Traditionally HitecVision has invested in medium sized businesses within the energy sector. Complete target control has usually been important as they act as an active investor. Furthermore the target companies have usually been privately held.
The last couple of weeks HitecVision bought stakes in two publicly traded companies as pure none controlling financial plays (I can not recall Hitec doing this before). In my perception, knowing HitecVision´s track and organization, I believe it is a good call to follow whatever they are up to in the public markets. Not surprisingly my focus today was to make space in my portfolio for the HitecVision investments (by rebalancing all my energy stocks to a lower base).
Hitec has bought 10 % of Prosafe and 10 % of Kvearner, where I find Prosafe to be the most obvious candidate for a 20 % or more annual return over the next five years (it is my perception that a buyout player like Hitec would never invest in anything that they do not expect would yield at least 20 % annually).
About Prosafe: The company owns and operates semi-submersible accommodation and service rigs to support oil production (11 of them). They also own a jack-up to use for additional needs. The rigs support both living quarters, offices, storage, desk cranes and so on. Most of its operations are related to activities on oil fields already in production...
Prosafe value proposition: The company mitigates its financial risk (approx. 70 % leverage), with relatively low operational risk, where the company focuses on mid- to long-term charters with operators while operating on oil fields already in production. The accommodation market may not have been hit as hard by the low oil price as the conventional drilling rig market, although Prosafe feels the pain as all other oil and gas related companies. The company currently trades at 0.9x book value, not very cheap compared to the drilling rig companies and at a 4.72x trailing P/E which is cheap considering the visibility of the company`s earnings. The dividend yield is currently 4.34 % and they are expected to pay dividend going forward (probably lower levels than during the boom times).
In my opinion investing in Prosafe as part of a diversified energy exposure is a good oil price bet!
Contract status rigs:
Source: Prosafe ASA
Disclosure: I am long Prosafe ASA.
I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
