In oil & gas, Dietswell echoes in its end of year update what bigger players are seeing: after the downturn that started in 2014, oil exploration & production companies are now much more resilient and ready for a “lower forever” oil price. Therefore, both exploration and production capex spending are likely to be stable with oil at $55-75/b.

This should particularly benefit the engineering sector, which does not have the overcapacity issues experienced by other sectors in the oil services field.

The outlook has been confirmed for H2 18, with a backlog above €10m at the end of November, up by c.€0.6m since August. Dietswell sees a sharp recovery in its oil & gas activities, especially in the audit and inspection division.

The audit and inspection division operates in a niche market, with a recurring activity and EBIT margins that can be above 20%. Higher activity will lead margins to increase with a breakeven for Q4. This momentum bodes well for the company that could see a positive net result in 2019 for its traditional businesses.

Management noted that discussions have re-emerged on the possible sale of the Sedlar Rig 160. As a reminder, the unit was heavily depreciated in 2014 and has a book value of €1.1m. Although, we remain conservative and do not take it into account in our estimate, there is value remaining in it and a sale could bring extra cash flow to the company.

Dietswell also sees encouraging developments in the new energies activities. The company has been awarded a commercial contract for the preliminary design of a floater for three units in the North Sea. This is positive news as it shows the potential of the semi-submersible floater, if it can successfully host wind turbines in the North Sea.

The company has issued €0.9m of convertible bonds to pre-fund the EOLFOAT project which won financing from the PIA-ADEME (French Investment for the Future).

Finally, management is upbeat about Dietswell’s future, aiming at a rapid return to a €1m monthly turnover, in line with our estimated 2019 revenues at €12.50m for the oil & gas activities. Management also targets €100m of revenue within five years, by being the European leader in drilling rig inspection and a significant player in the floater offshore wind market.

This is in line with our view, which considers a first pilot project of a 4MW design in 2019, followed by an order of six 6MW units in 2020. The 2022+ designs should all be 12MW turbines. We estimate the revenue for the three designs to be €7.5m, €10m and €12m, respectively.

We will integrate the pre-funding of the EOLFLOAT project in our model.

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