Prospects for companies that provide services for oil and gas producers were lifted on Thursday when Norway's Aker Solutions' third-quarter topped forecasts and Britain's Petrofac saw healthy activity.
The oilfield services sector has been hit by lower energy prices, which squeezed oil and gas producers and led to sharp cuts in investment this year, but some services companies are seeing better prospects with oil back around $80 per barrel.
Aker Solutions, which provides engineering and construction services for the offshore oil and gas industry as well as other sectors, said it had a sound financial outlook despite uncertainty about the global economy.
"Though market activity is declining in the short term, the fundamental basis for further market growth is likely to persist in the longer term," Aker Solutions said in its third-quarter earnings report.
Should the pace of new field development continue at a low level for some time, the result is likely to be an accumulated energy deficit which could boost the level of activity when demand eventually recovers, Aker Solutions said.
Petrofac, whose activities range from designing and building oil and gas infrastructure to safety training, said contract activity was lively in both its construction and offshore businesses, as oil companies sought cost efficiencies by putting out contracts to competitive bids on their expiry.
In a trading statement, Petrofac said it was confident it would deliver full-year earnings growth of at least 20 percent after continued contract wins and healthy bidding activity.
"A lot of it is around strength in the Middle East, particularly with national oil companies who are continuing to commit to new capital programmes," Petrofac Chief Financial Officer Keith Roberts told Reuters in a telephone interview.
STATE OIL COMPANY RESILIENCE
He added that while private companies have been trimming back capital plans over the last year, national oil companies have largely pushed ahead to get projects on stream.
Petrofac's services and training unit was still suffering from depressed activity, although there were signs that discretionary spend was beginning to resume in recent weeks.
"In the last 12 months we have had significant (oil price) volatility but underlying profits in the business have continued to grow and our prospects continue to be strong," Roberts said.
Its shares fell 3.2 percent at 0904 GMT after tripling in value since the start of the year and far outperforming the FTSE All Share Oil and Gas index.
Shares in Aker Solutions rose 3.2 percent against Oslo's benchmark 1.6 percent fall, after its reported forecast-beating third-quarter earnings, a reduction in net debt and full-year guidance in line with market estimates.
"We're seeing some more predictability in the 2010 order backlog," Aker Solutions Chief Executive Simen Lieungh told a conference call.
Aker Solution's EBITDA stood at 1.01 billion crowns ($181 million) in July-September, against 1.15 billion a year ago, and above an average forecast of 980 million from a Reuters survey.
Fourth-quarter EBITDA is expected to be on par with the third-quarter results, it said, adding that its subsea division would remain hampered by low activity for the rest of 2009.
"Tendering activity is high, but awards are tending to be postponed and pricing is competitive," Aker Solutions said.
Aker Solutions said it had booked 9.0 billion crowns in new orders in the third quarter and had an order backlog at 56.5 billion crowns ($10.1 billion), a decrease of 5.4 billion crwons from the previous quarter.
Petrofac's order backlog at the end of September was around $8.5 billion compared to $8.4 billion at the end of June.
