Aging Offshore Assets And New Intervention Platform Will Support Fair Long Term Prospects

Catalysts

About Odfjell Technology

Odfjell Technology provides well services, operations and project and engineering solutions to offshore oil and gas operators.

What are the underlying business or industry changes driving this perspective?

• Although the acquisition of Kaseum and Razor adds a higher margin, tool based intervention platform that can be rolled out across Odfjell Technology’s presence in more than 30 countries, the ability to translate this into sustained revenue growth depends on actually winning incremental plug and abandonment work in competitive tender processes. This could limit the contribution to group revenue and EBITDA.
• While aging offshore assets are creating a long term increase in intervention and decommissioning activity, operators’ preference for lighter, more cost efficient wireline solutions could attract additional competitors and price pressure around similar technologies. This may weigh on future margins even if activity volumes rise.
• Despite a current backlog of NOK 11.5b and tender activity described as high across regions, slower award timing and the normal Q1 seasonal dip on the Norwegian Continental Shelf could keep near term revenue and earnings growth muted if awards do not convert in time to offset these effects.
• Although the improvement program in 2025 delivered around NOK 100 million in savings and management plans to continue this into 2026, the easier cost measures are already taken. Further reductions in the cost base may be harder to achieve and could cap future EBITDA margin expansion.
• While funding the Kaseum and Razor acquisition through a NOK 600 million bond tap is intended to be immediately EBITDA accretive and cash generative, the temporary pause in dividends to protect leverage and covenant headroom underlines that higher debt servicing costs could constrain free cash flow available for shareholders and additional growth projects.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more pessimistic perspective on Odfjell Technology compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Odfjell Technology's revenue will grow by 2.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 5.3% today to 7.5% in 3 years time.
• The bearish analysts expect earnings to reach NOK 443.7 million (and earnings per share of NOK 11.07) by about June 2029, up from NOK 298.2 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as NOK622.9 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 9.2x on those 2029 earnings, up from 7.4x today. This future PE is greater than the current PE for the NO Energy Services industry at 6.4x.
• The bearish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.99%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The acquisition of Kaseum and Razor is described as a high growth, high margin intervention platform that is already ahead of internal expectations for 2026 and can be rolled out across Odfjell Technology’s footprint in more than 30 countries. If it is successfully scaled, this could lift revenue and EBITDA more than the market currently discounts and support a higher share price over time by improving earnings quality.
• Management highlights aging offshore assets and plug and abandonment needs as creating a very strong intervention and decommissioning market over the next decades. If this structural trend converts into sustained tender wins across Norway, the Middle East, the Americas and other regions, the long term growth in activity could support higher revenue and operating earnings than implied by a flat share price view.
• The company reports NOK 11.5b in backlog and describes high tender activity globally with expectations to improve and possibly increase backlog. If awards convert at a healthy pace and 2025’s NOK 801 million EBITDA is a base that benefits from ongoing efficiency programs, the visibility on future revenue and cash flow could justify a re-rating of the earnings multiple.
• The improvement program delivered around NOK 100 million in savings in 2025, with plans to continue in 2026 focusing on high return initiatives and further cost base reductions. If these efforts persistently raise EBITDA margins in Well Services and other segments, the resulting uplift in net margins and free cash flow could support a stronger equity valuation than a flat share price assumption suggests.
• Management describes international growth opportunities in the Gulf of Mexico, South America, West Africa and other regions, combined with low capital intensity and strong cash generation from the Kaseum and Razor tool based model. If this combination supports sustained free cash flow growth while leverage is managed within the communicated range, the company’s earnings and cash profile could improve in a way that challenges the idea that the share price will stay around current levels.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Odfjell Technology is NOK80.0, which represents up to two standard deviations below the consensus price target of NOK81.75. This valuation is based on what can be assumed as the expectations of Odfjell Technology's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be NOK5.9 billion, earnings will come to NOK443.7 million, and it would be trading on a PE ratio of 9.2x, assuming you use a discount rate of 9.0%.
• Given the current share price of NOK56.0, the analyst price target of NOK80.0 is 30.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.