Lionel Lim is a remisier and writes a blog, Invest From Bear to Bull
IT IS VERY clear that the oil and gas sectors are undergoing a bear market right now. Companies with big order books and long term chartering contracts are likely to ride out this difficult period.
One of the companies I have been analysing is Vallianz Holdings.
Some key corporate developments:
» On 20 July 2015, Vallianz Holdings negotiated an average of 10% cut in chartering rates with a National Oil Company (NOC). Tthe chartering contracts were extended till 2020 including options.
» In December 2014, Vallianz Holdings was awarded a US$97 million time charter to supply a customized Offshore Floating Storage and Supply Vessel to the NOC for up to 5 years.
» On 13 July 2015, the Group secured a time charter worth up to US$300 million to supply two self-elevating platforms to support the NOC’s offshore oil production activities for up to 7 years.
If you have gone through Vallianz Holdings' presentation slides on 12 August 2015, you will note that the charter period for both contracts start in Q3 2015.
» As at July 2015, the total outstanding order book is US$968 million.My View:
» Key risk: Contract cancellation, vessel delivery delay
However, do note that the above contracts were negotiated and/or renegotiated when oil prices were lower than the peak.
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