Oilfield services companies are putting a brave face on the continuing market downturn, despite some reporting shrinking order books.
Subsea 7 and Fugro reported shrinking order books in their 1Q results this morning.
Subsea 7’s CEO Jean Cahuzac said the “continuation of challenging market conditions resulted in subdued order intake and order backlog” at his company, dropping to US$7.6 billion.
Fugro said its Geotechnical and Survey backlog for the next 12 months was down 15.7% compared to 1Q 2014, reflecting current market conditions. Fugro has been making job cuts and is reducing its wholly owned vessel fleet from 11 at the end of 2014 to seven by year-end.
Yesterday it was reported that services firms Petrofac and Amec Foster Wheeler were in consultation with staff over job cuts and, on Monday, Wood Group PSN said it expected to make about 80 redundancies.
But, it is not all bad news. Norway's Aker Solutions saw its revenues increase 14% and order book increase to NOK48.3 billion, from NOK39.6 billion in Q1 2014 - a 22% year-on-year increase. Subsea 7 also saw an increase in profits in the period, from $131 million in Q1 2014 to $151 million in Q1 2015.
Cahuzac said: “Contract awards to the market continue to be delayed, reflecting the low oil price environment and resultant capital expenditure reductions by oil companies.” He said Subsea 7 was positioned competitively for the projects that are still expected to be awarded, but that visibility of timing on SURF awards remained low.
"The markets continued to be challenging as many of our major clients remain vigilant in how they allocate their capital,'' Aker Solutions CEO Luis Araujo said. He said the firm’s healthy order backlog put the company in a strong position “as we face this uncertain outlook.”
Fugro CEO Paul van Riel said while the company had been able to report an overall margin increase, aided by achieving profitability in the Seabed Geosolutions business, as a result of restructuring and improved utilization, its drop in backlog was a “clear signal of the continuing downturn in the oil and gas market.”
However, firms still see a long-term future for their businesses. Cahuzac. For Subsea 7, this is particularly so in deepwater, which is expected to contribute largely to any future growth in offshore production by the 2020s.
“The fundamental long-term outlook for deepwater subsea field developments remains intact despite the challenges facing the industry as a result of the lower oil price,” says Cahuzac.
Subsea 7’s new 1Q orders and escalations totaled $1.0 billion and included the Persephone project for Woodside, offshore Australia, and the extension of two life of field contracts for Shell, offshore UK, both announced in the quarter. Unannounced order intake included fabrication work for Sonamet in Angola and an award for the i-Tech division, offshore Australia. Since the quarter end, the firm also won a two-year pipelaying support vessel contract offshore Brazil for the Seven Seas.
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