Technip Energies

The two-week Iran-US-Israel ceasefire is a positive development. 

That said, Brent futures have already dropped more than 15%, and we think pure-play upstream (Equinor, Aker BP) have run too hard over the past few weeks. With a market correction looking increasingly likely, we do not see them reclaiming those levels anytime soon, even if the situation deteriorates again once the ceasefire expires.

As we flagged in yesterday's weekly review, a structurally lower Brent calls for a strategy shift: we are rotating out of upstream and into integrated majors (in few days if Brent keep going down) and oil services, with Technip Energies as the key name here.

We spoke with Technip Energies management yesterday. March was slightly disrupted but underlying activity held up. Clients are continuing to pay on schedule, with no material cash impact in Q1. Management has triggered all relevant contractual protections (time extensions, cost recovery), and insurance coverage is in place for personnel repatriation and equipment damage. Guidance is maintained for now.

The bigger news: they have been awarded the full EPC contract for Commonwealth LNG, covering six liquefaction trains in Louisiana, 9.5 Mtpa, with revenues of €500m to €1bn spread over several years. FID is expected by end of Q2 or over the summer, with financing close to being finalized. This is likely the strongest order intake quarter the group has seen in years.

We expect a positive market reaction for the stock.

Expert Opinion:
We expect/hope the ceasefire will hold and that a long-lasting peace will follow. Yet we believe Oil will maintain a substantial premium over pre-war levels, and we don't see Brent returning below USD70 anytime soon.  In that context, Technip offers an attractive profile. There is a need to rebuild damaged assets in the region, and the company provided us with reassuring comments.