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March 19, 2010
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Acergy S.A. (ACGY) is a leading oilfield contractor engaged in the designing, procurement, building, installation and servicing of a range of offshore surface and sub-surface equipment for the oil and gas industry.
In recent times, the company has successfully pursued a strategic shift towards the relatively high-margin deepwater markets (engineering and construction) that have braved commodity pricing and credit market turmoil. Deepwater drilling and subsequent construction activities are expected to get a further boost from the arrival of a large number of newbuild rigs in the coming years.
Acergy is one of only four companies providing a wide range of offshore services globally. As such, it remains well positioned to capitalize on the positive outlook for demand in subsea engineering and construction services over the coming years.
Acergy has been relatively untouched by the economic downturn so far, as more than 60% of the company’s worldwide clients are well capitalized oil majors like ExxonMobil Corp. (XOM), Chevron Corp. (CVX), Royal Dutch Shell PLC (RDS.A) or state-owned energy companies like Petroleo Brasileiro S.A. (PBR). While the occasional delay cannot be ruled out, we believe that most of the projects sponsored by them will remain unaffected.
Helped by these factors, the company recently posted better-than-expected fourth quarter 2009 results. Moreover, Acergy’s strong backlog, currently standing at $2.8 billion, offers long-term earnings and cash flow visibility. This enables the company to navigate through the current downturn better than many of its peers.
Acergy also remains in excellent financial health with about $908 million in cash and a total debt-to-capitalization ratio of 27.5%. This provides adequate financial flexibility to increase its capacity through newbuild programs or strategic acquisitions. Additionally, the company does not have any near-term refinancing requirements.
As such, we view Acergy ADRs as an attractive investment and maintain its Outperform rating. Our $21 price objective represents 2010 P/E multiple of 26.9X, still at a discount to the industry average.
Read the full analyst report on "ACGY"
Read the full analyst report on "XOM"
Read the full analyst report on "CVX"
Read the full analyst report on "RDS.A"
Read the full analyst report on "PBR"
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