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Polarcus Declines as UBS Cuts on Weak Order Backlog: Oslo Mover

Polarcus Ltd. fell to a two-week low in Oslo after UBS AG cut its rating on the surveyor of underwater oil and gas fields amid concern that a lack of orders may force the company to take on less profitable contracts.

The Dubai-based seismic surveyor declined by 2.6 percent to 4.136 kroner, the lowest intraday level since Sept. 9, by 11:14 a.m. in the city. More than 1.4 million shares were traded, about 68 percent of the average three-month daily volume.

“We are concerned over the limited amount of capacity” the company has booked so far, UBS analyst Caroline Hickson said today in a note to investors. “In the past, we have seen Polarcus opt to take lower priced contracts to fill its backlog and expect we could see this again.”

UBS cut its recommendation on Polarcus to neutral from buy.

Polarcus, which operates eight seismic vessels, has booked 65 percent of its capacity for the fourth quarter and 30 percent for the first quarter of 2014, it said in a presentation on its website yesterday. Its $200 million order backlog was booked at about $260,000 to $330,000 a day and Polarcus is seeing “high competition” for contracts for those two periods, it said.

“Our impression is that incremental bookings will likely be in the low-end” of that range, Pareto Securities AS said in an e-mailed note. “An improvement in the market is seen from mid-first quarter.” Pareto has a buy rating on the stock.

Oil and gas companies working off Africa, Norway and South America have raised exploration spending to meet higher energy demand. With established fields maturing and new resources harder to find and develop, Polarcus has joined Petroleum Geo-Services ASA and TGS Nopec Geophysical, Norway’s largest seismic companies, in betting on growing demand for underwater maps.

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