Paratus Energy Services $PLSV (-0.7%) has positioned itself as an attractive investment in the offshore services sector since its listing in June 2024. With a diversified business model, an exceptionally high dividend yield and a solid financial base, the company offers interesting prospects for income-oriented investors. Below is a comprehensive analysis taking into account the latest insider purchases and other relevant developments.

Company profile

Paratus is a holding company with three central holdings:

1. Fontis Energy: operator of five high-specification jack-up drilling rigs in Mexico, which are leased on a long-term basis to a state-owned customer.

2. Seagems: a 50/50 joint venture with Sapura Energy that operates six multi-functional pipe-laying vessels (PLSVs) in Brazil.

3. Archer Limited: A minority interest (24.2%) in a global provider of drilling and well services.

Financial highlights

1. revenue and EBITDA:

- In the third quarter of 2024, Paratus generated revenue of USD 110 million and an adjusted EBITDA of USD 63 million.

- The secured order backlog amounts to 2.3 billion USDwhich is approximately 92 % of the expected revenue for 2025 covers.

2. cash flow and debt management:

- In 2024, Paratus generated free cash flow (FCFE) of up to USD 345 millionwhich creates room for dividend payments and debt reduction.

- Net debt amounts to USD 597 millionwith most of the debt not due until 2029.

3. dividend yield:

- In Q2 and Q3 2024, the company distributed USD 0.22 per share which corresponds to an annual dividend of USD 0.88 per share. With a share price of around EUR 4.16, this results in a dividend yield of over 20 %.

New developments and insider purchases

1. insider purchases by Lodbrok Capital LLP:

- On December 23, 2024, Lodbrok Capital LLP announced the acquisition of additional shares in Paratus Energy Services through its fund Lodbrok European Special Situations & Dislocated Credit Opportunities Sarl. This demonstrates the confidence of a major institutional investor in the future development of the company.

2. increase in the stake in Archer Limited:

- In October 2024, Paratus invested a further USD 12 millionto support a strategic acquisition by Archer. This strengthens the company's position in a high-growth market segment.

3. uplisting to Euronext Oslo Børs:

- In November 2024, Paratus was successfully upgraded to the main stock exchange, increasing the company's visibility and facilitating access to institutional investors.

Strengths of the company

1. diversified business model:

- The combination of offshore drilling services (Fontis), subsea technology (Seagems) and investments (Archer) offers stability and growth potential.

2. attractive market conditions:

- Rising daily rates for both PLSVs (up to USD 300,000/day) and jack-ups (up to USD 165,000/day) are improving margins.

- The offshore market in Brazil and Mexico shows positive long-term prospects.

3. solid dividend policy:

- The high payout ratio (approx. 42% of FCFE) indicates that the dividend is sustainable and could potentially increase.

Risks

1. dependence on major customers:

- Fontis is heavily dependent on a state-owned customer in Mexico, which is currently experiencing payment delays (outstanding receivables: USD 283 million). However, the Mexican government has promised financial support.

2. market volatility:

- Changes in oil and gas prices could influence the demand for offshore services.

3. capital-intensive industry:

- Operating and maintaining the fleet requires high levels of investment, which could pose a risk in the event of unexpected market changes.

Conclusion

Paratus Energy Services combines stable income from long-term contracts with an attractive dividend yield and growth potential through increasing daily rates and new contracts. Recent insider purchases and strategic investments underline the confidence in the company. Despite risks such as dependence on major customers, Paratus remains a promising investment for income-oriented investors due to its solid financial position and strategic orientation.

The share offers an exceptionally high dividend yield (>20%) and is particularly interesting for investors looking for stable income. However, investors should continue to closely monitor potential risks such as market volatility or defaults.

Sources

[1] PDMR-Form_23.12.2024.pdf https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/30259846/954a351e-7e9f-4537-b6b4-fe1e58380706/PDMR-Form_23.12.2024.pdf

[2] Q3-2024-Interim-Results-Report.pdf https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/30259846/6c98a214-d81c-48ff-97cc-22f3d8f784f3/Q3-2024-Interim-Results-Report.pdf

[3] Paratus-Energy-Company-Presentation-November-2024.pdf https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/30259846/6b963087-a4a9-4f67-b957-74dd5cc4c5ba/Paratus-Energy-Company-Presentation-November-2024.pdf