Depressed oil prices are going to make 2015 a challenging year as the “industry adjusts to the new realities,” rig, engineering and fabrication firm Lamprell has said.
The Dubai-based company had an “exceptionally strong” 2014, with six new-build jackup rig orders won and several smaller awards signed recently.
But, the firm said the level of performance will not be replicated in 2015, both due to projects being at different stages in their construction cycles and the weaker market environment.
In addition, the firm says it anticipates “intense competition” in the market, with a large number of players chasing fewer projects, leading to increased pressure on margins.
Jim Moffat, Chief Executive Officer, Lamprell, said: "With the recent slump in the oil price, winning work in 2015 is going to be a challenge as the industry adjusts to the new realities.”
Oil prices have halved to US$50 a barrel since summer and analysts have been unable to agree as to when the fall might stop or reverse, as oversupply has conspired with reduced global demand.
Lamprell said: “We have already seen some of the global drillers and international oil companies announce reductions in their capital expenditure programs and this trend is expected to increase. While short-term tendering activity will continue at a pace required to meet current demand, our ability to carry on winning new business is contingent on the state of the broader industry.”
“The scale of the readjustment will remain unclear until the market and the commodity price stabilize,” the firm adds. “In this context, the outlook for the broad services sector looks challenging while the industry adjusts to the new realities.”
Moffat (pictured) says Lamprell’s position remains robust with a strong backlog. In 2H 2014, Lamprell started construction on four new-build jackup rigs, two for Ensco and two for Shelf Drilling. In total, seven new-build jackup rigs are currently under construction in the firm’s Hamriyah facility. The construction of two new-build jackup rigs recently awarded by NDC is also due to start shortly.
It also has a module construction project for 29 piperacks in fabrication for Petrofac at its Jebel Ali yard. Additionally, there are 10 rig refurbishment projects underway across the Hamriyah and Sharjah facilities.
“We are entering this period in a position of relative strength with a strong balance sheet and a high backlog,” says Moffat. “We will continue to focus on maintaining our competitive position in the sector."
But, Lamprell says it expects 2015 revenues to be about 10% below current expectations.
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