Maintain outperform on Aban Offshore but revise target price to R800 (earlier R900). We remain cautious on the older rigs, and build in increased re-contracting delays. We also model a medium-term idling of Aban VII (a relatively older, low-spec rig). FY16 and FY17 EPS falls by 11% and 3%, respectively.
Aban’s Q3 results saw a small beat helped by higher revenues (2% ahead). This was because Aban VIII continued to operate through the quarter on drilling commitments. Slightly lower costs helped ebitda beat CS estimate by 5%.
We had modelled the Aban VIII contract ending in October-2014 — but the rig has continued operating so far as the well commitments have not yet been met. This was countered by the idling of Aban Abraham for 40 days for the certification (done every five years). Overall revenues were 2% ahead of estimates.
A small opex improvement helped the ebitda beat as well. Depreciation and interest costs were in line while tax rates were lower. Aban suggested some delays in the Middle East receivables, which can hurt cashflows; however, the firm is confident that this is not a cause for worry.
By Credit Suisse