We are reiterating our Buy call on Ezra, with TP adjusted slightly to S$1.29. The stock has been sold down c.15% since it reported large unrealised forex losses in its 1Q09 results. While we view this as one-off, we also believe Ezra is better positioned to weather the current uncertainty with its diversified fleet and integrated operations. In the near term, the actual commencement of production on EOC’s FPSO may prove to be a re-rating catalyst.

Sold down 15% post 1Q09 results. Since revealing a large US$19.8m unrealised forex loss in its recent set of results, Ezra has been sold down 15%. As a recap, the forex losses arose primarily due to the unexpectedly sharp 29% depreciation of the Norwegian Kroner (NOK) against the US Dollar over 1Q09. The group had kept a large amount of NOK in fixed deposits amounting to around US$71m as of end August 2008 to pay for its equipment purchases.

Better positioned to weather uncertainty. We believe the sell down of this counter is unjustified, as such wild swings in the Norwegian Kroner seen over the September to November period are unlikely to occur again. In addition, Ezra’s diversified vessel fleet and integrated operations allow it to cater to the different stages of oilfield development, and hence, better positioned to weather the current uncertainty. Its offshore support fleet is chartered out on long-term contracts, averaging 4 to 4.5 years, with around 78% of its current motorised fleet deepwater capable, stepping up to c. 82% by FY11.

FPSO contributions to kick in soon? We view the impending commencement of production on EOC’s first FPSO, Lewek Arunothai, as a potential near term price catalyst. It is currently contracted out to PTTEP in the Gulf of Thailand on a 3 + 2 years charter contract. With day rates of US$228,000 for the first 3 years, and US$168,000 for the next 2 years, this will be a significant and recurring revenue generator for EOC, which will also have significant impact on Ezra’s bottom line.