KUALA LUMPUR: Icon Offshore Bhd is likely to record higher utilisation for its jack-up rig and offshore support vessel (OSV) in anticipation of the rising capital expenditure by industry players, said Maybank Investment Bank Bhd (Maybank IB).
Analyst Liaw Thong Jung said Icon Offshore's turnaround story began to gain traction and optimism after securing a short-term jack-up rig contract from ConocoPhillips, following the end of its previous gig (Petrofac) in the fourth quarter (Q4) of 2021.
Icon Offshore recently received a letter of agreement from ConocoPhillips Sarawak for the charter of its jack-up rig - Icon Caren.
The contract, worth an estimated US$9.6 million, will commence in the second quarter of 2022, and the work scope entails drilling three+ine wells for the client's 2022 drilling campaign in Sarawak.
Maybank IB said the contract value equates about US$75,000 to US$80,000 (three+one wells), which appears to be higher than its previous job (Petrofac; US$74,000; eight+three wells).
However, he said it is within the prevailing market's rate, and it did not rule out the possibility of the contract containing some 'add-on' items.
"The contract tenure (three to four months) is shorter than we initially expected but is not a concern, for we expect high extension/new charter prospects for its jack-up rig over the next 12 months."
The research firm said earnings estimates for Icon Offshore remains unchanged, on expectations of a softer quarter-on-quarter outlook for Q4 of 2021.
This was due to seasonal weakness (monsoon) kicks in, but a stronger FY22, it added.
"Overall, its earnings recovery is tracking to expectation, with its drilling ops continuing to be the company's key earnings driver.
"Maintaining high utilisation for its assets (jack-up rig and OSVs) remains its key performance index, followed by its continued cost optimisation exercise, which includes disposal of ageing/ idle OSV assets."
Maybank IB maintained a buy call for Icon Offshore with a target price of 0.16 as the company's turnaround story has begun to gain traction.