NFE, rig rate hike set to drive GIS growth in H2
Qatar Tribune
Satyendra Pathak Doha Qatarâs North Field East (NFE) project and the new higher offshore rig rates going into effect in July will drive the growth of Gul...
Satyendra Pathak Doha Qatarâs North Field East (NFE) project and the new higher offshore rig rates going into effect in July will drive the growth of Gulf International Services (GIS) in the second half (H2) of this year, QNB Financial Services (QNBFS) has said in a company report released on Sunday.âThe NFE project remains a significant catalyst for future growth of GIS. The company deployed the remaining three rigs in its GulfDrill JV in the second quarter of 2021. GIS has stated that Java Star, W-Castor and W-Tucana started working during the second quarter of 2021. The five rigs deployed by GDI will undertake an 80-well drilling programme for Qatarâs North Field East project,â QNBFS said in the report.âWe expect earnings to surface back into the green for 2021 as drilling loss declines significantly. Other segments also contribute positively, while continued progress in costs reduction and lower finance charges help boost earnings,â the report said.GIS posted a profit of QR4.8 million in the second quarter of 2021 against a profit of QR45.3 million in the second quarter of 2020 and a net loss of QR5.5 million in the first quarter of 2021. âReported earnings for the second quarter of 2021 beat our forecast of a profit of QR0.6 million with outperformance due to the aviation and drilling segments. Consistent with their first quarter of 2021 commentary, management continued to point to a recovery in the oil and gas sector in the second quarter of 2021,â the report said. With new higher offshore rates going into effect in July along with all five offshore rigs now being deployed under the GulfDrill JV for the NFE project, the report said, drilling momentum should accelerate in the second half of 2021. âMoreover, we continue to believe the progress made in costs reduction thus far should dovetail with an expected recovery in the market fundamentals as we move forward this year,â it said.âOverall the second-quarter revenue of QR726.7 million was in line with our estimate of QR715 million. The drilling revenue of QR242 million was 21.4 percent ahead of our estimate of QR199.4 million. This is due to the remaining three rigs deployed under the GulfDrill JV in the second quarter of 2021 that we had conservatively modelled to start operating later in the second half of 2021,â it said.âInsurance top-line of QR225.2 million fell 13 percent below our estimate of QR258.8 million as certain medical policies expired without renewal, which offset the growth in premiums in the general insurance segment,â the report said. âAviation revenue of QR173.2 million and catering revenue of QR86.3 million were in line with our estimates, with variations of 2.5 percent and -1.8 percent, respectively,â the report said.âRelative to our model, better-than-expected profitability from drilling and aviation served to boost the second quarter of 2021 net income against our estimate. Gulf Drilling Internationalâs second-quarter net loss fell to QR60 million against a loss of QR43.6 million in the second quarter of 2020 and a loss of QR72.4 million in the first quarter of 2021,â it said.âWe were expecting a net loss of QR67.8 million in the second quarter of 2021. Upside in drilling revenue against our model, along with improved margins, as GIS continues to optimise costs helped the second-quarter results. Drilling net loss margin improved to -24.8 percent against our estimate of -34 percent. Aviation net margin also grew to 35.7 percent against our estimate of 29.6 percent with the segment posting a net income of QR61.8 million against our estimate of QR50 million,â the report said.âWe stay longer-term positive on GIS shares but the stock remains in a âshow-meâ mode. We expect improving financial performance in 2021 and news flow regarding the NFE expansion and potential debt restructuring to drive stock price performance. We maintain âaccumulateâ on GIS with a price target of QR1.8 per share,â it said.More Related News