Aker Solutions profit sinks amid market slowdown
- Business & Finance
Norwegian oil services company Aker Solutions saw a decrease in its second quarter 2017 profit and revenues amid market slowdown.
For the second quarter of 2017, Aker Solutions on Wednesday posted a profit of NOK 33 million ($4 million), which dropped from a profit of NOK 131 million ($15.9 million) in the corresponding quarter of last year.
Further, Aker Solutions’ revenues fell 22% to NOK 5.4 billion ($653.2 million) for the second quarter of 2017, compared to the same period last year and revenues of NOK 7 billion ($1.43 billion) due to lower activity levels, especially for subsea projects.
The company now has two reporting segments: Projects and Services. Revenue in the first segment declined to NOK 4.2 billion in the quarter from NOK 5.5 billion a year earlier amid generally lower market activity and on some projects nearing completion.
Revenue in the second segment fell to NOK 1.2 billion in the quarter from NOK 1.4 billion a year earlier, primarily driven by decreased activity for subsea services and a maturing production asset services portfolio.
At the end of the quarter, the order backlog was NOK 30.7 billion, about half of which was for projects outside Norway.
Early signs of activity pickup
Looking ahead, the oil services company said the outlook for its services remains challenging as projects continue to be postponed amid a volatile oil-price environment. There are some signs of a recovery, particularly offshore Norway and in the brownfield segment where oil companies are focusing on optimizing output from existing fields. Industry efficiency improvements are bringing down break-even costs on developments, which is expected to spur new investments and project sanctions this year.
“We’re seeing a surge in demand for our front-end engineering services, which typically is an early indication of a pickup in activity ahead,” said Luis Araujo, chief executive officer of Aker Solutions.
The company further said that tendering is healthy and Aker Solutions is bidding for contracts totaling about NOK 60 billion. The majority of these are in the subsea area, where the company anticipates several major greenfield projects to be awarded in the next 12 months. While there is continued uncertainty, the signs of improving brownfield activity and expectations of key subsea projects moving forward bode well for 2018 and beyond, the company said.
Finally, the company stated it continues to see overall revenue down by about 10-15 percent in 2017 from the prior year, with an anticipated modest pickup in the field design segments of both Projects and Services while subsea volumes will be weaker. The company maintains its outlook for full-year underlying EBITDA margins to narrow slightly from first-quarter levels due to a continued market slowdown and a changing revenue mix. This will be partially offset by a continued strong momentum from the company’s global improvement program.
Offshore Energy Today Staff