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The Subsea 7 result is projected to change further in the first quarter of the year. Analysts expect the company to cut operating costs and investments in the face of the oil crisis in the future. – I think they will do well, says Haakon Amundsen at ABG Sundal Collier.
Subsea 7’s share has fallen sharply this year, but the company is among the most positive analysts, largely because it has a strong bottom line.
Subsea 7
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The oil services industry is heavily burdened by the brutal drop in oil prices. In general, the level of activity of the supplier companies is expected to decrease sharply as the investments of the oil companies decrease.
On Thursday, submarine contractor Subsea 7 will be in the fire, and ABG Sundal Collier analyst Haakon Amundsen tells E24 that he will monitor how the crisis affects the company in the short and long term.
– One is the short-term impact of Covid-19 on current operations and how they manage to execute the order book. In addition to how much you will have to say about the margin in the first half.
– The second is how the drop in oil prices will affect order intake and the outlook for the slightly longer term, and how the company will cope with the drop in activity. Among other things, how much to cut and how to prioritize in terms of balance, says the analyst.
– I think it will go well
ABG Sundal Collier believes Subsea 7 will announce that it will take action on the report before the first quarter of the year. Several other companies in the same segment have already done so.
– They will probably make big cuts in operating costs and investment costs, says Aamundsen.
However, the analyst believes that the company, which has net cash and little debt, is going through the crisis.
– Historically they have been good at using the flexibility of the cost base and have a good balance. So I think they will do well, says Aamundsen.
Subsea 7’s pre-tax earnings are expected to hit $ 10 million during the year, compared to less than $ 29 million in the same period last year, according to estimates Infront has collected from 14 analysts for TDN Direkt. Revenue analysts believe $ 884 million will end in the first quarter of 2020, up from $ 859 million in 2019.
At the end of the quarter, the Subsea 7 order book was expected to be $ 5.68 billion. In comparison, the order book was $ 5.18 billion at the end of the previous quarter, according to Infront TDN Direkt.
Pending cancellations
Sparebank 1 Markets writes in a note that the broker expects good results, as the virus outbreak “did not affect operations in the first quarter too much. However, analyst Tommy Johannessen expects the second quarter to worsen. He predicts that the company You will have to make repayments as well as cut your investment budget.
Sparebank 1 Markets has a buy recommendation for Subsea 7, with a target price of NOK 75. Oil service stock, which has fallen sharply this year, closed at a price of NOK 57.32 on Wednesday. The average price target is NOK 78.4 per share, which ranges from NOK 40 to 100, according to Infront TDN Direkt.
Pareto Securities believes that the updated guide, meaning future prospects, will be the most important thing to follow, writes Infront TDN Direkt.
The brokerage notes that Subsea 7 has had strong order intake so far this year, according to the news agency.
“This reflects projects sanctioned before the corona virus and this will end quickly as order intake is expected to be lower for an extended period,” Pareto writes, Infront TDN Direkt writes.
Although a lot of bad news has already been included in Subsea 7’s stock, Arctic Securities sees little room for positive data points in the company’s upcoming reports, according to the news agency.
