Bears crowd Ezra as Swiber’s woes signal oil risks

SINGAPORE: Bearish bets on offshore marine services provider Ezra Holdings Ltd jumped close to the highest in a year as the failure of smaller rival Swiber Holdings Ltd heightened concerns for the financial health of companies in the oil industry.

Shares of Singapore-based Ezra plunged to the lowest level on record yesterday after Swiber said last week it filed a winding up petition as the collapse in crude prices led to a slump in its offshore oil and gas businesses. Swiber dropped the liquidation plan late on July 29, and said it planned to restructure and operate under judicial management.

“Swiber’s knock-on effect is increasing the probability of others like Ezra facing similar issues,” Bernard Aw, market strategist at IG Asia Pte Ltd in Singapore, said by phone. “We might see more companies coming forward saying financials have not recovered. I would now prefer to sit on sidelines and see how it plays out.”

Ezra declined to comment on the level of short selling in an e-mail yesterday. The company is trying to strengthen its capital structure to weather the slump, working with an adviser to find investors for about US$100mil of new stock while seeking to extend terms on more than US$100mil of loans and bonds, people with knowledge of the matter said on July 29. An Ezra representative said at the time that the company “continues to focus on deleveraging.”

Crude prices have plunged more than 50% in two years and led oil explorers such as Royal Dutch Shell Plc and Statoil ASA to cut spending, hurting companies across the oil-services industry. Charter rates for vessels have plummeted and offshore support contracts cancelled, while Keppel Corp and Sembcorp Marine Ltd last week reported a slump in quarterly profits as orders for new drilling equipment dried up.

Short interest as a percentage of Ezra’s outstanding shares climbed to 8.3% on July 28, from 5.8% at the end of June and near the highest in a year, according to data from research firm IHS Markit. — Bloomberg