Ezion's offshore Myanmar project delayed to mid-May

Will profits be affected?

According to DBS, Ezion has secured a 6th service rig contract from Pemex, worth US$148.6m over 7 years (5+2) through a 50/50 JV with Kim Seng Holdings.

The units will be deployed in the Bay of Campeche, and will take Ezion’s YTD contract wins to US$364.5m.

Here's more from DBS:

We see thestrengthening ties with Pemex and its expanding presence in the Gulf of Mexico (GoM) as a positive development for Ezion.

Boost FY13/14 earnings by 1.0%/2.4%. Total capex is estimated at US$80m (70% bank loans, 30% equity) and Ezion will fork out only US$12m cash to fund its 50% equity stake in the JV.

These units will be chartered on bareboat basis at estimated day rates of ~US$58k/day starting end-Sept13. Taking into account a 10-year depreciation period, and 5% cost of debt, we estimate full year net profit from the rig to be c. US$10.2m, or JV income of US$5.1 to Ezion.

Update on Service Rig for offshore Myanmar. We understand that the service rig, which is supposed to be deployed in offshore Myanmar from April, may be delayed to mid-May due to an issue with owner-furnished equipment.

The opportunity cost (loss of profit contribution) is expected to be minimal, estimated at about US$1m or <1% of FY13 profit. In addition, Ezion may be compensated by the customer, thus the net impact will likely be insignificant.