Inventory risk remains high – E24

Seismic company PGS is again the stake with the largest short positions (see fact box) on the Oslo Stock Exchange, measured as a percentage of shares outstanding, according to the Finanstilsynet registry.

PGS takes the place from hydrogen company Nel, which has mostly been the stock with the highest short selling price on the stock exchange since May 2021.

At least 5.86 percent of the shares in PGS are now lent for short sale, a bet where you can take advantage of the lower share price.

Finanstilsynet’s brief overview records holdings of more than 0.5 percent of the company’s stock, so the short interest rate could be higher.

debt crisis

Sparebank 1 Markets analyst Christopher Mullerluken has a neutral recommendation for PGS, so he is not recommending his clients to buy or sell them.

Risks in the stock remain high as we expect the company to move away from the loan terms this fall. However, we believe that both parties will be interested in finding a solution and that we will avoid probate court, says the analyst.

At the end of January, the earthquake company announced a debt problem and the stock fell more than 56 percent during the trading day. The site has recovered somewhat in light of the fact that oil prices have gone up due to the Ukraine war.

$135 million, equivalent to about NOK 1.2 billion, falls due to debts to PGS in September.

PGS was also having debt problems in the fall of 2020, but then worked out a solution to the crisis that was largely about deferring debt payments.

The company’s total debt is about $1.1 billion, or about ten billion kroner. At the same time, book equity shrank to $245 million by the end of 2021.

Over the past year, the share of PGS has gained around 48 percent at a price of NOK 3.17. Market capitalization is 1.3 billion Norwegian kroner.

Difficult years for the earthquake industry

PGS and the earthquake industry have struggled since the end of 2014 when the price of oil fell and oil companies had to save money.

– It affected the earthquake industry because it is relatively easy to be cut off by oil companies. Then things started to get better. Mullerbacken explains that 2019 was a good year for the industry, then the corona came, and then there was complete curbing again by the oil companies.

The oil industry is the largest buyer of seismic data used to search for hydrocarbon deposits. In addition, earthquakes are also important for the development of new oil and gas fields, not least for production management.

It’s been some tough years for both the earthquake industry and PGS, he adds.

Why do you think PGS is the stock with the most default on the Oslo Stock Exchange?

It is well known that PGS will likely cut the terms of its loan this fall and this likely means that the short-term interest in the stake is relatively high, says the analyst.

According to Bloomberg’s overview, there are currently seven sell recommendations on the PGS stock, while one is buy and four are hold/neutral.

The average target price, which is a forecast of what the stock price will be in 12 months, is NOK 1.4.

The newcomer is in second place

Plastic recycling company Quantafuel has long been one of the top favorites among the green companies on the Oslo Stock Exchange, having been listed on the Oslo Stock Exchange in February 2020.

But a year after the listing, the stake began to decline in anticipation of a so-called “proof of concept,” anything that would prove the company’s technology could be widely used.

This stock is now the second most heavily discounted stock on the Oslo Stock Exchange and a newcomer on the list.

On Monday this week, Quantafuel finally received its “proof of concept”: over a period of time, the company was able to obtain production that would require processing 16,000 tons of waste annually. CEO Lars Rosenlov described this as a significant milestone and launch for the company.

The stock jumped 31 percent on the same day. However, the share fell 53 percent last year.