Yahoo Finance Oil market woes to dog Lamprell through 2018
Oil rig builder Lamprell has warned investors that the two-year oil market downturn will have a bigger than expected impact on its revenues this year and next.
The group had expected to bring in revenues of between $400m (£290) to $500m this year, and in March warned that this would fall towards the lower end of the range.
But in its half-year results, forecasts for 2017 fell further to between $370m to $390m, due to the ongoing slowdown in orders for oil equipment from cash-strapped producers.
The group’s revenue fell from $451.3m in the first half of last year to $159.2m in the six months to June.
Christopher McDonald, the group’s chief executive, said he expected the “challenging” market conditions to continue to impact the company through 2018.
The gloomy outlook left investors rattled, sending the shares down 12pc on Friday morning to 86.75p. The company’s near-£300m market value is half what it was in the months before the oil price crash began in late 2014.
Oil prices have climbed back above $50 a barrel from lows of $27.50 a barrel early last year but Mr McDonald said the recovery would take longer to yield benefits due to the lag between when investment decisions are taken and when project awards are handed out.
“We are encouraged by increased levels of bidding activity but do not expect to see revenue growth until 2019 on the basis of such awards in late 2018,” he said.
Despite the disappointing revenues equity analysts at Cenkos said the company was well placed to ride out the tough market.
“A key strength is the balance sheet with plentiful cash reserves on hand. The jack-up rig market remains challenging with a dearth of new business - as expected - but the contracting and services divisions performed strongly,” the analysts said.
In addition, Lamprell has managed to secure “an unprecedented opportunity” to partner with Saudi Aramco, Bahri and Hyundai Heavy Industries to help build a new maritime yard in Saudi Arabia.
“The project will further strengthen our position in the region and will provide exposure to significant new opportunities in a key market for the energy industry," Mr McDonald said.
