Valuation of Odfjell Well Services

Abstract

The objective of this valuation thesis is to estimate an enterprise value for Odfjell Well Services (OWS). OWS is a division of Odfjell Drilling (ODL) that went public on the Oslo Stock Exchange in the fall of 2013. OWS is a part of the oilfield services industry and is an international provider of Well Services. Their main market segments are Tubular Running Services, Rental, and Well Intervention. An external analysis uncovers that the oilfield service industry is an attractive industry with prospects of excess returns. Whereas the internal analysis reveals that OWS is operating its resources and capabilities to capture value with a focus on quality. It is a capital intensive industry that is currently in a downturn. However, oil prices and investments are forecasted to bounce back starting from 2016. The financial statement analysis exposes how OWS has generated high profits and margins. Whereas both the profitability- and liquidity analysis reveals that OWS is on par or above the peer group average in every category. Historic accounting data, together with the findings in the strategic analysis serves as the foundation for the cash flow forecasts. The Discounted Cash Flow (DCF) model serves as the main valuation model. While the comparative company- and preceding transaction analysis complements the DCF model. A Monte-Carlo simulation shows that the enterprise value estimate is very sensitive to changes in the underlying variables. The complementary valuations implies an enterprise value between USD 415M and USD 527M. A Monte-Carlo sensitivity analysis estimates the enterprise value, within 95% certainty, to be in the range of USD 322M and USD 619M. The DCF, which has been the main valuation model for this thesis, estimates OWS enterprise value at USD 457M.