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Lamprell looks to Aramco deal to brighten outlook as stock tumbles

Lamprell forecast revenues in the range of $370 to $390 million this year compared to the lower half of the $400 million to $500 million range it reckoned in March. (Courtesy Lamprell)
LONDON: Lamprell hopes that the creation of a joint venture with Saudi Aramco will help to offset a muted earnings outlook that sent its stock tumbling.
The UAE rig builder cut its full-year forecast on Friday and warned that it did not expect revenue growth from potential contract awards until 2019.
That sent the stock of the London-listed company tumbling by more than 23 percent before partially recovering to trade more than 11 percent lower.
The company forecast revenues in the range of $370 million (SR1.4 billion) to $390 million this year compared to the lower half of the $400 million to $500 million range it reckoned in March.
It expects 2018 revenues to be about 10 percent lower.
Lamprell said it was continuing with a strategy review and “further operational efficiencies and geographical and sector diversification.”
The company’s bid pipeline rose to $3.1 billion at the end of June from $2.5 billion at the end of December, it said.
Lamprell struck a joint venture with Saudi Aramco, Bahri and HHI in May to establish and operate a fabrication yard in the Kingdom.
Once commissioned, the maritime yard will become one of the biggest in the region with 4.1 kilometers of quayside. It is expected to be partially operational by 2019 with full functionality reached by 2021, Lamprell said.
It could lead to the construction for 20 offshore drilling rigs over 10 years.
Lamprell CEO Christopher McDonald said: “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.”
An extended period of oil price weakness has dampened demand for new oil rigs and hit regional rig builders and oilfield services companies such as Lamprell and Petrofac.
The company said that project completions and the slow pace of new contract awards brought yard activities to a “relatively low level.”
“There is significant profit recovery potential over time, but it is hard to predict the timing with any confidence,” said Investec.
Still, the company said it had started fabrication work on its flagship renewables contract for ScottishPower Renewables – the East Anglia One project.
The company also this year reached an agreement with Cameron, a unit of Schlumberger, ending a dispute over some jacking equipment.
It said that despite the row, the company still has a strong relationship with Schlumberger which has commissioned Lamprell to build two land rigs.

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