Top Story : Oil & Gas – Upturn in FPSO market Overweight
Sector Update
♦ According to Fred Olsen (a Norwegian floater specialist), the marked recovery is a continuation of the pickup in activity since 4Q 2009 which saw the award of seven contracts followed by another four contracts in Jan-Feb 2010. Going forward, we believe the market for FPSO is on track for a strong rebound driven mainly by: 1) stronger E&P spending beginning 2H 2010; and 2) increase in deepwater E&P activities.
♦ We highlight the potential shortages for the ‘High Case’ forecast of around 25-30 vessels p.a. in 2010-11, in the event of stronger-than-expected demand stemming from increased E&P activity in deepwater and ultradeepwater fields (Brazil, Africa, Malaysia, Vietnam and Gulf of Mexico). Hence, we expect FPSO charter rates to rise significantly over the next two years, driven by strong demand amidst a shortage of supply in the market.
RHB Equity 360° - 3 May 2010 (O&G, Banks, Notion Vtec, MAS; Technical: Maybank, Genting)
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