Multiyear Offshore Contracts And Tight Vessel Supply Will Support Stable Outlook

Catalysts

About Solstad Offshore

Solstad Offshore operates a fleet of offshore vessels serving subsea, anchor handling and project related work, with a strong presence in Brazil and Asia Pacific.

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

• New multiyear contracts for vessels such as Normand Tonjer in Asia Pacific and Normand Topazio with Petrobras are set to secure higher fleet utilization after recent idle periods. This directly supports revenue visibility and can help stabilize EBITDA margins.
• High project activity among subsea contractors, combined with record high order books at these clients, is feeding through into vessel demand. This can sustain day rates and underpin earnings and cash flow for vessel operations.
• A tighter supply demand balance in anchor handling, helped by vessels being mobilized out of the North Sea, is supporting healthier spot rates for the remaining fleet. This can lift net margins when vessels roll onto new work.
• A growing and lengthening backlog of US$325 million at year end 2025, with nearly all 2026 capacity already committed and focus now shifting to 2027 and beyond, gives multiyear earnings visibility and supports smoother revenue recognition.
• Exposure to Brazil and deepwater field installation work through high spec assets such as Normand Maximus and the Brazilian anchor handlers, combined with long term Petrobras contracts and associated company contributions, provides multiple income streams that can support earnings and help maintain a solid equity ratio and low net interest bearing debt.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Solstad Offshore's revenue will grow by 5.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 48.1% today to 48.2% in 3 years time.
• Analysts expect earnings to reach $164.1 million (and earnings per share of $2.0) by about March 2029, up from $139.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 4.6x on those 2029 earnings, up from 4.1x today. This future PE is lower than the current PE for the GB Energy Services industry at 8.7x.
• 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 7.71%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• High exposure to Brazil, where about half of the combined fleet operates, means any long term slowdown in Brazilian offshore activity or changes in Petrobras contracting could weaken vessel demand and contract renewals, which would put pressure on revenue and earnings.
• The purchase option for Normand Maximus, with a present value of US$107 million and linked to a US$49 million bareboat charter and future financing that may include new bank debt and equity, could strain the balance sheet if market conditions or contract terms for the vessel become less favorable. This would affect net interest bearing debt and net margins.
• Future class renewals and dockings for key assets like Normand Maximus, which could fall in late 2026 or early 2027, may coincide with periods between contracts similar to the recent idle time for Normand Tonjer and Normand Topazio. This would lower utilization, reduce EBITDA and weigh on earnings during those windows.
• The long term shift to providing only operational adjusted EBITDA guidance from 2026, excluding contributions from associated companies and joint ventures, highlights a reliance on external entities such as Solstad Maritime, Omega Subsea and Normand Installer for part of total earnings. Any weaker long term performance or lower dividends from these holdings would reduce reported EBITDA, net result and cash available for dividends.
• Quarterly dividend payments, including the proposed US$4 million for the fourth quarter of 2026 while also preserving cash for the Normand Maximus option, create an ongoing trade off between shareholder distributions and internal funding needs. If long term market conditions soften, this could force lower dividends or additional financing, which would impact cash flow, equity and potentially earnings per share.

Valuation

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

• The analysts have a consensus price target of NOK71.0 for Solstad Offshore based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $340.3 million, earnings will come to $164.1 million, and it would be trading on a PE ratio of 4.6x, assuming you use a discount rate of 7.7%.
• Given the current share price of NOK66.9, the analyst price target of NOK71.0 is 5.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.