Profits up as rigs backlog surges

Petrofac and Lamprell, two oil and gas contractors with large rig-building and repair yards in the Emirates, have lined up almost US$9 billion (Dh33.05bn) in orders as drilling activity picks up. Most oil and gas service companies are seeing their earnings improve this year due to the earlier rebound in oil prices. As their order books start to fill, the companies expect a strong finish to the year.

"We have achieved an order intake of approximately $2bn in the year to date, which, together with our healthy prospects list, gives us confidence that we will grow our backlog over the calendar year," Ayman Asfari, the chief executive of Petrofac, said yesterday. The UK-based company posted a profit on continuing operations of $206.3 million for the first half of this year, up 42 per cent from the same period last year.

Its first-half net profit of $331.9m included a one-off gain of $125.6m on the spin-off of EnQuest, a company formed to take over Petrofac's North Sea exploration assets. "Given our strong start to the year, we expect to deliver like-for-like net profit growth for the full year, excluding the gain on the EnQuest de-merger, of around 20 per cent," Mr Asfari predicted. Petrofac, which derives most of its revenue from designing and building oil and gas infrastructure, said its backlog stood at about $8bn after expanding by $1.1bn this month and last.

Lamprell, a UAE firm that builds and refurbishes drilling rigs and this year started building vessels to install offshore wind turbines, yesterday reported a first-half net profit of $39.7m, up 25.1 per cent from the same period last year. The firm also reinstated its interim dividend with a proposed payout of 3.8 cents a share. It cancelled the dividend last year, as oil companies delayed work orders during the downturn.

"This has been a busy and successful period for Lamprell operationally during which we have won a number of significant new contract awards, in excess of $890m," said Nigel McCue, the chief executive. "We continue to see a high level of interest for the wide spectrum of new build services we offer, and our proposals pipeline remains strong." Lamprell's profits rose despite a 27.2 per cent drop in revenue to $189.3m and a 38.9 per cent decline to $19.3m in profit from continuing operations.

Those results excluded a $23.9m one-off gain related to the cancellation of a contract with the troubled Norwegian firm Riginvest. But the work order has been transferred to Abu Dhabi's National Drilling Company, which last month ordered new rigs from Lamprell. "Encouragingly, we are now beginning to see some signs of recovery in our operating markets and, importantly, our efforts to diversify the scope of our operating markets are beginning to bear fruit," said Jonathan Silver, the chairman of Lamprell.

Mr Silver said the company's backlog of $836m was substantially higher than a year ago but he cautioned that markets for oil and gas contractors were becoming more competitive due to new entrants from South East Asia offering "extremely low prices and on very favourable payment terms". "We cannot become complacent," he said. "Inevitably, margins have and are expected to continue to come under pressure."

Lamprell would target Iraq and other Middle East countries as well as India for further contract awards in the medium term, Mr Silver indicated. Last month Halliburton, the world's second-largest oilfield services corporation, posted a 70 per cent increase in second-quarter profit from continuing operations to $474m, compared with the same period last year, while revenue rose 17 per cent to $4.4bn.

"Our international results reflect the anticipated seasonal recovery of markets in the eastern hemisphere and improved activity in Latin America," said Dave Lesar, the chairman, president and chief executive of the company. This week, Halliburton and Petrofac confirmed they had won contracts in Iraq. Halliburton was chosen to drill 15 wells to boost production from the country's largest oilfield, Rumaila. Petrofac is to build oil-processing plants at the field.

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