Northern Offshore – Market Fails to Notice Upcoming Rise In Earnings, Free Cash Flow

My most popular series of posts by far have been those on Awilco Drilling. Awilco has been a solid investment, providing a total return of over 70% since I first wrote about the company last May. Despite these results, the company still trades at a dividend yield of close to 22% and an EV/EBITDA of 4.1, and I believe the shares still have a lot of room to run. Today’s post is about a similar high-yielding company in the same industry. This company is reminiscent of Awilco a year ago, when the market had yet to price in the coming increases in earnings and cash flow from new contracts.

Northern Offshore owns a collection of marine drilling assets, including two jackup rigs, a semisubmersible rig, a drillship and a floating production unit. Northern is domiciled in Bermuda with its executive offices in Houston, and trades on the Oslo exchange as “NOF.” (There is also a US ADR, NFSHF, though trading volume is thin.) Northern’s assets are leased to drillers and explorers in the North Sea, Asia and soon, Africa.

Compared to Awilco’s stellar management team, Northern has not always enjoyed the same leadership quality. Struggling with an unmanageable debt load, the company underwent a reorganization in 2005 that included a share issuance and a brand new board of directors. Unfortunately, the new team made a massive and debt-financed $455 million acquisition in 2007. The acquisition was poorly-timed, and in 2010 the jackup rigs the company acquired were written down by $205 million. Despite the unfortunate transaction, Northern managed to stay current on its debt and eventually paid down the balance. Today, the company has a net cash position.

Let’s take a look at Northern’s active operating assets. Like Awilco, these assets are hardly new, yet they still have a reasonable lifespan and will produce a great deal of cash flow over that life.

Northern Producer

Northern Producer is the company’s floating production facility, currently operating in the North Sea. Northern Producer was originally contracted as a semisubmersible drilling rig in 1977 and converted to a floating production facility in 1991. Northern Producer is contracted to EnQuest for the life of the oil field, and earns revenues based on production levels. In 2013, Northern Producer earned tariffs on an average of 18,103 barrels per day and earned just over $40 million in revenues.

Energy Driller

Energy Driller is Northern’s semisubmersible drilling rig, originally constructed in 1977. The rig has undergone substantial upgrades, most recently in 2012. Energy Driller in contracted to ONGC off India’s west coast at a dayrate of around $210,000 until April 2015. Energy Driller has historically operated off of  Southeast Asia and Brazil. In 2013, Energy Driller earned revenues of just under $58 million.

Energy Endeavor and Energy Enhancer

Energy Endeavor and Energy Enhancer are Northern’s harsh environment jackup rigs, currently operating off of the Netherlands and Denmark by Wintershall and Maersk, respectively. Endeavor is contracted until November 2014 at a dayrate of around $160,000. Wintershall has an option to extend the contract by six months. Enhancer is contracted until July 2015 at a dayrate of around $140,000. Maersk has a one-year option to extend the contract at a higher rate. Both Endeavor and Enhancer were constructed in 1982. In 2013, Northern’s jackup rigs brought in revenues of nearly $77 million.

Northern has two new jackup rigs on order to be delivered in 2016. More on these a bit later on.

In 2013, Northern Offshore’s active assets earned $174.9 million revenues, and produced $50.4 million in EBITDA and net income of $11.3 million. Free cash flow was $30.2 million, which the company devoted entirely to paying dividends. Based on its current market capitalization of $238.6 million, Northern’s valuation seems attractive.

Capture

 

One could see the EV/EBITDA multiple of 4.5 and the double-digit free cash flow yield and conclude that Northern is cheap, but that would be some very lazy analysis. After all, drilling companies face some unique challenges. Drilling companies must engage in significant capital expenditures, lest their assets become too old or degraded to have any economic value. Drilling companies are also subject to fluctuations in dayrates, and risk revenue declines once contracts end. For those reasons, buying drilling companies purely on backward-looking EBITDA or free cash flow yield can be a losing proposition.

However, at some point, the free cash yield becomes high enough or the EBITDA multiple low enough to adequately compensate for these factors and then some. This is likely to be the case for Northern Offshore in 2014. Remember how I described Northern’s active operating assets and their revenues? I used the term because Northern has another very significant asset, one that sat idle for all of 2013.

Energy Searcher is Northern’s drillship, used in exploration activities. The ship completed a contract earlier than expected off Vietnam in 2012, and was sent to Singapore for maintenance after. Northern Offshore marketed the ship for the entirety of 2013, but could not find a taker. Finally, Northern has signed a contract with Camac Energy for use off Africa’s west coast, and at a handsome rate: nearly $100 million per year, with an option for an additional year. The ship is currently on its way to its new market, where it will begin operations in mid-2014. The revenues from this contract should add handsomely to Northern’s EBITDA and free cash flow.

Before I proceed to evaluate the impact of Energy Searcher’s contract, a few caveats. First, Energy Searcher is an OLD vessel. Rigzone.com and other shipping info sites list the date of construction as 1982, but some other sources indicate that Energy Searcher was originally built in Sweden in 1958 and converted to a drillship in 1982. Apparently, the original engine is still going strong, but anyone wishing to model out Northern’s results should probably not assume a long remaining life for Energy Searcher. Second, Northern’s troubles marketing Energy Searcher are not new. The ship also sat idle for much of 2011. Finally, Energy Searcher’s new employer, Camac Energy, is hardly a prime operator. Camac is a highly speculative prospector that recently required a capital injection from a South African pension fund to continue its operations. Should Camac run into further trouble, its ability to perform on the Energy Searcher contract could be in doubt.

Assuming all goes well, Energy Searcher will provide a serious boost to Northern’s operating results. In previous years, drilling and production costs have ranged from 40.7% of revenues all the way to 71.1% of revenues.

Capture2

 

Conservatively assuming that drilling and production expenses eat up 70% of Energy Searchers’s revenues, Energy Searcher will contribute an additional $30 million or so to Northern’s EBITDA and free cash flow once the contract kicks in. The chart below compares Northern’s actual 2013 results with pro forma results including Energy Searcher’s revenues. The projection ignores increased revenues from a higher dayrate for Energy Enhancer and assumes general and administrative costs remain steady.

Capture3

Once Energy Searcher is again in operation, Northern’s EBITDA and EBIT will likely jump significantly. Free cash flow will likely rise by a similar amount, though some working capital investment may blunt the effect slightly. Regardless, 2.8x pro forma EBITDA and 4.7x pro forma EBIT is flat out cheap, even for a company that faces distinct risks.

Complicating the matter is Northern Offshore’s order for two high specification jackup rigs, currently being built in China for delivery in 2016. Northern Offshore will require financing for the total cost of just under $180 million. Northern Offshore will have a few financing options available, including a bond issue, a sale-leaseback arrangement with  a company like Ship Finance or Ocean Yield, or selling off its existing assets. Whether the new jackup rigs will be a profitable investment is another question, and one that is difficult to determine two years in advance. Much depends on the direction of oil prices and jackup dayrates in the interim.

Despite these risks, I contend that the market has failed to adequately price in Northern Offshore’s upcoming EBITDA and free cash flow boosts. Once the market notices the absurd EV/EBITDA multiple and the 20%+ free cash flow yield that the Energy Searcher contract could bring, shares could appreciate, much like Awilco’s did once its rigs were fully contracted and operating. In the interim, shareholders will be well-compensated by Northern Offshore’s 14% dividend yield.

Alluvial Capital Managment, LLC does not hold shares of Northern Offshore  for client accounts. Alluvial does hold shares of Awilco Drilling for client accounts.

OTCAdventures.com is an Alluvial Capital Management, LLC publication. For information on Alluvial’s managed accounts, please see alluvialcapital.com.

Alluvial Capital Management, LLC may buy or sell securities mentioned on this blog for client accounts or for the accounts of principals. For a full accounting of Alluvial’s and Alluvial personnel’s holdings in any securities mentioned, contact Alluvial Capital Management, LLC at info@alluvialcapital.com.

 

29 Comments

  1. We agree. NFSHF is one of our larger energy holdings. We think that the market is significantly underpricing Endeavor’s ability to increase its day-rate once the contract with Wintershall rolls off. They have two six month options to extend, and we think rates will be a lot more interesting by the time it comes up for renewal.

  2. At first glance it seems a lot more dicey than Awilco. No guarantee the EBITDA won’t just be a one year thing with the drillship contract (not to mention bad debt comes into play, given the customer). Day rates are declining across the board with an oversupply of rigs. Is there any guarantee the jackup will be able to pull a significantly higher day-rate when the current contract rolls off? I’ll have to investigate further, but seems like the risk/reward is still with Awilco.

    • I agree that the overall risk/reward was better with Awilco. But I also think Northern has more appreciation potential than Awilco did, with a correspondingly greater risk of loss. Northern certainly does not deserve a premium or even a peer average valuation, but I’d argue that virtually any profitable going concern deserves a valuation greater than 2.8x pro forma EBITDA. Even long-term doomed businesses like newsprint manufacturers and tobacco sellers trade for more than that, and justifiably so.

  3. You have to take into account declining day rates from over supply. When day rates come down, the E&P companies will most likely prefer newer ships over older ships for safety concerns. The odds of Northern Offshore’s fleet getting cold stacked becomes quite significant. Great cigar butt play nonetheless.

  4. Hey, nice find and bought a few.

    I think it s cheap enough for a cigar butt play. Read a few documents and thinks the rigs in the northern sea will be under contract for minimum a few years left.

    Good blog, i hope you have found a few customers for your services.

  5. I incurred a $15 fee on my transaction. Ameritrade tells me that the fee charged by the firm that manages Northern Offshore LTD (NFSHF). Evidently, the fee is charged on both the buy and sell transactions.

  6. Hey all:

    Earnings came out today. Looks good to me. Earnings of $.06/share. Dividend of $.05/share. Management says that cashflow should increase substantially very soon.

    Interesting comment is that they are looking to spin off ownership of Northern Producer into a separate publicly traded company? Seems kind of thin to have only the one asset in a new company…

    “With respect to the Northern Producer, our client EnQuest has plans to drill another development well this year in the Don SW field, and is producing a Field Development Plan (“FDP”) for the Don NE field. Should the FDP result in additional development drilling in Don NE, earnings from the Northern Producer could increase substantially. As such, our board of directors recently requested that management investigate the possibility of spinning off the Northern Producer and its life-of-field contract. The board believes that a spinoff of the Northern Producer could unlock value for the shareholders and allow the remaining company to focus exclusively on growing its contract drilling business.
    The intent would be to establish a publicly traded company to own and operate the Northern Producer, with a focus on cash distributions to the shareholders. Initially the plan is to consider distributing approximately 20% of this new company to the shareholders of Northern Offshore. This company would also consider the acquisition of similar assets with long-dated contracts to enhance dividends.”

    They also started cutting steel in China for the first of the new jackup rigs.

    So generally good news all the way around. Probably another quarter till we see revenue from the ship off of Nigeria.

    I imagine the stock will start to move higher….

    • Thanks for the update! I am fascinated by the idea of a single-asset company. Investors would likely price it at a very generous yield due to risk, so it could be a good buy.

      • Everything they said about this the Northern Producer on the 2014 Q1 earnings call made sense to me EXCEPT one thing.

        High level we should think about this asset as being more like a oil or gas pipeline or gathering line, not like a drilling unit. That is, rigs get paid a dayrate (adjusted for downtime) and the more days they are on contract and not having downtime incidents, the better. But they quickly hit a limit on maximum earnings — i.e. determined by the dayrate itself.

        Northern Producer has a life of field contract that really has nothing to do with dayrates — it gets paid based on throughput (like a pipeline) and there is even some relation to Brent crude prices (which has some similarities to POL and POP contracts in nat gas gathering).

        All of this is great.

        The thing that doesn’t make sense relates to the contractual arrangement: “The contract is a life of field lease, with a five year minimum term, at which time the client can terminate upon giving twelve month written notice but no earlier than September 7, 2013.” (From the 2013 Annual Report)

        Unlike pipelines, floating production facilities are mobile assets and hence their economics are contestable. If this vessel starts throwing off huge amounts of cash flow (and likely has a high valuation by the market) the smart move for Enquest is to bring in (or more technically threaten to bring in) a new FPF at a much lower tariff per throughput. If there aren’t available FPFs, then one of the many stacked semis around the world would could go through the conversion process. Basic Greenwald here: If EPV > Replacement Cost in a contestable market, then the earnings power will come down over time. That is, we really shouldn’t think of the current contractual arrangement as being so favorable — Northern Producer’s Achilles heel is the Enquest’s ability to terminate with 12 month notice. None of this instantaneous, so realistically if throughput picks up, the contract in place on Northern Producer would probably be renegotiated downward in 12 – 24 months.

        Given this Achilles heel, I really don’t know why Northern Offshore would spinoff this single asset and present it to the market as a cash cow. Is it possible that Enquest would be lazy or inefficient about renegotiating the contract? Yes. But Northern Producer has been averaging close to $40MM of EBITDA / yr over the last 5 years and if this number moves upwards significantly because of throughput growth, it would be quite odd for Enquest to not notice and respond opportunistically.

        I think it is fairly clear that Northern Offshore is looking for a 7x – 9x (or higher) multiple on Northern Producer, ala what TK got on drop downs to TOO. Even using 2013′s FPF segment EBITDA of just over $30MM at this multiple range, would cover nearly the entire value of Northern Offshore. The problem, though is how to think about Enquest’s ability to terminate for convenience with 12 month’s notice (which should allow it to renegotiate tariffs downward).

        • Without knowing the mind of management, would not the spin-off produce enough cash in the short term to purchase another life of field contract? In other words, certainly the cash flow of the Northern Producer could be leveraged. No?

          Ps. I arrived at this site from looking up info and opinions on MUEL.

          • My sense is that the FPF is earning above normal rates of return, and if production picks up, the rate of return would increase even further. My best guess for the future is that it will, one way or the other, earn lower rates of return— after a lag period.

            Could it get a new contract somewhere? Yes. But –unless I am really misreading prospective competition– why would we expect it to get really great returns on that new contract? Most likely case in my guess is that if production does increase, its existing contract gets re-negotiated on terms that are less favorable than the existing one for Northern Offshore.

            Side question: what is MUEL?

          • D, thanks for the response.

            What I mean by the first comment I made is that, say NFSHF spins off Producer. NfSHF shareholders get 20% of Producer. Say the offering nets 50 million. Then say the Producer nets 10million over the next five years. Could the company borrow another 50 million to purchase another LOF contract somewhere?

            Or use ten million over three years.

            Or use 7million over five years.

            Regardless, surely management would not spin off the Producer solely to receive dividends for a few years on declining contract revenues. If so, then, IMO, the present management of this company is dumb.

            Perhaps management wants to spin off FPF Northern Producer because management sees rough waters ahead for the FPF. And so doing enables management to more aptly dispose of the asset, either by a.) leveraging the cash from the LOF contract– given the expected decline in contract price, if the speculation of such decline is rational– to purchase a separate contract and thus maintain present cash flows via NFSHF’s ownership share of the spin-off, or, b.) surreptitiously transfer the Producer to new owners via share sale, i.e.: the spin-off, in effect mimicking an advanced depreciation while still receiving the cash from the offering.

            Anyhow, I’m trying to get a handle on why management would do this from a businessman’s pov.

            Thanks. And thank-you to Alluvial. I’m a fan.

            Yours truly,

            Alluvial Fan

          • My inference here, and I think the right base case to start out with is: assume it is a pure spinoff. I.e. each shareholder who owns one share in NFSHF now, post spin owns 1 share in NFSHF (though the company has no FPF) and 1 share in the SpinCo, which houses the FPF. Most deviations from this simple case are either non-relevant details (e.g. doing a 4:1 spinoff ratio instead of 1:1) or they are a way to raise additional primary proceeds to the company via selling to 3rd parties (e.g. with this in mind, a classic tax driven move in the US would be to do a carveout IPO of 20% of the FPF company’s shares, and then in the future spinoff the rest of the FPF company’s shares to NFSHF shareholders).

            There’s nothing intrinsically wrong with raising proceeds from 3rd parties, but it tends to muddy people’s thinking on these matters — in my view anyway. Because what we really have are two different ways of creating value for existing shareholders — one is a fundamentally driven way that looks at expected payoffs over time, and the other relies on the greater fool theory.

            Setting the greater fool theory aside for now, why would management, or more technically, why would a control shareholder like Frederiksen do a pure spinoff of the FPF? If the FPF’s merits aren’t being appreciated by the market and Frederiksen is looking to close a gap between the market price and ‘true’ value, that could make sense.

            But if future waters are likely to be rougher than indicated – why go ahead with the spinoff? That is a great question. It is compounded by the fact that highlighting the ‘value’ of the FPF to the market via a separate stock listing, will also highlight the value of the FPF’s existing contract to Enquest. (Classically one of the very important but little talked about considerations in IPOs is, will going public bring unwanted scrutiny by your company’s potential competitors, suppliers, customers, tax authorities, etc.? The change in degree of scrutiny is not quite the same here because the FPF is already a reporting segment of a public company but the phenomenon is still there.) If that contract did not have an easy termination provision, I would say great…. But it does.

            What does that leave us with? So far, I’ve only thought of two things.

            1) It’s possible that terminating / renegotiating the contract would be a ‘no-brainer’ for Enquest on a standalone basis, but that doing such a thing could have ramifications with Enquest’s dealings with other parts of the Frederiksen business group. That is, as a one-shot game, the termination could make sense. But POSSIBLY as part of a repeated / indefinite game with the Frederiksen group, termination may not make sense from Enquest’s perspective.

            AND / OR

            2) Some variant of the greater fool theory does apply. Whether it is selling shares to 3rd parties at inflated prices, or receiving loans on overly advantageous terms, there are many different ways for the greater fool theory to come into play.

          • I respect wholeheartedly your inference.

            Not so sure I agree with your speculation that the rates for N. Producer are headed down. Obviously increasing number of rigs across planet. If I had real money I would buy a dime of National Oilwell Varco. Or a penny. Anyhow, cost of capital is also increasing, at least looking out three and five years. A concern of mine is that NFSHF is buying two new rigs. So they are following the rest of the industry, or they are in the middle, or they are ahead in their purchase given what NFSHF has encountered and endured the past few years financially. Regardless, they’ll have two new jack-ups in a couple years. What I am trying to say is, you may be seeing a company experience a transition from being squeezed both by customers and suppliers to one that has leverage based on safety, reliability, and efficiency. To me, the reliability of the contractor is always what keeps him employed.

            Is this company putting itself in position to earn more money over the next few years?

            All I’ve heard is that management is sorry and that Enquest is going to eat their lunch on the FPF. I’m not so sure I buy that. Not to say that your hunch isn’t valuable.

            My next move would be to examine Enquest.

            CAMAC freaks me out, but Nigeria needs the oil money to fund their electric utility transmission infrastructure.

            Ultimately, regarding the FPF, why would Enquest turn down a floating cash machine? Someone would rent it. I mean, oil is either diminishing across the globe or it’s not. At least at this point in history. Cost of exploration increases. Cost of capital to fund exploration increases.

            Okay. Thanks for the conversation so far.

          • My point is that if Enquest’s production increases and the FPF’s is basically getting a fixed toll per bbl that goes through it (i mentioned some of the more technical specifics in my original comment), then as production increases Enquest has to pay a lot more money for using the FPF.

            Is there demand from Enquest and many other players for FPFs? Yes. But people forget this for some reason… this goes back to the diamonds and water paradox that I believe Adam Smith posed. If there is so much more demand for water than diamonds why do diamonds cost more? The answer can be stated two ways: (1) value (or price) is computed at the margin or (2) supply AND demand matter. The point with the FPF is it has a low replacement cost so if it costs $X to replace, and production goes up so that it starts earning 20%, 30%, or more on that replacement cost, it is very likely that someone else creates a new FPF and offers to contracts to Enquest at, say a 10% rate of return. The mere threat of that plus a weak contract means Enquest (again, setting aside larger Frederiksen group concerns) would be foolish to not at a minimum squeeze down its overall payment to the existing FPF, which Northern Offshore owns and is thinking about spinning out.

            That’s probably all I will say about Northern Offshore at this point. The strategic framework for the rate on the existing FPF is, all things considered, pretty straightforward. If it only had a better contract in place.

  7. Hi everybody,

    interesting stock no question!

    Donot forgett to mention that the biggest shareholder is John Fredriksen. Known as a big friend of shareholders in terms of unlocking value and growing distributions.

  8. D,

    I understand your arguments and the questions you raise. It is good to think about this. In my humble opinion, having some experience with Oil & Gas contracting in the North Sea:

    - The regulatory environment in the North Sea is very tough. Having a new FPF fully licensed is not easy,
    takes a lot of money and time. New supply of FPF’s is thus not as straightforward as you think. This wil
    take considerable time to have the effects of new supply.
    - Given the investment in (re)building a FPF you want to have it earn the highest return of capital, i.e. the
    highest day rate (with the lowest possible operating cost) and thus you want to go to the deepest water
    you are allowed to operate as this will command a higher day rate. Given the relatively shallow North
    Sea there are not a lot of investors willing to invest in a FPF for this shallow water as the day rate is
    relatively low compared to Gulf of Mexico and you are thus limiting your return on capital. This will thus
    limit the supply side for FPF in the North Sea.
    - On the demand side it is limited as well. Given the relatively shallowness of the North Sea a cheaper
    option for production is a fixed platform. So no operator will opt for a PFP if there is a commercial &
    technical option to use a fixed platform. If you are operating fields of limited commercial production
    time and/or in deeper seas Northern North Sea above Schotland and Norway), you might want to use a
    FPF. These are mostly made to request of the customer and are contracted for life of field. (See
    Songa). So this limits the demand side for FPF
    - replacing a current operating FPF will cost a lot of capital:
    — you have to contract another FPF that ticks all the operational, environmental, technical and
    commercial requirements ( not easy, but doable);
    — you have to contract this FPF and fully staff it and prepare it for operations in parallel to operating
    the current FPF.
    — you have to get all the operational and environmental inspection done to get this new FPF licensed
    under your current operating and environmental license. (you better make sure you have a technical
    equal or superior FPF, because turning up with a downgrade because it is cheaper will not go down
    well
    — You have to stop production to undo all the umbilicals and risers to the subsea production
    infrastructure.
    — Then you need to hookup all the umbilicals and risers for the new FPF
    This will cost you about $300k/day for at least 3 months.
    — More important though than above cost, is the cost of missed production. As you are running at least
    against 75% current cost (operating cost of the new FPF that is a potential 25% cheaper than your
    previous FPF ), all the revenues you are missing goes straight down to your bottom-line. My estimate
    is that you downtime will be about 3 months (90 days) against avg. 16k BOE/day @ $110/BOE =
    $158.400.000 of missed revenu/profit. You will save 90 days of $25.000 operational cost. This is
    $2.250.000. So in total you are missing: $156.150.000.
    — This $156.150.000 has to be made up with your achieved 25% reduction of FPF cost. Current
    Northern Producer cost/day is about $100k. This means that $25k of savings needs 6246 days to
    break even. This is about 17,1 years. This is (much) shorter than field life …
    — The other FPF of Norther Offshore operating in India has an avg. revenue of $170k/day. So the
    Northern producer is cheap compared to this and even cheaper compared to the current day rates of
    FPF in the North Sea.

    So long story short: Chance of Enquest changing Norther Producer for another FPF is minimal. Your stated low replacement cost for the FPF is simply not so and one could argue that the negotiation power is with Northern Offshore as they could end the current contract and negotiate with Enquest as they struggle to avoid above loss of revenu/income.

    Sjoerd

  9. D,

    A few days ago I didn’t understand the production facility, what it does in comparison to the rigs. Forgive me if I came across in a wrong way.

    After some hours these past few days I have a better handle on production and storage facilities. I went over Enquest’s 2013 AR. So that gave me a nice geography lesson and some microecon.

    Sjoerd said the same thing I recognized over the weekend, except I was just like, “The opportunity cost of keeping the Producer is too high for Enquest to change partners.” It just seems like a big investment on Enquest, a struggling marginal field producer.

    My hunch after all this is that spinning off the Producer would give Frontline an opportunity to transform some of their tankers into production and storage facilities, thereby beating other companies to contracts who presently wait for new fpf from the shipyards. It would be quite a move, but totally doable, and I wouldn’t be surprised if Frontline hasn’t already started, considering the number of hulls they own. Also, most of the new production facilities are headed to Brazil, China, and Nigeria/Ghana. It’s like watching a race, the whole offshore oil and gas market, or a flock of blackbirds at the beach.

    Anyhow, I appreciate your pov. Duly noted. Thought-provoking, and, yeah, well, okay man. Win the race.

    Ps: I am looking for reasons NOT to buy shares in this company.

  10. RCB,

    This is what has been provided to the regulatory based on the Don NE environmental statement:

    “The Ythan field (note: this is the working name for the Don NE field) development production wells will be connected to the Northern Producer via the existing 8” production pipeline and 8” water injection pipeline and 3” gas lift pipeline which connect to the riser base structure and flexible risers.”

    Sjoerd

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