After a few adjustments (LAM bad-debt recoveries, merger related costs and impairment & restructuring costs), clean 2Q EBITDA of $225mm, below both Consensus/WR of $255mm/$236mm. We are getting to a clean EPS loss of $0.14 vs Consensus/WR of -$0.04/-$0.30. Revenues were in-line but EBITDA/EBIT margins of 9.9%/0.3% were light vs. 11.3%/1.0% Consensus. NAM and LAM worse than expected. Europe/Africa/Russia Caspian was soft, too. MEA beat though. Most of the softer-than-expected 1Q issues were highlighted at a competitor’s conference last month, but numbers never really came down for some reason. See variance below.
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Tough market these days. Decent 2Q outlook could not propel the stock higher today. HAL actually underperformed by ~100bps (-0.8% vs +0.2% for OSX). We agree with HAL – there is a tale of two cycles playing out globally. The short-cycle NAM market is rapidly accelerating (maybe too quickly), while the offshore and international recovery remains elusive, though management affirmed they did see bottom in 1Q (mostly attributed to some seasonal improvement in Eastern Hemisphere). 52% of HAL’s 1Q revenues were generated in NAM. This we like, although there is a bit of NAM onshore de-risking amongst investors as concerns are growing around the sustainability of the NAM onshore recovery, something we have been highlighting for months now. Regardless, HAL is our favorite way to play NAM onshore, especially now that RES (recently downgraded to PP) is trading at a similar multiple. Nonsense. Maintain OP & $55 YE18 PT (10x ’19 EBITDA).
Despite strong market commentary on the conference call, PDS finished -3.2% (OSX = +0.2%) today (4/24) after 1Q missed on higher costs. Recall, NBR (PP) and HP (UP) have already indicated elevated 1Q OpEx/d. PDS gave an overview of the technology it will demo at its May 15th analyst day, indicating it will build core technologies but outsource various non-core competencies to the likes of NOV (PP), SLB (OP), etc. Lastly, PDS reiterated deleveraging as a priority (YE17/18/19 ND/EBITDA = 4.9x/4.3x/3.2x). This has been the biggest overhang on the stock, in our opinion. Maintain OP. Reduce PT slightly to $5.0 (7.5x ’19 EBITDA) from $5.6, assumes 0.75USD/CAD Fx rate.
Prior enthusiasm over the Siem Helix 1 (SH1) acceptance faded quickly as a temporary (hopefully) reduced dayrate and delayed SH1/SH2 start resulted in lowered guidance. Two key points though: 1) Petrobras (PBR-NR) accepted SH1, basically taking cancellation off the table and 2) SH1 acceptance actually sets precedent for SH2 acceptance (same contract specs). On our new estimates, HLX is trading at 7.3x/5.1x ‘18/’19 WR EBITDA, a significant discount to offshore drillers of 10.4x/10.3x (Cons). Historically, HLX has traded at least similar multiples as offshore drillers, thus implying the market is discounting a rather dire scenario with these Siem vessels. At 10x, the market is pricing in only $110mm of EBITDA in ’19, essentially implying negative $40mm/vessel of EBITDA for each Siem vessel and no growth in their base businesses. Unlikely, in our opinion. Reiterate OP. Reduce PT to $7.5 (6.3x ’19 EBITDA) from $10.
Excluding $1.5mm business development expense and $6.3mm vendor contract restructuring, SLCA reported EBITDA of $42.8mm vs Consensus/WR of $37.3mm/$39.8mm. Clean EPS of 9c compares to Consensus/WR of 6c/10c. Revenues of $245mm beat Consensus of $237mm (WR = $221mm). O&G drove the beat. See variance below
1Q EPS/EBITDA of $0.04/$586mm vs Consensus of $0.03/$569mm and WR of $0.03/$579mm. Prior to preannouncing in late March, 1Q EPS stood at $0.14. NAM revenues increased 24% q/q, much better than the high single digit increase reported by Schlumberger (SLB-OP). Int’l revenues fell -8% q/q (SLB = -7% q/q). The company no longer reports regional margins, only C&P and D&E segment margins now. See variance below.
Reported Adjusted EBITDA of $CAD84.3mm, missing both Consensus/WR of $CAD91.8mm/$90.2mm. The miss was attributed to US Drilling, where OpEx/day increased ~$900/day as PDS moved rigs from the Bakken and Marcellus into basins with stronger demand, such as the Permian and SCOOP/STACK. US Drilling Gross Profit of $C29mm missed WR expectations of $C41mm due almost entirely to these higher costs. But the majority of these mobilization costs will be recovered over the contract period. This is the first we’ve heard of rig mobilization costs being reimbursed. See variance for full 1Q segment details.
Excluding $1.0mm Fx gain, HLX reported adjusted EBITDA of $14.6mm, better than Consensus ($11.8mm) but in-line with WR ($14.8mm). Revenues of $104.5mm (Consensus/WR = $109.6mm/$107.6mm) came in a touch light as Robotics topline fell 46% q/q. Robotics was impacted by normal seasonal slowdown and general market weakness which reflected “a lack of subsea infrastructure spending.” Lastly, HLX announced Petrobras’ (PBR-NR) acceptance of the Siem Helix 1 (SH1) on April 19th and started its 4-year contract in mid-April, but at a reduced dayrate as certain items identified in the vessel acceptance process are worked through. See variance below.
1Q EPS of $0.25 was in-line but underlying results were not all that inspiring as a material seq decrease in non-operating items (D&A, R&D and eliminations) helped EPS by 6-7c. 2Q EPS guidance was also disappointing (up only 15-20% q/q, or $0.29-0.30), implying more downside to Consensus EPS ($0.35) than we were previously modeling ($0.32). Nonetheless, shares only underperformed modestly on Friday (-2.3% vs -1.4% OSX). And while we see downside to both ’17 & ’18 Consensus for SLB – but less downside, at least in ’18, than most other companies we cover – we strongly believe management is implementing the right strategy to prevail during The Age of Optimization. Maintain OP. New/Old YE18 PT of $86/$87 (12x/26x ’19 EBITDA/EPS).
CLB finished +2.1% (OSX = +0.2%) today (4/20/17) on the heels of solid 1Q results & positive 2Q guidance, implying ~5% upside to 2Q/2017 Consensus EPS. Buybacks will resume, too. But Reservoir Description (RD) mgns came in bit light (again), which likely contributed to shares lagging revisions slightly. Still a trailblazer during The Age of Optimization. Maintain OP. YE18 PT increased to $126 (24x ’19 EBITDA) from $125 on slightly higher ’19 EBITDA.
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