Wednesday, October 29, 2014

Fred Olsen Energy dives into the deep end of the pool

Fred Olsen Energy (Oslo: FOE), like the whole offshore drilling industry, has been hammered this year. In last couple of days FOE has been diving because of worse than expected quarterly report. To date it has clearly performed worse than most of it's peers listed in Oslo and New York.

In March this year, we tripled our position in this stock. Now it's our worst performing stock. Luckily, rest of the portfolio has performed better than the market, so despite of FOE moving to wrong direction, we might beat the market as much as 10%. However, it's still two months to go and anything can happen.

With regards to FOE, I'm not able to pinpoint any fundamental reason why FOE is performing worse than peers.

Any ideas from readers?

1 comment:

  1. Fred Olsen does have more very old rigs than its peers (clearly a negative), but it has longer average contract periods, which is a positive in the current very weak sector environment.

    I think it is the best value compared to its peers. Still, if oil prices stay low for several years, many old rigs of Fred Olsen will not get new contracts, cash flow will fall and the upside of the stock could be limited. Market expectations have changed a lot during the past few months.