• We attended PVD’s AGM on April 24. Overall, management is optimistic about oil prices and the jack up market outlook at least until 2030, despite the recent postponement of Saudi Aramco’s capex. Strong drilling demand is expected for both the domestic and overseas market. Notably, Block B is progressing to open bidding for two drilling rigs, which re-confirms its solid progress.
• Shareholders approved 2024 guidance for revenue of VND6.2tn (USD248mn; +10% vs actual 2023), and PBT of VND440bn (USD17.6mn; -33% vs actual 2023). We attribute this to management’s caution as PVD’s actual 2023 PBT beat its guidance by 5x.
• PVD released preliminary Q1 2024 results with PBT of VND200bn (USD8.6mn; 3x YoY), driven by PVD’s 34% YoY higher average day rate. Based on this PBT, we estimate recurring NPAT-MI equivalent to 23% of our full-year forecast, in line with our expectation.  
• Shareholders approved PVD not to pay a dividend for 2023; the 2024 dividend will be decided after 2024’s results. 
• Management anticipates Saudi Aramco's recent delayed contracts for 18 jackup rigs are just temporary, with minimal impact on the Southeast Asian standard jackup dayrate as well as PVD’s dayrate  (it might have some negative impact on the dayrate of premium jackups). Conversely, the suspension could create opportunities for PVD's fleet expansion in the coming years as the scare rig supply might ease. Aside from one rig announced earlier this year, PVD also plans to invest in one additional rig with cooperation from Borr Drilling (a large-scale drilling contractor of premium jackup rigs; the ownership split between the two parties is not yet disclosed).
• Small delay in new rig investment: Shareholders approved 2024 capex guidance, which primarily allocates funds for acquiring a second-hand jackup rig valued at USD90mn. The acquisition is expected to suffer a slight delay from PVD's previous target stated in the January 2024 quarterly meeting. This delay is due to 1) PVD needing ~8-10 months to re-activate the rig which is hard to coincide with the client’s timeline; 2) PVD is looking for other rigs which might have better investment costs.
• Our view: We foresee a slight downside risk to our earnings forecast due to higher-than-expected forex loss and VND depreciation as well as potential slightly lower profit from the new rig (as PVD plans to apply a 7-year depreciation policy vs our assumption of 12 years). We note that we think the new operational timeline of the new second-hand jackup rig is in line with our expectation (early 2025).

Strong preliminary Q1 2024 results supported by YoY higher average day rate, in line with our expectations. PVD announced its Q1 2024 preliminary results with revenue of VND1.7tn (USD68.2mn; +35% YoY), and PBT of more than VND200bn (USD8.6mn; 3x YoY). The strong performance is driven by (1) full utilization of rigs (flat YoY), coupled with (2) 34% YoY higher average day rates amid the tight rig market in Southeast Asia. 

Conservative 2024 guidance despite a promising market outlook, confirmed by strong Q1 performance. 

• PVD guides 2024 revenue of VND6.2tn (USD248mn; +10% vs actual 2023) and PBT of VND440bn (USD17.6mn; -33% vs actual 2023), which are equivalent to 82% and 37% of our respective forecasts. We attribute these figures to management’s cautious approach. Notably, in 2023, the actual profit was 5x its guidance, and even during the peak cycle of 2012-2015, the actual profit was 38% higher than the guidance.
• The guidance is mainly based on the assumption of a 10-15% YoY increase in the average day rate of four jackup rigs. However, (1) PVD's average day rates in Q1 2024 surged by 34% YoY, and (2) Southeast Asia's jackup day rates in 2M 2024 are 21% higher compared to 2023, and 14% higher compared to Q4 2023. 

Management anticipates a positive outlook for both the domestic and overseas drilling market, supported by high oil prices and strong demand: 

• High Brent oil prices forecasted by the EIA (USD89/bbl and USD87/bbl in 2024 and 2025, respectively) are expected to drive increased drilling activity and higher rig day rates.
• PVD's rigs are currently fully contracted until 2025, indicating strong demand (Figure 1).
• Petronas, Hibiscus, PTTEP, Harbour, Chevron, and others have long-term drilling plans for the next ten years, which solidifies the robust demand for drilling in the overseas market
• PVD anticipates an increase in domestic drilling activity in 2024 and 2025, fueled by planned field development projects by Vietnamese oil and gas companies (e.g., Vietsovpetro's Ca Tam field and Murphy Oil's Camel Wine wells).
• Active progress on Block B - O Mon by the Vietnam Oil and Gas Group, including the upcoming open bidding for two drilling rigs, further strengthens this positive outlook.

Figure 1: PVD’s drilling plan in 2024 and 2025

Source: PVD, Vietcap. Note: No shading indicates contracts that are already secured; green shading indicates contracts under negotiation; grey shading indicates no contracts.

Saudi Aramco's recent delay in contracts for 18 jackup rigs is temporary. 

• The recent delayed contract for jackup rigs by Saudi Aramco is seen as a temporary effect (some rigs still operational, some will be used for gas drilling). This aligns with the commitment to oil production cuts of OPEC+. The possibility of moving the rigs from the Middle East to other areas is low, as it will only temporarily suspend operations for 12 months. Therefore, PVD anticipates it will have a nominal impact on the SEA jackup market outlook.
• Additionally, PVD believes that this will only impact the high-end segment, which has a day rate of nearly USD160,000/day. PVD focuses on the mid-end segment, the day rate is nearly USD120,000/day, so it will not be affected. In addition, PVD's existing rigs are fully contracted until at least 2025, minimizing short-term risks.
• Conversely, the suspension could create opportunities for PVD's fleet expansion in the coming year if rig investment costs decrease due to the market pressuring client’s timeline; (2) Following the recent temporary suspension by Saudi Aramco, PVD is looking for other rigs that might offer better investment costs.

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