Strong performance in its subsea business has helped Technip offset “unsatisfactory” onshore and offshore revenues despite industry headwinds, the firm’s CEO Thierry Pilenko announced today.
But, the chairman of France’s Technip, which recently launched a new subsea joint venture, Forsys Subsea, with US-based FMC Technologies, also warned that the firm continues to expect the slowdown to be “prolonged and harsh.”
Despite Technip seeing an increase in its subsea revenues and profits, subsea engineering and technology firm Oceaneering was less buoyant, citing lower earnings due to “lower demand and pricing” for many of its services and products, largely on lower remotely operated vehicles (ROVs) and asset integrity services.
Pilenko said new projects are being deferred and while projects sanctioned in and before 2014 continue to progress, they are subject to protracted contract renegotiations and variations.
Pilenko said: “The sharp fall in oil prices has had a substantial impact on our clients’ behavior, NOCs and IOCs alike. New projects are of course being deferred as clients assess their investment priorities in a durable changed economic environment. Projects launched in 2014 and earlier continue to progress, but tension along the supply chain is exacerbated by the lack of financial flexibility from some clients and, as we said as early as Q2 last year, negotiations are protracted on contract changes and variations, in particular on onshore/offshore projects.”
Kevin McEvoy, CEO at Oceaneering concurred, saying: “2015 will be a very challenging year, despite our Q1 earnings per share exceeding our guidance. Since our last earnings release, our oilfield business outlook for the remaining quarters of this year has weakened for ROV, subsea projects and asset integrity. We are challenged with materially lower demand, customers demanding price concessions, and competitors willing to dramatically reduce prices to secure utilization for their assets.”
The firm’s ROV fleet utilization dropped to 73%, compared to 86% last year. Oceaneering has 336 ROVs, up 22 compared to March 2014.
But, Pilenko offered a ray of hope to the industry, suggesting that innovation would be required and that investment must continue to avoid a dramatic reduction in production in years to come.
“Even as clients put pressure on their supply chain, they also seek innovative and collaborative ways to decrease the cost of their investments,” he said. “Whilst new projects obviously have to be viable to move forward, investment is needed to avoid a dramatic reduction in production in the years to come. With this in mind, we have signed during the quarter a groundbreaking alliance with FMC Technologies. Having started discussions a year ago, we quickly found a common conviction that, with early involvement in design, the two companies could significantly reduce development costs for the offshore and subsea developments.
Pilenko said order intake was “robust,” at €1.5 billion, strongly supported by subsea business, including “resilient demand for the Brazil pre-salt developments with a significant hi-tech flexible pipe award.” This was for about 200km of flexible pipes and associated equipment for the Lula Alto pre-salt field in Brazil. In the Gulf of Mexico, Technip signed two contracts for the Amethyst field on Mississippi Canyon Block 26. The first includes detailed engineering, procurement, fabrication, assembly and testing of a 5in production static riser. The second covers a tieback to the Pompano fixed platform in about 395m water depth.
In the North Sea, Technip was awarded a brownfield contract for the Triton FPSO. The contract includes the fabrication of a dynamic umbilical to be manufactured in Newcastle, UK, and the use of the dive support vessel Orelia for the installation campaign.
In contrast, onshore/offshore order intake “was not satisfactory,” Pilenko said, particularly when it came to EPC awards. The firm’s order intake included a front end engineering design contract for two tension leg platforms for the Liuhua 1101 and 16-2 joint development in the South China Sea.
Technip’s backlog stands at €20.6 million, following an order intake of €1.5 billion in Q1. It says adjusted revenue grew 17% to €2.9 billion in the quarter, with net income growing 28% to €86.1 million.
McEvoy said Oceaneering remained convinced its strategy to focus on providing services and products that facilitate deepwater exploration and production remained sound. “Deepwater is still expected to continue to play a critical role in global oil supply growth despite its large capital commitments, technical challenges and the current commodity price environment. Therefore we anticipate demand for our deepwater services and products will rebound and rise over time, and believe our long-term business prospects remain promising.”
Oceaneering’s Q1 revenue stood at US$786.8 million, down from $840.2 million in the same period last year, with net income of $69.6 million ($91.2 million last year).
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