Odfjell Drilling operates harsh-environment offshore drilling rigs benefiting from the current upcycle in offshore dayrates. Reported adjusted ROIC of 11.2% and +NOK 709M economic profit reflect strong current earnings, and on a static reverse-DCF the equity screens materially cheap.
But this is among the most cyclical businesses in the universe: dayrates are at high-cycle levels, free cash flow is currently negative (−8% yield, reflecting capex/rig investment), and the reporting-currency (USD) versus listing-currency (NOK) treatment makes the headline 'upside' less reliable. The negative implied perpetual growth tells you the market already discounts a normalisation.
On the static reverse-DCF the equity screens well above the price, but capitalising peak-cycle offshore earnings overstates through-cycle value, and the negative free cash flow and currency nuance argue for caution rather than a literal large-upside target. We anchor the base near the price and size conviction low.
Base NOK 85 (≈flat); bull NOK 120 (the offshore dayrate upcycle proves durable and free cash flow turns positive); bear NOK 55 (dayrates normalise as new supply arrives and capex weighs).
The market pays today’s enterprise value for roughly -13.4% NOPAT growth over 5 years. The business earns 13% on capital against a 8% cost of capital (spread +4.7 pp); the no-growth value is NOK 133/share (148% of price), so the rest is priced-in growth.
| Scenario | 24m target | Impl. g | Upside | Prob. | Driver |
|---|---|---|---|---|---|
| Bull | NOK 120 | -4% | +34% | 35% | Durable dayrate upcycle; FCF turns positive |
| Base | NOK 85 | -15% | -5% | 40% | Near price; peak-cycle earnings, low visibility |
| Bear | NOK 55 | -28% | -39% | 25% | Dayrates normalise on new supply; capex weighs |
| Prob-weighted | NOK 90 | — | +0% | 100% | Scenario-weighted expected value |
| WACC \ g | 0% | 3% | 5% | 8% | 10% | 15% |
|---|---|---|---|---|---|---|
| 6.50% | 192 | 212 | 227 | 250 | 266 | 310 |
| 7.25% | 158 | 173 | 183 | 200 | 212 | 243 |
| 8.00% (base) | 133 | 144 | 152 | 164 | 173 | 195 |
| 8.75% | 114 | 122 | 128 | 137 | 143 | 158 |
| 9.50% | 99 | 105 | 109 | 116 | 120 | 130 |
Green = fair value above the current price of NOK 89.70. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.
⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.
Tight harsh-environment rig supply has driven dayrates sharply higher.
Multi-year contracts provide near-term cash-flow visibility at high rates.
A modern, high-spec harsh-environment fleet commands premium utilisation.
If free cash flow turns positive, debt reduction would transfer value to equity.
Both the screen and a static DCF flag a large valuation gap — the optionality.
Odfjell Drilling offers genuine optionality on a durable offshore upcycle, but hyper-cyclicality, negative free cash flow and reporting-currency nuance keep visibility low. We rate it HOLD, low conviction; base target NOK 85 (≈flat), with wide scenario dispersion.
This is a name to size small; durable positive free cash flow and dayrate persistence would be needed to justify the screen's deep-value reading.
Every adjustment traces to the cited note/page in the source filing — click to open it there. Source reports archived locally.
NOPAT adjustments: Not available from structured data
Company add-backs we reject: Not available without footnote extraction
Pages read — FY: — · Q: —
How the mttssn view has evolved — each prior dated note is preserved.