Business looks well rigged for Maridive

Company to reap benefits as new entrants deterred

The offshore oil business has been in the news recently for all the wrong reasons, but the industry outlook bodes well for Maridive and Oil Services. After 20 months of volatility in oil prices, stability is returning, exploration and production activity is on the rise and rig counts are up. Maridive, based in Egypt, offers an array of services to the offshore exploration and production value chain. Its clients include large oil and gas players such as Saudi Aramco, Qatar Gas, Kuwait Oil and Gulf of Suez Petroleum.

The business has two distinct operational divisions: one providing offshore construction and the other offshore support vessels. Maridive is geographically diversified with only 15 per cent of its revenue from Egypt and negligible exposure to the Gulf of Mexico. With stringent regulations introduced as a result of the BP spill, regulatory barriers are deterring new entrants, which favours established players such as Maridive, said Zeinab el Behairy, an analyst with Naeem Brokerage.

The analyst has a "buy" rating on Maridive's shares with a fair value price of US$4.87. It is trading at a discount of about 45 per cent to its peers, Ms el Behairy said. Maridive closed at $2.60 yesterday. Maridive has a backlog of $559 million, which represents twice the company's revenue last year, Ms Behairy said. The Aramco contract of $380m for offshore construction set to run to the end of 2013 is by far the largest.

Maridive suffered from low margins in the first half of the year as the Aramco contract was restricted to mostly procurement and engineering activities, which carry low margins. The contract has been moved to the more lucrative construction phase. The company is also negotiating four new contracts that could lift Maridive's revenues in the second half of the year. Maridive is also planning to increase its fleet to 74 from 64 by 2012. The company has already secured financing for the purchases, which will lower the fleet age for the company and boost average daily rates, Ms Behairy said.