Frustrerte franske oljetopper, fiberkongen i olja og Akers vei ut av fornybarboblen

A very good Tuesday morning and welcome to Børs Morgen here at Finansavisen. My name is Marius A. Larsen, here at DNB Arena in Stavanger for ONS, day 2. Karl Johan is at Smestad in Oslo on the 27th of August. We will hear from Aker's CEO Øyvind Eriksen. We will also hear from a telecom company that controls large parts of the infrastructure the oil industry depends on, both in the North Sea and the Gulf of Mexico, namely Tampnet. But first, we must take a look at today's headlines, which are dominated by the fact that the strike is over. It was short-lived and traffic should be back to full operation tomorrow as planned. Also, Apple is out inviting to a launch event on September 9th and reports that long-time CFO Luca Maestri is stepping down after 10 years, a period during which the stock of the IT giant has risen almost 800%. Bovern Ran Gruber and Techstep and several other companies are out with either numbers or news today, and we will come back to that. I just wanted to mention that the markets and Nordnet expect the stock exchange to open either flat or slightly up today. We have slightly positive futures on the continent. The Oslo Stock Exchange rose 0.6% yesterday after oil prices made a solid jump to well over $81 per barrel. Political unrest in Libya and threats of shutting down production and export of oil drove the price up. We also saw Israel's attack over the weekend against Hezbollah, which contributed. Energy stocks in the US also did well last night. Otherwise, it was mixed on Wall Street, with the Dow Jones ending up 0.2%, S&P 500 and Nasdaq down 0.3% and 0.10% respectively, with Asian markets in the morning hours today slightly down. We will get Karl Johan back right after this.

This broadcast is sponsored by Nor-Shipping 2025. Hold 2-6 June in your calendar for the most important maritime week in Oslo.

And we are back. We will get Karl Johan, good morning Karl Johan. We have quite a lot of news to cover. One thing I just wanted to mention very quickly: Arendals Fossekompani's people have stepped aside in the board of Volue so that they could evaluate the bid that has come at 42 kroner per share, and they say, quote, even though the bid is on the conservative side, the price is within an acceptable range, and it comes with a unanimous recommendation. But you have looked at other things, Nvidia and not least the French Total Energies CEO Patrick Pouyanné is here at the oil conference in Stavanger.

Yes, shall we take Radforsk first? Sold 2 million shares, and they show that they are like all other investors, they are like private investors. They haven't understood what this is. Now you have two types of investors in Nykode: those who made money before we sold half or more of the shares at 70 and 80 kroner and don't care much about the share price because they have made their money, and those who have been along for the whole ride down and have to sell because they need the money. Radforsk is among the latter. They behave like a private investor and haven't really understood what they were part of, and that is sad for a research institution. Quite brutal, 40% halved in the last month. Yes, but that's the risk when you are in phase one. You have to compete to qualify, and this is no game. It's not like there is room for everyone when there are already existing medicines. If you get cervical cancer, you will choose the best on the market, and if it's not good enough, you won't be chosen, and then you can't get your tests done. So yes, it's competition. It's not about participation medals. You have to qualify, and this is tougher than elite sports. You have to be on the podium to get to continue. Nykode is not on the podium; it's like an everyman biotech company that can't get past the phase with its products.

Yes, we see how challenging it can be even among the big pharma companies, both with Novo Nordisk and Eli Lilly on one side and Pfizer on the other that has lagged behind. But speaking of which, we talked a bit about Patrick Pouyanné, I mentioned. He has been here; he won't do any press interviews, but he gave some comments in passing, both to us and other media. He is keen to point out that the energy transition won't be free. But you have looked at this desire of Pouyanné to move to US stock exchanges. Which company was it you wanted a comment on?

Total, yes, we have a comment on Total in the newspaper today. The company's CEO is in Stavanger, and we have an interview about renewables, but he has created a drama in the company by announcing at the second quarter report that he was considering moving the company's primary listing from Europe to New York. He had a mandate from the board to figure this out by September, which is in a month. He got that, and it's strange that they haven't figured out that it won't work. He has managed to anger the French finance minister, who says they will work against this with all means. Imagine if Equinor's CEO went out and said he was thinking of moving the primary listing to the US, there would be a huge uproar. TotalEnergies has 40% of its shareholders from the US, which is a huge success because it's a cheap stock. I think they would be very surprised when they got to the US and found that Americans wouldn't pay any more for the stock. All European oil stocks are priced at P/E 7.9 to 8, except Eni which has a discount at 7.3. There is a fixed pricing at P/E 8 because growth is lacking. US companies positioned with shale oil in the Permian Basin and in Guyana are priced at double, but that's due to exposure. We know from Equinor how difficult it is for a European company to buy its way to becoming big in the US; they have tried and end up being cheated round and round. It's a long game: first Wall Street comes in, then they expand the Permian Basin with junk bonds, then the families that own most of it come in, then the independent companies, and then the big companies take over when things have been developed. It's a game for a club, and we in Europe are not in that club. No matter how much money Total or Equinor or BP try to spend in the US, they get cheated round and round. If they don't get cheated by the Americans, they manage to cheat themselves. That went considerably better with the acquisition of Brigham Exploration in the US back then. We'll see if Total and Shell and others can make big profits from the big discoveries off West Africa over a period now, but it's doubtful. Guyana and Brazil are among the hot regions.

We also have to talk a bit about Temu, and Pinduoduo. Temu, which is filling up all post offices at Modum and Brøttum and Løkkum, reported a profit warning and weak outlooks yesterday. On the conference call, the CEO warned of very weak growth in China, and the stock fell 29%. This is a company worth $140 billion, and it's Pinduoduo, and it also infected Alibaba and JD.com, which fell 5%. These are stocks priced around P/E 10, and yet they guide much weaker growth than the estimates. So China is really struggling, and that's why Temu will continue to bombard with digital ads in the US and Norway to fill up the post offices with packages. The Temu ads won't stop anytime soon.

Not in my websites anyway, they follow me everywhere. I just wanted to mention, Karl Johan, before we go quickly to Nvidia, the stock exchange opens slightly up, 0.4% from the start today, so quite flat. North Sea oil is just over $81 per barrel. We have a couple of companies that have reported numbers today, including the oil service company Bouvet, which is managed by Thomas Nilsen in the First Fund. He writes that he thinks it's strong numbers from Bouvet: revenue up 20% and earnings per share up 49% year over year in the second quarter, of course helped by the timing of Easter. The result was 136 million compared to 89 million the same period last year, and the margin is much better. The offshore shipping company for offshore wind, which has the lift vessels, had a gross operating result of 22 million euros, down from 42 million the same period last year, but the order book is at 1.9 billion euros. But speaking of quarterly results, Karl Johan, tomorrow something big happens on the other side of the pond that many will follow and that can affect many index funds and equity funds: Nvidia's numbers. We might see some big movements when Jensen Huang releases the report and gives some statements about what he sees in his crystal ball.

Yes, Nvidia is priced at an option element. The stock exchange is worth $320 billion, and it's just the volatility we can expect tomorrow from those numbers. So there is great uncertainty, and it will mean a lot for the stock market going forward that Nvidia delivers and doesn't report anything very bad. It will drag many others down, as we saw with Pinduoduo in China and how it affects the rest of the market.

Also, for that matter, the invitation from Apple, they call their event 'Glow' or something, hinting at the new design of Siri, the smart assistant. So we can probably expect even more news about their AI push, which could be an important trigger for people to buy new and better phones this Christmas. I don't know if you are still with us, Karl Johan. I just wanted to quickly mention on the way to the commercial break that we will bring in the Aker CEO, that we had quite a few movements yesterday too. MPC Container Ships reported numbers, rose over 5% on the Arctic report with a target price of 26.9, stock at 23.40. We also had Bakkafrost, which rose about 1% even though the numbers were a bit disappointing, and DNB lowered the target price by 10 kroner to 640, but maintains buy. Atlantic Sapphire continues sharply down, over 22%, with a tick of 10 øre. Berenberg is hovering just over 40 kroner, the bid there is becoming a bit controversial now that Pareto is hired by some other shareholders. Pareto's target is 50. And we have IDEX, which rose 17% after the Visa approval came through. Also, we have numbers from Ran Grubber and Moss, and TEP has received a contract renewal worth 600 million, which is much larger than the previous one. More about that on FA. But we will have our first guest of the day right after this.

So, let's get started on this Tuesday here at ONS in Stavanger. We now have CEO Øyvind Eriksen from Aker, one of the heavyweights in the industry, not just on oil and gas but also on renewables. Very nice to have you here, by the way. Thank you for coming. You have been in this for many years. We had 2014 with high oil prices, just before it hit the fan, so to speak. Then we had a few years with a heavy downturn in the industry. 2016, 2018, then the pandemic came just when things were starting to look brighter. 2022, things started to brighten up again. How do you feel the mood and the economic climate are now? It seems the dialogue has become more practical, more realistic.

We can come back to oil and gas and many of the transactions you have done, but let's start a bit with renewables. You set up a fairly large portfolio platform, Aker Horizons, during the pandemic. Then there have been some companies, you have taken them off the stock exchange and integrated them back into the system. Not long ago, you also announced that you are selling 80% of this carbon capture business to SLB, formerly known as Schlumberger, Aker Carbon Capture. Where are you really heading now? Many are wondering if we will see you start large new projects or what phase you are in.

You will free up quite a bit of capital with the transaction with SLB on Aker Carbon Capture. Many wonder what you plan to do with it, but I also wonder what made you reach that conclusion. Is it just the investment need? It seems like carbon capture, if you look at what some US companies are doing, is a technology that many are betting on and that may have come further than some of these hydrogen and ammonia projects.

When can we expect to get an answer on what you will use the freed-up money for?

But you are interested in some dividends upward to Aker?

We must talk a bit because a lot has happened in the Aker system if we rewind a few months. We have received a bid for Philly Shipyard in Philadelphia in the USA. You have been through the big restructuring of Solstad Offshore. You have merged the subsea division with two other partners. Where are Aker's focus areas going forward? With carbon capture, you have partially sold out, same with the subsea business. That frees up a lot of human resources internally to be more focused on other things. Is it the offshore supply company, Aker BP, that is the main focus going forward, together with Aker Solutions?

Øyvind, when you look at what Equinor is saying, which they launched at their capital markets day in February, a steady production roughly on the Norwegian continental shelf at around 1.2 million barrels per day until 2035, and you look at investor sentiment, some plans are tweaked. We see the new Shell CEO has taken some steps. Will this oil age last longer for you in Aker, both on the production and supplier side, than you perhaps thought a few years ago?

Do you sleep well with $80 per barrel? Do you sleep well at night with $80 per barrel on oil?

Øyvind Eriksen, CEO, thank you for coming.

We have Statoil from 2001, installations on 350 offshore facilities in both the North Sea and the Gulf of Mexico, and fiber cables that span 5,250 km. So maybe some are starting to guess what we are talking about, namely Tampnet. The CEO of Tampnet, welcome.

Welcome. Based in Houston, here across the Atlantic, I guess you would say. Correct, we are a global company, headquartered in Houston but I spend lots of time here and flying across the Atlantic.

If you get to operate alone in this market, because obviously it's a special market having fiber cables from to these installations?

Yeah, in the geographies where we own the network, we own it, we build it, we operate it. Not lots of competition, very limited competition. We have the largest high-speed, low-latency subsea network. We cover 500,000 square kilometers between both networks, so it's really vast. It's subsea cables, overlay with some 4G, 5G, microwave mobile network, and then we serve the whole energy and maritime sectors.

And you've been now for a few years owned by a couple of private equity companies, 3i, ATP, about 50-50. Plan to...?

You know, we are a very healthy company. We have so many areas to grow. We are actually growing about 15% year over year for the past 20 years since our inception. So we have been exceptional. We have a lot of options. And 3i and ATP, our current owners, have been owning us since 2018, 2019, so now it's time is coming to look at all their options.

I mean, I can say I would be surprised if we hear more from you in the future. But let's talk about your business then, because your revenues are up 14% annually roughly, as you say, to $1.4 billion last year. Talk about how the business works when you operate like this.

No, it's a very high capex intensive business. It's very high barriers of entry, and that's why we don't see too many direct competitors. We work for the subsea fiber; we have typically 20-25 year contracts, CPI adjusted as well, so it's quite healthy, commercial real estate almost. It's a good business to be in. And we are a niche operator, so we know exactly what we do offshore. It's very hard for someone onshore to make the rollout, deployment, and operation after very efficient. We have very high customer satisfaction. We really care about the customers. Our network operation center, I think our net promoter score was over 60 last year, so it's very good. Very low turnover; once a customer comes with us, they don't leave. That goes for the subsea fiber, but also for the mobile network and all our services. We also, on top of giving connectivity to all the oil and gas fields, now we give connectivity to all the wind farms offshore and to the maritime sector. And then we have also a carrier division. We pride ourselves for a very low latency in the North Sea, round trip is like 6 milliseconds now, down to 6 milliseconds, so all the finance community, media, telecommunications industry use our network to move data between Scandinavia, Frankfurt, London, all around the North Sea.

So you're basically expanding then into carrier as well, right, outside of offshore?

Not really, it's still offshore moving the data, yes.

Yes, yes. On the platforms at Equinor, for example, for some else, can you leverage that to make connections to, let's say, an oil field free of choice without basically being hindered by the existing customer?

Yes, and an advantage for us is how we lower the cost of ownership. We do the network; we have space on those platforms that we rent or we use, and then we have a seamless network for all these customers. So we have agreements with all the big telecommunications providers like Telenor or Telia for roaming purposes, and then we also have private networks towards the different platforms where it will be a dedicated secure network for the Equinors of the world or for Shell, BP, etc., where they can use a slice of our network as their own network for their operations. And that enables all the digitization and remote monitoring and etc.

Networks, carrier business, countries, but talk about also in the Gulf of Mexico, and I guess you're sort of the sole big provider there as well, right?

Correct, we have a small competitor, but yes.

Are you considering moving into other markets offshore where we see a lot of offshore activity like Brazil, Guyana, other geographies?

It's a great question. So our model that was very successful in Norway, we have now replicated in the Gulf of Mexico, similar model. We have also expanded into Canada offshore on the east coast. We have expanded offshore east coast of the US. Now the first wind farm offshore of the US is covered by us. We have now also one confidential, the first deepwater contract in Mexico. We had a few small business, but now with this one we will establish ourselves really big in Mexico. And we have activities in Brazil on the way, we have the companies there, and we are on the way to Guyana as well. And then we are looking at other places. Geographical expansion is one, and then we are expanding through the value chain with digital private networks more and more available from a technology perspective, so that unlocks the whole digitization on the assets that we are already there, so we increase the ARPU. And my philosophy is that we embrace all the new technologies that are coming, no matter how disruptive they are. So all the LEO, Starlink, etc. We embrace it as part of our portfolio. Every new technology that comes, 5G now, our network is on 5G.

Brazil means companies like Youn, all companies try drones, robots, and all digital twin solutions, quite data-intensive applications that require a lot of bandwidth back and forth.

Nothing beats fiber. And the microwave 5G, and in areas where we don't have fiber, we have a global contract where you have rigs that are moving outside of our geography, then we backhaul through Starlink now. In order for this to work, you need a private network, because then you can bring the core network to the edge, to the platform. You have an access network there, and we cover 100% of the whole asset. We actually are a fraction of the cost of WiFi if they need to deploy WiFi, and much more efficient. And what we do is 80% local processing on the asset itself in a very secure way, and then you backhaul only 20%. So you lower the cost of your backhaul, and then you can use Starlink for this purpose. So you can combine it with technology, but again, nothing beats fiber and 5G when they are available.

Geographic expansion with technology that existed 10 years ago, companies paying for fiber network in Guyana, all of them are today. But would they 10 years ago? 10 years ago as well?

I mean, look, before the data is growing, the data on our network is doubling year over year, in some cases even more. And that is really to also handle the data in real time offshore as well. So new things are coming. Digitization, I believe, is just starting, transformation just starting, and connectivity is just the beginning.

Decade of expansion now several years. You know, you said this business is capital intensive. When I hear all these expansion plans, I sum up in my head all the billions that need to be invested to be able to deploy all these networks. How do you finance this growth?

Mainly through our own balance sheet and the cash we have. And also our owners, but mainly our balance sheet.

Yes, Eli Han, thank you so much. Very interesting to hear about your business. It seems like a growing business.

Thank you so much for having me. It's a growing business, an exciting business, a very exciting company. Thank you. Keep an eye out.

And at the end of the broadcast, I just wanted to say that as we round off Børs Morgen on this Tuesday, 27 August, the stock exchange is still hovering around zero, barely in the red today. We have a couple of oil companies, not Aker BP, which is slightly up 0.4%, Kongsberg down 1% on the most traded list. We also see Bouvet, which is out with its quarterly report today, up 4% on its report. Moss Wall is up 2.9% with oil prices at $81.41. Around Europe, mostly green from the start today, except for the Sinke and Stockholm, which are just below zero like we are here at home. Later today, we will talk with both the CEOs of Statkraft, the CEO of Vårgrønn, the renewable energy company of Eni Plenitude, and High-Tech Vision. We will also talk with Aker Solutions, which quarter after quarter has raised its guidance on how much revenues should increase, so we must hear about that. And then we will also meet DNB's new oil and gas chief, the largest bank in Norway has made some changes in how they organize their offshore wind area, so we will talk with Katrine Blystad a bit later today. Before that, you get the latest news on FA. My name is Marius A. Larsen. We are back with the economic news here from DNB Arena at ONS in Stavanger at 14:30. Thank you for now.