash outflow for the top 10 deepwater operators over 8-year period. This is clearly
unsustainable and something that needs to be addressed
Top 10 UDW rig users* cash flow - consensus (USDbn)
Drivers:
• Production volumes
• Commodity prices
• Costs
350
300
250
200
150
100
50
0
-50
Cash flow from
operations
Capex
Dividends
CF after dividends
-100
2007
2008
2009
2010
2011
2012
2013
2014
2015e
2016e
2017e
Source: FactSet, Swedbank Research estimates. Note: *) Based on aggregate of the 10 largest users of UDW rig capacity (1q14) incl. Anadarko, BP, Chevron,
ConocoPhillips, ENI, ExxonMobil, Petrobras, Shell, Statoil and Total
4
Market hinting that further measures are needed
In particular Petrobras have no choice but to continue focusing on improving its cash flow
generation
Petrobras bond yields
Pemex bond yields
16%
16%
14%
14%
12%
12%
10%
10%
8%
8%
6%
6%
4%
4%
2%
May-13
Dec-13
Jul-14
Yield, PBR 2019 bond
Source: Macrobond, Bloomberg
Feb-15
Sep-15
Yield, PBR 2023 bond
2%
Sep-13
Mar-14
Sep-14
Yield, Pemex 2019 bond
Mar-15
Sep-15
Mar-16
Yield, Pemex 2024 bond
5
We estimate E&P capex reduction in 2016 by approx. 25%
Worst downturn since mid 80s
Global E&P capex change y-o-y
30%
25%
18% 18%
20%
18%
15%
9%
10%
21%
19%
19%
18%
15%
12%
12%
12%
9%10%
9%
8%
6%
3%
1%
5%
3%
3%2%
0%
0%
1984
-10%
1987
-8%
1990
1993
-3%
1996
1999
2002
2005
2008
2011
2014e
2017e
-6%
-12%
-20%
-21%
-30%
-23%
-25%
-33%
-40%
Source: Schlumberger, Citigroup, WoodMac, Swedbank Research estimates
6
Agenda
1. Grim picture
2. Market dynamics that are working right now
3. Outlook
4. Closer look at NCS
5. Light at the end of the tunnel?
1) Lower capex = lower production
Late 1980s illustrating that sharp reductions in E&P investments tend to weigh on production
volumes
Capex vs. production growth
Non-OPEC production
58.0
mb/d
57.5
57.0
Capex vs production (non-OPEC)
6%
y = 0.073x + 0.01
R² = 32%
5%
CAGR Non-OPEC production, next 4y
During 1986-1989 both capex and production
declined in the countries outside OPEC. We believe
the same will happen in 2016/17.
4%
3%
2%
1%
57.7
0%
1986
-30%
-20%
1987
1989
57.0
-10%
0%
10%
20%
30%
-1%
1988
56.5
2015e
2016e
Non-OPEC
Source: IEA, Rystad, Swedbank Research
-2%
CAGR Non-OPEC capex, real terms, past 4y
8
1) US shale production decline accelerating
Most recent estimate from EIA is that production is off ~500kbbls/d from Jul-15 to Apr-16**
US shale oil production*
MMbpd
Now: Growth rate
-0.96mmbls/d p.a.
6
5
Avg. 5.3
Before: Growth rate 1.3mmbbls/d p.a.
4
Avg. 4.71
Avg. below 4.6?
3
2
1
0
Source: EIA Drilling productivity report. Note: *) Include oil production from the regions Haynesville, Marcellus, Niobrara, Permian, Utica, Eagle Ford and Bakken. Note: **)
‘actual’ figures are only estimates for the last 3 months
9
1) Lower non-OPEC production expected in 2016
To contribute to rebalancing of the oil market
Oil demand growth vs. non OPEC supply growth (mmbbls/d)
Call-on-OPEC turning from negative to
positive
3.0
2.7
2.6
2.5
2.0
1.8
1.7
1.6
1.5
1.5
1.5
1.3
1.2
1.2
1.2
0.9
1.0
0.6
0.6
0.5
0.3
0.0
2010
2011
2012
2013
2014
2015e
2016e
2017e
-0.5
-0.6
-1.0
Change demand
Source: IEA
Change Non-OPEC + OPEC NGLs
10
2) Substantial cost reductions being realized among the E&Ps
STL showed USD 39/bbl break-even as of Sep-15, significantly lower than WoodMac’s for the
same projects
Breakeven prices, key STL projects (USD/bbl)
90
80
70
60
50
48
43
39
35
34
33
40
30
20
1q13
Project 1
3q13
Project 2
1q14
Project 3
3q14
Project 4
1q15
Project 5
3q15
Project 6
Source: Statoil (left chart), WoodMac (right chart), Swedbank Research. Note: *) Woodmac figures, includes 10% IRR. Selection may not be complete. Shaded bars show
projects were Statoil is operator
11
3) Cash spent on debt repurchases rather than rig upgrades
Approx. USD 1.8bn of cash used on early debt redemptions from 3q15
Bond repurchases* 3q15-> (USDm)
2000
1800
1600
Equivalent to:
1400
RIG
1200
~9 New-build jack-ups
ORIG
1000
ESV
NE
800
~25-90x Special
Periodic Surveys if
USD 20-75m per SPS
600
400
200
0
Bond repurchases*
Source: Companies, Swedbank Research estimates. Note: *) Aggregate purchase price
12
3) There are still lots of candidates for retirement
~30% of current fleet of floater rigs older than 30 years. These are key candidates for retirement in
today’s difficult market
Floater rigs by build year
Highlights
111 units built prior to YE 1990
(29% of total including newbuilds)
35
111 rigs, including 33
DW/UDW units, will be
>25 yrs in 2015
30
33 DW/UDW rigs built prior to YE
1990 (9% of total including newbuilds)
96 rigs, including 25
DW/UDW units, will be
>30 yrs in 2015
25
20
15
10
5
0
197 0
197 5
198 0
198 5
199 0
199 5
200 0
200 5
201 0
201 5
202 0
>7500ft floater rigs by build year
5000-7499ft floater rigs by build year
<5000ft floater rigs by build year
Source: ODS Petrodata
13
3) Wave of attrition
Total attrition have reached 54 floaters from 2014-YTD
Floater rig attrition per month
Floater rig attrition, cumulative
9
60
8
7
50
7
40
6
23
5
30
4
20
3
2
24
10
1
0
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16
MW
DW
Source: ODS Petrodata
UDW
0
Jan/14 Apr/14
Jul/14
Oct/14 Jan/15 Apr/15
MW
DW
Jul/15
Oct/15 Jan/16
UDW
14
3) Expecting significant capacity adjustments
As many as 30+ new-build projects may be terminated, and most of the uncontracted new-builds
will be deferred. Our scenario assumes scrapping of 105 rigs (vs. 54 thus far)
Floater rigs fleet growth (# rigs)
40
30
20
10
0
1996
2000
2004
2008
2012
2016e
-10
-20
-30
-40
-50
Attrition
Source: ODS Petrodata, Swedbank Research
Expected new-builds
Scheduled new-builds
Net fleet growth
15
Agenda
1. Grim picture
2. Market dynamics that are working right now
3. Outlook
4. Closer look at NCS
5. Light at the end of the tunnel?
Fleet – 2017 fleet expected ~20% lower than in 2014
Floater rigs fleet (# rigs)
450
Fleet if all new-builds delivered according to schedule and no further attrition
400
Expected fleet
367
350
300
255
250
200
150
100
50
0
1995
1999
Source: ODS Petrodata, Swedbank Research
2003
2007
2011
2015e
17
Demand – 2017-18 sensitive to 2016 oil price development
We assume relatively stable demand in 2017 vs. 2016, followed by recovery in 2018
Floater rigs contracted – demand (# rigs)
300
250
200
150
100
50
0
1995
1999
2003
2007
2011
Historical demand and future backlog
Assumed new contracting
Demand est. SWB oil price trajectory
Demand est. fwd curve
Source: ODS Petrodata, Swedbank Research
2015e
18
Market balance scenario (derived from a lot of assumptions, whereof most touched upon)
Low point 2016, start of recovery in 2017, starting to see some pricing power for 2018
Floater rigs fleet (# rigs)
350
100%
300
250
90%
200
80%
150
100
70%
50
0
60%
1995
1999
Total fleet
Source: ODS Petrodata, Swedbank Research
2003
2007
Active fleet
2011
Demand
2015e
Active utilization
19
Mid 80s utilization would still imply moderate economics
Small variation in day rates in 75-85% utilization range
Offshore rigs – supply curve (floaters)
SCORE to day rate conversion
SCORE Index (Floaters)
180
New -build cost (USDm)
Opex per day (USDk/d)
160
140
SCORE
90
85
80
70
60
50
40
30
20
120
100
80
60
475
165
EBITDA
EV/EBITDA
annualized new -build
109
103
97
85
73
61
49
36
24
4.3
4.6
4.9
5.6
6.5
7.8
9.8
13.0
19.6
Day rate
464
448
431
398
365
331
298
265
232
40
20
0
60%
65%
70%
75%
Oversupply,
rates cost driven
80%
85%
90%
95%
100%
Marketed utilization floater rigs
’Normalized’ Undersupply,
economics
windfall profits
Source: ODS Petrodata, GlobalSantaFe, SWB Research estimates. Note: *) Assumes USD 650m build cost, USD 190k/d opex
20
Agenda
1. Grim picture
2. Market dynamics that are working right now
3. Outlook
4. Closer look at NCS
5. Light at the end of the tunnel?
Active NCS floater fleet expected to contract to 20 units
We estimate the active NCS floater fleet to decline to approx. 20 units (18-21) by 2017
NCS fleet
NCS fleet growth
6
30
4
25
2
20
0
2013
2014
2015
2016e
2017e
2018e
2019e
-2
15
-4
10
-6
-8
5
-10
0
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017e2019e
Active fleet
Cold stacked
Source: ODS Petrodata, Swedbank Research estimates
Scrapped
Probable/possible rigs entering
Cold stacked
Existing rigs incoming
Rigs leaving NCS
New-builds contracted
Net change
22
Declining demand since 4q13 peak of 28 NCS floaters in use
L20yrs average demand of 19 units
NCS floater market (# rigs)
35
100%
30
80%
25
60%
20
Avg. 97-16ytd: 19
Avg. 97-16ytd excl. 12-14: 17.5
15
40%
10
20%
5
0
1q85
0%
1q88
1q91
Demand
Source: ODS Petrodata
1q94
1q97
1q00
Total Supply
1q03
1q06
1q09
Marketed Supply
1q12
1q15
Utilization
23
Historical avg. demand would imply 88-95% utilization of 17ye fleet
NCS floater market – 2017ye fleet vs. historical demand range (# rigs)
35
# rigs
143%
31
% 2017ye active fleet
30
28.5
25
95%
20
88%
18.9
20
17.7
15
10.9 55%
10
5
0
Total fleet ye2017
Active fleet
ye2017
Source: ODS Petrodata, Swedbank Research
Peak demand
4q13
Avg. demand
1997-2016td
Avg. demand
1997-16td, excl.
2012-14
Trough demand
4q03
24
>10 NCS development projects viable given current fwd strip
Supports expectation of improvement in contracting as soon as oil price recovery takes some
pressure off operators’ cash flows and balance sheets
NCS – top 11 future field development projects vs. Brent forward prices (USD/bbl)
60
55
50
Top 11 NCS projects* - high
45
Top 11 NCS projects* - avg. b-e
40
35
Top 11 NCS projects* - low
30
25
Brent fwd
20
12/2015
12/2016
12/2017
12/2018
12/2019
12/2020
12/2021
Source: Statoil, WoodMac, Swedbank Research estimates. Notes: *) Includes 6 unnamed Statoil-operated projects, plus Snadd North (BP), Pil & Bue (VNG), Garantiana
(Total), Krafla (Centrica), Skarfjell (Wintershall)
25
Statoil likely to need more capacity from 2017
STL has reduced its floater rig fleet on the NCS by approx. 40% since the early 2013 peak. Based
on 6 rigs only with charters through 2h17, we would expect tendering for 2h17/1h18 start-up
Statoil floater fleet NCS *
18
1717
16
16
Statoil floater contract overview
Dec-15
171717
Ocean Vanguard, Semi 1500 3rd
16
Transocean Leader, Semi 4500 4th
15
COSLPioneer, Semi 1640 5th
1414
14141414
14
Transocean Spitsbergen, Semi 6500 6th
131313
1212
12
1111
10
Dec-17
Dec-18
Terminated
Released / Exit to UK
Terminated
Released
Songa Trym, Semi 1200 2nd
Terminated
COSLInnovator, Semi 1640 5th
Terminated
West Venture, Semi 2600 5th
11
Dec-16
Released
Songa Delta, Semi 1500 3rd
10
10
Songa Dee, Semi 1800 3rd
Bideford Dolphin, Semi 1750 4th
9
West Hercules, Semi 10000 6th
Stena Don, Semi 1640 4th
8
Scarabeo 5, Semi 6233 4th
6 6 6 6 6 6 6
6
Deepsea Bergen, Semi 1475 3rd
Deepsea Atlantic, Semi 10000 6th
COSLPromoter, Semi 1640 5th
Songa Endurance, Semi 1640 6th
4
Songa Equinox, Semi 1640 6th
Songa Encourage, Semi 1640 6th
2
Songa Enabler, Semi 1640 6th
Construction
0
1q11
1q12
1q13
1q14
1q15
1q16
1q17
Source: ODS Petrodata, Swedbank Research
Current contract
Yard
Free/mob/etc
Future contract
Option
1q18
Note: *) Shows number of rigs contracted for at least part of the quarter
26
Agenda
1. Grim picture
2. Market dynamics that are working right now
3. Outlook
4. Closer look at NCS
5. Light at the end of the tunnel?
Offshore drillers 2016: high leverage and balance sheet focus
Several shares have come down to levels where market capitalizations to a large degree only
mirrors option value, reflecting high probability of need for refinancing/debt restructuring
Market cap. as percentage of proforma enterprise value
100%
80%
133%
60%
40%
54%
48%
20%
34%
32%
27%
22%
20%
12%
9%
9%
8%
4%
3%
3%
3%
PRS
ODL
SDLP
PACD
ORIG
NADL
SONG*
0%
AWDR
DO
RDC
NE
ESV
RIG
ATW
FOE
SDRL
-20%
MCAP/Proforma EV
Net debt/Proforma EV
Minorities/ Proforma EV
Associated co's/ Proforma EV
Rem. New-build capex/ Proforma EV
Source: Swedbank Research estimates, FactSet. Note: *) SONG prior to transaction announced 15-Mar-16
28
Extreme volatility
Challenges analyst toolbox
SDRL vs OSEBX – daily % changes 2016
SDRL vs OSEBX – aggr. abs. daily changes 2016
500%
70%
SDRL
60%
450%
OSEBX
50%
400%
40%
350%
30%
300%
OSEBX
5.6x
20%
250%
10%
0%
05-Jan-16
SDRL
444%
200%
19-Jan-16
02-Feb-16
16-Feb-16
01-Mar-16
15-Mar-16
150%
-10%
100%
80%
-20%
50%
-30%
0%
Total distance travelled ytd
-40%
Source: InFront, Swedbank Research
29
Example: SDRL market capitalization vs. bond discount
SDRL mcap vs. aggregate bond discount*
SDRL bond discount relative to mcap*
USDm
300%
20,000
18,000
250%
16,000
14,000
200%
12,000
10,000
150%
8,000
6,000
100%
4,000
2,000
50%
0
0%
SDRL (incl. NADL) sum currently outstanding bonds @mkt
Aggregate discount to par all SDRL bonds (incl. NADL)
SDRL mcap
Aggregate discount to par all SDRL bonds (incl. NADL) relative to
SDRL mcap
Source: Bloomberg. Note: *) Aggregate discount to par across all currently outstanding SDRL bonds (incl. issues by majority owned subsidiary NADL)
30
Any closer to the light at the end of the tunnel?
31
‘Peak bearishness’ possibly behind us
Energy HY credit spreads peaked in Jan-16 at close to 1200 basis points and have later narrowed
to around 900
Analyst ratings offshore rigs* (cumulative)
US HY Energy Credit Spread (bps), BofA
80%
1 400
70%
1 200
60%
1 000
50%
800
40%
600
30%
400
20%
200
10%
0%
Nov-00 Nov-02 Nov-04 Nov-06 Nov-08 Nov-10 Nov-12 Nov-14
Sell rec. in % of total
0
2001
2003
Hold rec. in % of total
Source: Bloomberg, Swedbank Research. Note: *) Analyst ratings for ATW, DO, ESV, NE, RDC and RIG
2005
2007
2009
2011
2013
2015
US HY Energy Credit Spread (bps)
32
Brent fwd complex: currently back to 50/bbl by 2019
However, we note some re-pricing vs. a week ago
Brent oil, fwd market (USD/bbl)
80
70
60
50
40
30
-1W
20
05/2015
Source: Bloomberg
05/2016
05/2017
-1M
05/2018
-3M
05/2019
-1Y
Brent fwd
05/2020
05/2021
33
Oil price outlook: 40 likely way below long-term equilibrium
Swedbank forecasts somewhat more optimistic than the forward market currently
Brent crude (USD/bbl)
Source: Macrobond, IMF, IEA, SWB Research estimates.
Note: Dotted lines show average actual Brent price for the year
34
Oil price seasonality also on the positive side
Brent oil yearly performance since 1990 (1-Jan = 100)
Source: Macrobond
35
80s: demand/utilization increase 1.5yrs after oil price trough
Floater rig demand vs oil price
200
Floater rig utilization vs oil price
45
100
45
40
90
40
35
80
35
30
70
30
25
60
25
20
50
20
190
180
170
160
150
140
130
120
110
19 m
19 m
100
15
Jan 1986 Jul 1986 Jan 1987 Jul 1987 Jan 1988 Jul 1988 Jan 1989 Jul 1989
Demand, floaters
Real oil price (2014 USD)
Source: ODS Petrodata, Macrobond, Swedbank Research
40
15
Jan 1986 Jul 1986 Jan 1987 Jul 1987 Jan 1988 Jul 1988 Jan 1989 Jul 1989
Active utilization floaters
Real oil price (2014 USD)
36
Re-pricing always happens before market recovery
Shares normally find their way to trough valuations amid ‘peak concerns’, which typically takes
place close to 1 year prior to the low point for rig market utilization
Offshore rig stocks vs. floater rig utilization
100%
80s downturn
90s recession
9/11 sell-off
Asia crisis Mkt downturn
10 000
Macondo
Credit crisis
90%
1 000
80%
70%
100
60%
50%
Jan-85
14 m
11 m
11 m
9m
12 m
7m
10
Jan-90
Jan-95
Tota l uti liz atio n flo ater ri gs %
Source: Infront, ODS Petrodata, Swedbank Research
Jan-00
Ma rke te d u ti li zati on flo a ter rig s %
Jan-05
Jan-10
Jan-15
Index R IG, ATW, DO, ESV, NE , R DC (rhs )
37
Disclaimer
Recommendation structure and definitions
Information barriers
Swedbank Large Corporates & Institutions Equity Research department operates with 5 recommendation categories based on expected
absolute return for the security 12 months forward. The absolute return includes share appreciation and dividend yield combined.
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same time been involved in corporate assignments for companies described by him or her.
Strong Buy:
Buy:
Neutral:
Reduce:
Sell:
Share price target
The absolute return is estimated to be in excess of 15%
The absolute return is estimated between 5% and 25%
The absolute return is estimated between 0% and 10%
The absolute return is estimated between 5% and -10%
The absolute return is estimated to be less than -5%
All share price targets are based on a 12 month horizon
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Recommendation at the 17 March 2016
No of shares
Part of total
Part of MCAP
Strong Buy
1
1%
0%
Buy
52
48%
51%
Neutral
41
38%
40%
Reduce
12
11%
2%
Sell
2
2%
0%
Total distribution of
recommendations
Redu
ce
11%
Sell
2%
Buy
48%
Neutr
al
38%
Source: SWB Research
Stron
g Buy
1%
Distribution of
recommendations for
Companies that Swedbank
has delivered investment
services:
Redu
ce
15%
Sell
8%
Stron
g Buy
0%
Buy
42%
Additional disclaimer
Neutr
al
35%
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