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NFE project set to drive GIS growth: Report

NFE project set 
to drive GIS  growth: Report

Satyendra Pathak
Qatar’s North Field Expansion (NFE) project remains a significant catalyst for future growth of Gulf International Services (GIS), QNBFS has said in a company report released on Sunday.
“We stay longer-term positive on GIS shares. We expect improving financial performance in 2021 and newsflow regarding the NFE expansion, potential debt restructuring to drive stock price performance over the next 12 months. We remain ‘Accumulate’ on GISS with a price target of QR1.8,” QNBFS said in the report.
“GIS’s drilling segment Gulf Drilling International (GIS) JV with Seadrill called as GulfDrill started deploying its jackup ‘Lovanda’ on March 29, 2020, as part of its 80-well drilling programme for Qatar’s North Field East project. The second rig ‘West Castor’ started work in late August. We further model in the remaining four rigs in 2021 but our rig deployment schedule projections are somewhat back-end loaded against management guidance of a phased deployment in the first half of 2021,” the report said.
GIS posted a loss of QR5.5 million in the first quarter of 2021 against a net profit of QR8.7 million in the first quarter of 2020 and a net loss of QR367.3mn in the fourth quarter of 2020.
“The reported net loss for the first quarter of 2021 beat our forecast of a net loss of QR55.2 million with outperformance basically due to the drilling segment. While management pointed to a recovery in the oil and gas sector in the first quarter of 2021, they did state that positive signs of recovery were not felt immediately within the group’s operating segments. We believe the progress made in costs reduction thus far should dovetail with an expected recovery in market fundamentals as we move forward this year,” it said
“With drilling revenue coming in moderately lower than our model, the lower-than-expected segment net loss was due to improved general and administrative (G&A) and operating expenses as GIS continues to optimise costs. The other three segments posted modest variations against our model, with catering and aviation coming in modestly ahead of our estimates,” the report said.
“We expect earnings to surface back into the green provided there are no one-offs such as impairment in 2021 as drilling loss declines significantly. Other segments also contribute positively, while continued progress in costs reduction and lower finance charges help boost earnings,” the report said.