Paris-headquartered subsea and engineering house Technip has come out of Q1 2016 with a better than expected profit, but its CEO expects front end market activity to remain damp until late-2016, early 2017.
Meanwhile, Subsea 7 has seen a greater dent to revenues and stacked vessels as it has suffered low utilization rates amid the drop in SURF market activity. FMC Technologies was also been hit in Q1, with revenues down 28% compared to the same period last year, and net income down from $148.1 million to $19.8 million.
Technip's positive results were helped by high vessel utilization rates, standing at 82% in Q1 2016, compared to 68% in the same period last year.
Adjusted revenue fell 4.2% to €2.76 billion (US$3.14 billion), however the firm's subsea segment revenue grew 7.4% to €1.38 billion ($1.57 billion). Net income was €114.4 million ($130 million), up 32.9%, and the firm took in €930 million ($1.05 billion) of new orders, taking the total backlog to €15 billion (17 billion).
New orders included an early stage contract with Statoil, under the Forsys Subsea joint venture, for the development of the Trestakk field offshore Norway.
CEO Thierry Pilenko said order intake remained at a low level, but it was satisfactory. "Our views of the market are unchanged compared to mid-February," he said. "With a low and volatile oil price and their cashflows under pressure, our clients are more than ever focused on cutting their capex and costs to substantially below 2014 levels. Project awards are therefore being postponed and even cancelled, putting visible strain on some parts of our industry.
He said, while the downstream business had continued interest in investment and upgrading, in upstream, "the market would be less resilient, with front-end work only gaining momentum from late-2016 into 2017."
Subsea 7
Meanwhile, Subsea 7 said it had been impacted by a global reduction in subsea, umbilicals, risers and flowlines activity.
Subsea 7's revenue was down 37%, at $746 million in Q1 2016, compared to $1.18 billion in the same period last year. Net income stood at $147 million, compared to $151 million in the same period last year - less of a dramatic fall, thanks to cost reduction and efficiency initiatives.
Subsea 7's active vessel utilization was 71%, with one chartered vessel released in the quarter and seven owned vessels stacked at quarter end. However, total vessel utilization was 55%.
Subsea 7 took in $1.1 billion of new orders, increasing the backlog to $6.5 billion as at the end of March. New contracts included West Nile Denta Phase 1, off Egypt (the largest project awarded to Subsea 7 since 2011, and two life of field awards offshore UK.
The firm said: "The outlook remains challenging and the timing of new contract awards is still uncertain as clients continue to postpone capital investment decisions in the current market environment."
However, it added: "The fundamental long-term outlook for subsea field developments remains positive and industry activity is expected to improve when the oil and gas markets rebalance."
FMC Technologies
FMC's Q1 revenue was $1.2 billion, down 29% from the prior-year quarter. Total inbound orders were $671.6 million, including $345.9 million in Subsea Technologies orders. Backlog for the company was $4 billion, including Subsea Technologies backlog of $3.4 billion.
"While operators' reduced capital spending continues to delay large deepwater projects, we believe that our subsea service orders will remain fairly resilient in 2016," said CEO John Gremp.
Image: Technip's Skandi Africa
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