In an outlook update on Medserv plc, Edison Investment Research stated that “Medserv is now truly expanding internationally, and appears to be increasingly verifying its credentials”. This follows the recent announcement of the company’s full-year 2018 results and the directors’ interim statement for the first quarter of 2019.
The directors’ interim statement reported a group turnover for this year’s first quarter that is 51 per cent higher than that achieved in the first quarter of 2018, resulting in earnings before interest, taxes, depreciation and amortisation (Ebdita) improving by 157 per cent over same period last year.
According to Edison, the Suriname offshore base management contract is a prime driver of significant improvement in FY19, with group revenues set to almost double. Progress was also reported in Egypt, Cyprus and Malta, with potential for significant new opportunities for this year for both integrated logistic support services (ILSS) and oil country tubular goods (OCTG) operations.
The report said: “We would regard 2018 as a year of transition for Medserv. New operations in Egypt commenced, Cyprus oil discoveries transformed prospects for the base, Oman OCTG operations were transferred to the new facility at Duqm and the Suriname base management contract not only extended operations beyond the EMEA region, but also introduced management services as a new and sizeable revenue stream.”
The directors also provided a trading update on the group’s various operations across the globe. The Malta business unit continues to support the offshore Libya Bahr Essalam Phase 2 project. Despite the conflict in Libya, all client operations have continued without any disruption using Medserv’s base in Malta as the shore base for these operations. The company has also secured various engineering work engagements from the oil majors operating in Libya.
In Q119, the company supported ExxonMobil’s offshore drilling campaign, which resulted in a significant gas discovery in Cyprus. The discoveries offshore Cyprus by ExxonMobil and ENI have led to an increase in exploration drilling campaigns which are scheduled to start in the last quarter of the year. These positive developments have triggered additional offshore exploration drilling campaigns in neighbouring countries for which the company has been invited to participate to tender.
Medserv... enjoys first-mover advantage
Medserv, being the first international shore base logistical company to operate in Egypt, enjoys first-mover advantage. The company has been contracted to carry out additional services in the coming months, and other international oil companies (IOCs) are showing interest to subcontract their shore base logistics to Medserv.
The company’s operations in Suriname have kicked off successfully. The State oil company has started its nine-well near-shore drilling programme and has already drilled one well. ExxonMobil’s successful oil discoveries in neighbouring Guyana have raised optimism of a major discovery in Suriname. The company is pursuing further growth opportunities in the region as other IOCs plan to drill in this emerging region later this year and in the coming years.
The group’s OCTG business in the Middle East region is also registering an improved performance, particularly in Iraq. This business unit continues to recover as the oil and gas industry becomes stronger.
As previously reported, the company is still waiting for the State authority’s approval for the Uganda project to proceed. An award would provide the group with another long-term contract with consistent revenues. The company is also awaiting the adjudication of an award of additional supply chain management contracts in the Middle East in 2019.
The directors expect the positive trend and increased market activity in the oil and gas industry to continue in 2019 with several large projects within Medserv’s core competencies expected to be awarded to the market during the year. “Improved market conditions, increased drilling projects and a track record of successful delivery of projects, are key in supporting the company’s growth in earnings. The results for 2018 showed a significant increase in group earnings and performance. We are excited about the prospects for 2019 and expect the performance this year to continue to improve,” said Medserv Group CEO Karl Bartolo.
Last week Medserv’s board of directors provided an update on the intention of the two major shareholders – Anthony Diacono and Malampaya Investments – to source a strategic partner for their holdings, which aggregate to 65 per cent of the share capital.
The shareholders have received non-binding offers from interested offerers and are in the process of evaluating the offers. It is anticipated that the company will shortly proceed to grant selected offerers access to further information as part of the process. While this does not guarantee an offer for the shareholdings, it marks a significant step forward in the process.
Edison now reports a capped discounted cash flow value of €1.33 per share but see an upside to this if significant new long-term contracts are awarded this year.
The full Edison report may be viewed on the company’s website at the links below.
http://www.medservenergy.com/medserv-edison-research