Photo by extranoise

Photo by extranoise

Ezra had announced, on July 16, 2009, its next lap growth strategy which involves growing organically through the provision of deepwater subsea services to existing and new customers. This division will be headed by Mr. Paul McKim, a veteran with 36 years of experience in the oil and gas industry. This expansion plan is based on the asset profile which Ezra had committed to date, including the 2 new MFSV and a new heavy lift construction vessel coming on board by FY 2010. Detailed slides were provided to enable readers and shareholders to better understand the wider range of services being provided by this new division, which is an extension of their current Energy Services Division. This new growth strategy and thrust is supposed to take place over the next 5 years, and benefits are said to accrue from 2H FY 2010 onwards.

An analysis of the slides given (which are quite technical unless you are working on the ground in the oil and gas industry) as well as the press release suggest that this is a new strategic direction which Ezra is heading for; and is different from what the Company has previously used to grow from 2003 (time of listing) till the present. To recap, Ezra had been growing their vessel fleet aggressively from IPO till now, by using a mixture of share placements (equity), floating their subsidiary on Oslo Bors (EOC, now their 48.9%-owned associate company), debt (bank financing over the years) as well as sale-and-leaseback arrangements.

These methods, for better or for worse, have enabled the Company to grow their revenue base tremendously, and core earnings have also correspondingly climbed over the years. Of late, however, this strategy has been crimped in part because of the global financial crisis, which has led to debt financing nearly drying up, as well as dehydrating the availability of easy funds from the stock market through institutional placements. Their strategy has also weighed heavily on their Balance Sheet as gearing has been consistently high and was expected to go over 1x if not for the cancellation of their 3 MFSV (2 with Karmsund and 1 with Keppel Singmarine). As a result, cracks have been spotted with Ezra’s old business growth model and it was time for Management to plan something alternative which would continue to spur growth. Read more…