Download Eurasia Drilling Co. 4Q12 preview – results and outlook known – but

2013.28.03 Oil & Gas
Research Department
Eurasia Drilling Co. 4Q12 preview – results and outlook
known – but any surprises?
Eurasia Drilling Co.
Ticker
Current price, GDR (as of March 27)
Target price (GDR)
Upside, %
Recommendation
Market capitalization
Common shares outstanding, mln
Common/GDR
Free float
EDCL LI
$35.90
$40.00
12%
OVERWEIGHT
$5,264 mln
146.8
1
32%
OFS companies performance vs. RIOB Index, YTD
150%
100%
50%
0%
-50%
EDC
Integra
Mar 13
Jan 13
Nov 12
Sep 12
Jul 12
May 12
Mar 12
Jan 12
-100%
C.A.T. oil
RIOB Index
Source: Bloomberg
Eurasia Drilling Company (EDC) is scheduled to release 4Q12 US GAAP
results on Tuesday, April 2, followed by a conference call the same day.
Summary results have already been published and we might see only a
marginal surprise on the EBITDA line. Moreover, the company has already
published its 2013 outlook, which makes the conference call not that
interesting, as the company historically has not provided an outlook
beyond one year. The company needs to show some surprise to move the
market, but we doubt it will.
4Q12 – low season in drilling and margins. Historically the
fourth quarter has always been among the weakest for EDC and drillers
in general – the year-end is near and rigs are starting to move to new
locations. 4Q12 was no exception for EDC – drilling came in at 1.47
mln meters, down some 16% QoQ but still up 38% YoY. Drilling in
4Q11 was down 18% QoQ, so 2012 ended on a pretty good note.
Top-line numbers are known. EDC has already disclosed guidance
for revenues and the EBITDA margin for 2012, so we hardly expect a
surprise on these lines. However, the company may still surprise on
EBITDA, as guidance assumed a pretty low (20%) EBITDA margin for
4Q12, down 1 pp YoY. Moreover, the net income figure does not really
matter, as the company has already announced dividends for 2012 at
$0.7 per share.
Guidance for 2013 has also been given. Revenues were guided
to grow 12.5% YoY to $3.6 bln, with the EBITDA margin expanding 0.5
pps to 24.8%. The company also said it expects drilling volumes to be
slightly higher in 2013. The main source of revenue growth will be
workover and sidetracking.
Third offshore rig to begin operating in 3Q13. The third
offshore rig will contribute significantly in 2H13 and we see the main
upside to EDC’s 2013 forecast mainly in the offshore. In our view, the
company’s revenue and EBITDA projections do not account for possible
contributions from the third offshore rig. This is in line with the historical
policy of EDC, a company that has always been extremely cautious with
its forecasts.
Good news is already priced in; surprise needed. We doubt
that EDC’s 4Q12 results will be able to boost the share price. The
numbers for 2012 were already given and guidance for 2013 is unlikely
to be massively upgraded. The company needs to provide some real
surprise to trigger a further re-rating of the stock. We do not expect the
results or conference call to have a significant impact on the stock, but
EDC remains on our list of top picks, as we expect the company to start
outperforming in 2H13.
EDC 4Q12 US GAAP preview, $ mln
Revenues
EBITDA
EBITDA margin
4Q12E
798
163
20%
3Q12
838
242
29%
4Q11
710
150
21%
QoQ
-5%
-33%
YoY
12%
9%
4Q12C
815
164
20%
Source: company, Bloomberg consensus, Gazprombank estimates
Alexander Nazarov
+7 (495) 980 43 81
[email protected]
Copyright © 2003-2013
Gazprombank (Open Joint-Stock Company)
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