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Additional revenue make PV Drilling a sound long-term investment
PetroVietnam Drilling and Well Services JSC, or PV Drilling, is the top pick for institutional investors who look for profitable investments in long-term and retail investors who prefer defensive stocks.
The oil well drilling firm, founded in 2001, is an affiliate of Vietnam’s oil monopoly PetroVietnam Group. It is the leading firm specializing in drilling and repairing oil and gas wells, as well as providing oil and gas drilling and production platforms.
PV Drilling’s capital and revenue are set to rise significantly as its subsidiary PVD Invest will merge with it later this year. After the merger, PVD Drilling have a total of three offshore rigs and one onshore rig that will help it increase revenue by leasing them out.
In 2001, rentals accounted for one third of PV Drilling’s total revenues. Rentals from the offshore rig PV Drilling I and the onshore rig PV Drilling 11 last year rose 57.18 percent, making up more than 40 percent of the company’s total revenues.
Renting an onshore rig fetches around US$30,000 a day while an offshore rig is leased at more than $200,000 per day, according to PV Drilling. Therefore, two more offshore rigs will significantly boost the firm’s revenues this year.
PV Drilling 11, which is located in Algeria, has been sold at $25 million, a net profit of $8 million.
Revenues from providing designing services and installing drilling platforms last year increased 84.17 percent year-on-year, accounting for 31.4 percent of the total amount.
“The difference between revenue growth from renting rigs and providing designing services and installing drilling platforms, shows that PV Drilling is focusing more on the latter,” said Pham Ngoc Ha, analyst with Ho Chi Minh City-based stock newswire Vietstock.
Revenue from providing materials and equipment for drilling oil and gas, however, fell 24.5 percent last year amid a decline in demand. “We will gradually reduce this sector because of its low returns,” said a company official who asked to remain anonymous.
Hefty growth in its main products and services last year helped boost PV Drilling’s earning results, with revenues and net profit rising 35.8 percent and 62 percent year-on-year respectively.
Return on equity in 2008 increased sharply to 44.3 percent compared to 2006's 14.9 percent and 2007's 31.5 percent.
“Du Pont analysis showed PV Drilling’s return on equity surged from 14.9 percent in 2006 to 31.5 percent in 2007 thanks to the two rigs,” Ha said.
Du Pont is a type of analysis that examines a company's return on equity by breaking it into three main components: profit margin, asset turnover and leverage factor.
But PV Drilling is likely to hardly improve its earning in 2009 and 2010 because of an increase in operating costs of its new offshore rigs. Its revenues
may also be affected by the global financial recession, which has showed no sign of stopping.
The firm’s earning per share is estimated to fall by more than 60 percent to VND4,628 this year as the merger of the VND1trillion PVD Investment will raise its equity sharply.
“However, I expect PV Drilling’s income will be positive in 2010, when the two new rigs become operational and the rental income increases as global economies recover. Therefore PVD is the best choice for institutional investors looking for profitable long-term investments; and retail investors who prefer defensive stocks,” Ha said.
Tai Viet
thanhnien
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