Ezion

Ezion: Cancelled rig contract? - CS According to IHS-Petrodata, Ezion's Noah's Ark rig (service rig unit 25) is "idle in Sharjah, UAE since around mid-July 2014". It was further noted that "the accommodation contract with Maersk Oil Qatar was cancelled two weeks after the rig arrived in Qatar in April 2014", and is being marketed as an accommodation unit. Built in 1973, Noah's Ark is the oldest rig in Ezion's fleet of service rigs at 41 years. Prior to its deployment in the Middle East, the rig was upgraded at an estimated cost of US$20m. The unit was supposed to be contracted over a three-year period starting late-2013 to support an international oil company in the Arabian Gulf at a dayrate of US$44,000. Credit Suisse estimates the rig to contribute US$12.6m of EBITDA in 2015E, representing 2.8% of FY15e group EBITDA estimate. While Ezion has yet to respond to CS' queries on this piece of news, if true, this would support the house's view that the rig replacement cycle will put downward pressure on the utilisation of older assets. The house maintains its UNDERPERFORM rating and TP $1.80, due to concerns about Ezion's service rig fleet.