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June 4, 2010
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Acergy S.A. (ACGY) was recently awarded a contract in offshore Nigeria for $120 million. This contract includes removal of existing risers and the installation of approximately 15 kilometers of new pipelines and associated risers, together with associated diving and hook-up activities. While construction engineering will commence immediately, the offshore installation will commence in the first quarter of 2011.
Acergy has been successfully pursing a strategic shift towards the relatively high-margin offshore markets. Deepwater drilling and the subsequent construction activities are expected to get a further boost with the arrival of a large number of newbuild rigs in the next few years. Between 2009 and 2012, the estimated investment for deepwater activity would be around $20 billion annually, an opportunity that augurs well for the company.
Acergy is one of only four global companies capable of providing a wide range of offshore services on a worldwide basis. As such, the company remains well positioned to capitalize on the positive outlook for subsea engineering and construction services demand over the coming years.
Management indicated that the medium-term business environment has improved with oil price operating in ‘appropriate’ range with greater stability. The company anticipates more activity in the conventional West African market, that too at good margins.
Our Outperform recommendation for Acergy ADRs reflects the company’s healthy backlog (stood at $2.5 billion as of Feb 28, 2010), significant cash balances and no near-term refinancing requirements.
Read the full analyst report on "ACGY"
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