Ezra eyes $1b subsea oil services orders in 12 months: Update

Singapore’s Ezra Holdings (EZRA.SI) said it has the muscle to triple its subsea oil and gas services orders to around US$1 billion ($1.24 billion) in the next 12 months, as offshore oil drilling is expected to pick up pace globally.

Singapore-based Jasper Investments (JASP.SI), a relatively small player in the oil services industry, also told Reuters that it was confident about the offshore drilling sector and was acquiring more jack-up rigs.

 

Ezra has benefited from the recent acquisition of Norway’s Aker Marine Contractors, which could boost its capability to grab subsea orders for equipment and construction in the Gulf of Mexico, the North Sea, Latin America and Africa.

 

“I would be disappointed if within 12 months we don’t bring the backlog up to close to US$1 billion. That would be our target,” Ezra’s managing director Lionel Lee told Reuters in an interview.

 

“Oil and gas demand obviously will take an upturn because there are a lot of areas in nuclear (technology) that could go wrong compared to oil and gas,” he added.

 

Japan’s nuclear crisis, the Middle East turmoil and high oil prices are pushing oil majors to accelerate the search for offshore oil and gas, which analysts see as a positive sign for rig-makers and drillers.  

Jasper — which rents out rigs to oil exploration and production companies — said it intends to acquire 2-4 more jack-up rigs in the next 2-3 years as it is bullish about global demand for oil and gas.

 

Brent crude prices held steady above US$122 per barrel on Friday as the radiation threat in Japan fuelled concerns about the safety of nuclear energy and the unrest in the Middle East and Africa puts oil supplies at risk.

 

JPMorgan Securities said in a recent report it is more positive on offshore drillers as disruptions in the Middle East will increase rig contracts and it expects more permits to be issued in the near future in the Gulf of Mexico.

 

Earlier this month, the drilling rig arm of Danish shipping and oil group A.P. Moller-Maersk (MAERSKb.CO) ordered two deepwater drilling vessels for nearly US$1.3 billion from Korean group Samsung Heavy Industries. 

 

Jasper recently ordered two jack-up rigs from Singapore’s Keppel Corp (KPLM.SI), the world’s largest oil rig builder, at around US$180 million each. The first rig is scheduled for delivery in November 2012, while the second one in May 2013.

 

“Just in Africa alone, we have identified at least 25 companies that will be requiring rigs for drilling activities in the next one year,” Jasper executive director Geoffrey Yeoh told Reuters.

 

“Today I think the charter rates for jack-ups are between US$130,000 and US$140,000 a day. Now there’s expectation that as more activity picks up, this level may go even higher.”

 

Yeoh said the firm hopes to return to profitability when the drillship Explorer starts work on a well for a project worth around US$15 million off West Africa in October this year. 

 

Jasper had signed a letter of intent with Norway’s AGR Peak Well Management to drill one well, with an option for another. AGR also has the option to use the drillship for another five-well drilling program.

 

“Oil and gas activities are picking up, thanks to rising global demand and favourable oil prices,” said Ng Kian Teck, an analyst at SIAS Research.

 

“It is an opportunistic move for companies, especially those in the upstream, to ride on the trend and expand their operations now,” he said, adding that underexplored regions such as Africa may generate upside for the firms.

 

However, Ng said risks come from project execution and macro-economic factors such as oil price movement and global economic growth. These risks will affect the charter rates and utilization rates of the rigs, he said.

 

At 2:07 p.m., Ezra shares were down 1.1% at $1.75 on a volume of 4.9 million shares. The stock had fallen nearly 3% so far this year, compared with a 1% drop for the broader Straits Times Index.