Acergy ADRs Upgraded to a Buy

London-based Acergy S.A. (ACGY - Analyst Report), previously known as Stolt Offshore S.A., is a leading oilfield contractor engaged in the designing, procurement, building, installation and servicing of a range of offshore surface and sub-surface equipment for the oil and gas industry. This equipment includes the above-water topsides and platforms used for processing oil and gas, pipelines, and electrical and hydraulic cables (also called umbilicals) used to control sub-sea wells.

We are upgrading Acergy to Buy from Hold on valuation grounds. The ADRs look very attractive at current levels, having dropped 47% in the last 12 weeks in response to the pullback in oil prices. In spite of some near-term challenges in the form of weak expected delays project awards and a tentative commodity-price environment, the long-term outlook for deepwater offshore activities remains very favorable.

We view ACGY ADRs as an attractive vehicle to play this positive outlook for deepwater construction. Our unchanged $19 price objective represents 2009 P/E and EV/EBITDA multiples of 10X and 6X, respectively, still at significant discount to the broad oilfield service market.

Read the full analyst report on ACGY