Ezion

Ezion: Management held an analyst briefing yesterday to provide more clarity on its on-going lawsuit by JV partner Atlantic Marine Services (AMS), which alleged that Ezion was behind a conspiracy to induce Maersk Oil to breach charter agreements over three service rigs by creating the impression that AMS was in financial trouble.

Management disclosed that it has three service rigs in the North Seas that are operated by AMS for Maersk Oil but the former had failed to meet contractual and operational obligations, prompting the oil major to approach Ezion to take over the operations of the rigs.

Additionally, Ezion clarified that AMS had originally been granted options to acquire 50% stake in 2 rigs, although these options have been revoked, as AMS did not pay for additional costs incurred despite initially agreeing to bear the cost of overruns.

On the inflated charter rates, Ezion clarified that AMG had agreed to the higher rates because of additional cost incurred to upgrade the rigs which its JV partner did not want to bear.

Accordingly, Ezion has also gained control of AMS’ stake in the JV rigs, as AMS had pledged its shares to Ezion and was unable to fulfil its financial obligations.

Overall, Maybank-KE believes that the sell-down is overdone and that the earnings impact is likely to be immaterial. The house has a Buy rating and TP of $1.57 on Ezion, labelling the group as the most resilient asset owner.