DALLAS, TX / ACCESSWIRE / September 22, 2017 / Deep Down, Inc. (OTCQX: DPDW):
Company Description
Deep Down, Inc. (OTCQX: DPDW) is an oilfield services company specializing in complex deepwater and ultra-deepwater oil production, distribution system, and support services. Its services and technological solutions include providing distribution with installation support, engineering services, umbilical terminations, loose-tube steel flying leads, ROVs, and related services along with marine automation, monitoring and control systems, and the design and fabrication of large onshore and offshore carousel systems. It also supports subsea installation, commissioning, and maintenance projects through specialized, highly experienced service teams and engineered technological solutions.
Summary
Deep Down, Inc. provides innovative concepts of subsea distribution systems with specialization in engineering services, installation management, custom fabrication, site integration testing, and inspection and repair of equipment for the subsea oil and gas industry.
- The Company focuses on complex ultra-deepwater oil production support services and products. Importantly, Deep Down is focused on supporting clients on the completion side vs. drilling.
- Deep Down provides support for subsea engineering, installation, and maintenance projects through specialized, highly experienced service teams and engineered technological solutions. We note that the Company is more service-oriented, but also produces some specialized products such as steel flying leads.
- One of DPDW's core competencies is its ability to collaborate with oil and gas operators, installation contractors and subsea equipment manufacturers to determine the fastest, safest, and most cost-effective solutions to the full spectrum of complex issues that arise in the Company's industry.
- While the Company has a diversified base of customers that include operators, installation contractors, and original equipment manufacturers (OEMs), Deep Down has recently made significant inroads with majors.
- Global spending on subsea production systems is due to reach $65B between 2015 and 2020, a 56% increase from the previous period.
- The Company reported a backlog of approximately $11M as of Q217, and, while management has discussed a reduction in backlog from historic highs, DPDW continued to report one of its strongest balance sheets at 6/30/17 and also increasing interest in services for non-oil and gas applications, such as the development of deepwater technologies for other industries.
- Deep Down is focused on margin improvement. For Q217, the Company reported gross margins of approximately 50%, and in Q216 it was 33%. The Company believes it can continue these improved gross margins longer-term.
- In early 2016, the Company sold its manufacturing facility in Channelview, TX, for $3.8M, allowing DPDW to pay off its only debt of $2.7M and significantly strengthening its balance sheet. Additionally, due to the sale of Channelview and improved efficiency in its remaining facility, the Company has been seeing cost savings of~$35K to $45K/month.
- Significant upside exists if DPDW can sell or rent two umbilical carousels currently being stored. Expected sale proceeds could generate several million in profit. Alternatively, long-term rental income on a carousel could be significant with high gross margins.
We employ a scenario analysis using multiple relative valuation frameworks. The details are on page 8, and all scenarios show upside. We also note that the current market capitalization of approximately $13.9M is significantly less than the Company's tangible net worth of $23.4M, with $7.2M in cash on its balance sheet as of Q217.
The full report can be accessed by clicking on the following link:
http://stonegateinc.com/reports/DPDW_SEPT_2017_Final.pdf
About Stonegate Capital Partners
Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high quality investment opportunities.
SOURCE: Stonegate Capital Partners