American Depositary Receipts (ADRs) of Acergy S.A. (ACGY) hit a 52-week high of $15.87 Monday. The oilfield contractor has seen its share price climb 58% since September, as investors have been buying shares of the company for its attractive fundamentals and positive outlook. The turnaround in fuel prices amid recent optimism about economic recovery have added to this bullish sentiment.
We currently have an Outperform recommendation on the ADRs, reflecting the company’s strong leverage to the still very favorable outlook for deepwater oilfield activities and the quality of its client base, which mostly includes well-capitalized oil majors or national oil companies. With a healthy backlog, significant cash balances, and no near-term refinancing requirements, Acergy should weather the challenging business environment.
In recent times, commodity prices have been way below year-earlier highs, driving down exploration and production activity among oil companies. This translates into less work for service providers like Acergy, chipping away at its revenues and earnings.
However, according to the company, the medium-term market fundamentals remain strong, primarily due to rising field depletion and the necessity to access new reserves. Additionally, Acergy is strongly positioned, both financially and operationally, to benefit from asset opportunities (should they emerge), and to take advantage of new growth areas when markets rebound.
London-based Acergy, previously known as Stolt Offshore S.A. (SOSA), 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. The company also provides field-decommissioning services (the removal of offshore structures and equipment) after the field has been depleted and has to be abandoned.
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