Oman's Renaissance set to ride crude's rise

A hefty 1bn rial investment programme to boost Renaissance Services' fleet size is elevating the oil and gas services company's shares.

Renaissance Services, an Omani oil services provider, last year embarked on an expansion to increase its fleet size by almost 50 per cent.

It seems now that the timing could not have been better. With oil prices above US$90 a barrel, the company is positioned to profit from increased demand for its vessels. Renaissance shares are up more than 50 per cent in the past six months on the Muscat Securities Market.

Kanaga Sundar, an analyst at Gulf Baader Capital Markets in Muscat, has an "accumulate" rating on the stock and says it is trading at a lower valuation than its global peers.

"The rating is on the back of expectations of stronger earnings growth in its key business divisions and the upcoming robust capital expenditure programme," Mr Sundar said.

The company is forecast to report a full-year net profitof 27.2 million Omani rials for last year, an increase of 8.7 per cent on 2009, Mr Sundar said. As part of its expansion, Renaissance plans to spend 1 billion rials over the next three years to increase its fleet size to 150 vessels, from 103 at the end of 2009.

Its fleetuses dry-docking facilities in Salalah, Abu Dhabi, Fujairah, Kazakhstan and Azerbaijan.

The vessels are deployed to support the development phase of oil projects as well as the production phase. Renaissance also owns a fabrication operation with facilities in Abu Dhabi and Fujairah.

Renaissance's offshore fleet is among the youngest in the world, with an average age of 7.6 years. The global industry average was more than 14 years at the end of 2009. In the MENA region, more than half the vessels are over 25 years old. Oil majors operating in the region are often willing to pay a premium to use younger vessels.

The company gets more than 80 per cent of its revenue from the Middle East and Caspian Sea area, with additional revenue coming from North Africa and South East Asia.