Aker Solutions Optimistic in Longer Term
Norwegian oil services company, Aker Solutions, has presented five strategic objectives after splitting in two in September last year.
“The split allows us to reduce complexity, build on synergies and bring down costs, which makes us much better equipped to respond to the needs of customers in the 22 countries where we operate,” said Chief Executive Officer Luis Araujo. “Our focus now is on creating value for our clients and shareholders through the right technology development, quality in execution, cost control and by applying the full force of our engineering skills at the conceptual stage of a project to find the most effective solutions.”
The company, which meets today with investors in London, will build on its strengths in key subsea and field design markets as it seeks to:
– Be the preferred partner, with an unparalleled level of safety and performance;
– Capture growth in offshore deepwater, subsea and harsh environment markets;
– Maintain and expand a global presence through disciplined, organic growth;
– Further develop portfolio with a diversity of customers, regions and strong contract mix;
– Deliver operational excellence, realize synergies, strengthen cost control and capital discipline.
Aker Solutions won a contract from Statoil to deliver a concept study for future phases of the North Sea Johan Sverdrup development, Norway’s largest oil find in three decades. While Norway is the company’s single largest regional market, Aker Solutions is this year set to get 60 percent of its revenue outside its home market amid an expansion in key offshore oil and gas markets in Africa, Brazil and Asia Pacific. That share is growing from 50 percent last year and about 40 percent the year before.
Aker Solutions had a near-record order backlog of NOK 48 billion kroner in 2014 after winning major contracts including a NOK 14 billion order from Total at the Kaombo field in Angola, one of the world’s largest subsea developments, and a more than USD 300 million contract from Petrobras in Brazil to deliver subsea manifolds.
The company’s subsea, umbilicals, engineering and maintenance, modifications and operations (MMO) areas were spun off in September 2014 to create a new business under the Aker Solutions name.
“We’re ideally placed to excel in key subsea, deepwater and field design markets through our considerable local content, strong client relationships, leading technology and unique engineering,” said Araujo. “We’re taking on current market challenges from a position of strength, with a robust order backlog and a sharp eye on our operational and financial performance.”
Aker Solutions’ new cost-savings programs in all business segments and corporate functions are well underway. These include a goal for the engineering business to reduce engineering and procurement services costs 30 percent by the end of 2017. The MMO area is also on track to lower the cost of modifications 30 percent by the end of 2016. The subsea segment has set a target to improve operational efficiency 15 percent annually. This was achieved in 2013 and 2014.
Uncertainty has increased for oil-services providers as oil companies scale back spending amid concern over capital and the slump in oil prices since last summer. This is particularly affecting the Norwegian MMO market and the company anticipates a continued slowdown in this area over the next one to two years. Major projects such as the Johan Sverdrup development will help offset some of the decline.
Aker Solutions expects to grow with its key markets over the medium term and at least maintain market share in its core businesses. Margins are expected to remain robust in engineering and gradually recover in MMO. Aker Solutions targets peer-group margins over time for Subsea.
“Longer term, we are optimistic,” said Araujo. “Our leading technology, engineering and project management skills put us in a prime position to benefit from a shift toward more complex offshore resources. Few companies are better placed in the global deepwater and subsea segments, which are among the fastest-growing offshore oil and gas markets in recent years.”