Lamprell earnings rise despite oil slump

A new rig from Lamprell at Lamprell shipyard in Hamriyah. Jaime Puebla / The National

Lamprell, the London-listed oil services company which has its operational head office in Sharjah, reported a threefold jump in annual profit just two months after it warned that earnings would be hit by the oil price slump.

Lamprell’s after-tax profit for last year came in at US$118 million from revenue that was hardly changed at just under $1.1 billion.

Lamprell’s shares have recovered since the profit warning in January, when they fell below 100 pence to 95.25 pence on the London Stock Exchange. They were at 113.50 pence late on Thursday afternoon, compared to Wednesday’s close of 112 pence.

John Kennedy, Lamprell’s non-executive chairman, said in a statement accompanying the annual results: “The board is mindful of the challenges facing the industry in a lower oil price environment and affirms the revised guidance given in January.”

Many oil companies, large and small, have said that they plan to curtail their spending this year after oil prices suffered one of their steepest ever declines.

Oil prices slumped last year and have been erratic of late. Having fallen from a high last June of around $115 per barrel, the world benchmark North Sea Brent crude hit a low in mid-January around $45 and recovered to $63 in mid-February before falling back recently. Brent was down $1.27 late afternoonUAE time, to stand at $54.64 a barrel.

The share prices of oil companies have followed the same pattern to a greater or less extent, depending on their ability to weather the storm. Lamprell’s shares fell from a high above 175 pence in September to their January low before recovering.

Jim Moffat, Lamprell’s chief executive, said in the warning to shareholders in January that “winning work in 2015 is going to be a challenge as the industry adjusts to the new realities”.

But in the statement on Thursday, the company said that orders remained strong last year, including the delivery of three new jack-up rigs to National Drilling Company, part of the Adnoc group of companies, and Lamprell’s largest client.

The company said that it had an order backlog and bid pipeline that was higher at the end of last year than the same period a year before – at $ 1.2bn (versus $900 million) and $5.2bn (versus $4.7bn), respectively.

Nevertheless, the company reiterated its January guidance when it had said it expects revenue and its “financial performance” this year to be 10 per cent below “current expectations”. JP Morgan Cazenove, Lamprell’s “house broker” (ie, it advised on its listing and other transactions), has trimmed its revenue forecast for this year by 11 per cent to $941m.

Lamprell employs about 10,000 people and its primary facilities are in Hamriyah, Sharjah and Jebel Ali. It also has facilities in Saudi Arabia and Kuwait.

In the statement, Mr Kennedy talked about the company’s strategy to offload less profitable operations, something that began when Lamprell hit choppy waters in 2012, well before the oil price slump, that led to a halving in its share price.

“The board reviewed the strategy and concluded that there was a need to focus on our core markets in the short to medium term – our long-term goal is to broaden our offering into related markets such as the modular plant and FPSO markets where we have already been successful and have a proven track record,” Mr Kennedy said.

“Lamprell is now leaner, fitter and stronger, and aiming to accomplish more.”

Follow The National's Business section on Twitter