Ezion announced earnings early this morning which showed its second quarter net profit fell 36% year on year. The decrease in net profits were mainly due to the absence of contribution from the marine and offshore logistics support services division, as projects in Australia did not go as originally planned. Also, the company’s cost of sales and servicing increased by 29.6% due to the deployment of additional Service rigs….
 
According to the company release via the SGX this morning, Ezion explained that its earnings were weaker than the previous financial year because the group has made long term strategic decisions which include interchanging a few of its service rigs among its existing clients. This will be beneficial in the long run but not in the current financial year. Also, additional costs and delays were incurred because of extensive modification and repairs on several of the Group’s Service Rigs. However, the improvements in their Service Rigs have resulted in the Group being able to renew some of its contracts for a longer period.
 
Outlook in the next 12 months
Going forward, Ezion expects the Oil and Gas sector to remain challenging and that oil majors will continue to reduce capital expenditure on exploration and development. Rather, oil majors would focus on extraction and production related activities. Ezion believes that the group’s key assets are designed to provide offshore production support and hence it will be working closely with clients to meet this new focus.
 
In addition, the group raised S$120 million via a five year bond issue with the support of DBS bank earlier this month and this allows the company to be in a better position to explore further opportunities to better support its clients.
 
Ezion, the second “most shorted” counter
With oil prices near multi-year lows, the offshore and marine sector has been going through rough times in recent months. Among the companies affected is Ezion, falling 31.7% year to date. According to data furnished by Markit, Ezion is the “most shorted” counter on the Singapore Exchange after commodity giant, Noble Group. The firm’s outstanding shares on loan jumped to 8.6% at the start of August as compared to 3.4% in August 2014.

Source: Macquarie Research - 14 Aug 2015