Contractors Put on Brave Face with 2Q Earnings

Contractors reporting 2Q and 1H results in recent days have put on a brave face in a tough operating environment, with some even turning in a modest profit after heavy retrenchment over the past year, in terms of both staff layoffs and asset disposals.

US drill services giant Baker Hughes said July 28 its 2Q 2016 revenue of $2.4bn was down by 39% year-on-year. Pre-exceptionals, it made a net loss of $911mn (versus a loss of $188mn in 2Q 2015) after steep declines in North America rig counts.

Yet after accounting for just over $3bn of impairment and restructuring charges, offset by a gain of $3.5bn paid by Halliburton in April 2016 after the two firms’ planned merger was terminated, Baker Hughes’ adjusted net loss was $392mn – still larger than its 2Q 2015 loss of $62mn. CEO Martin Craighead said the firm took “swift and decisive measures” to bolster its balance sheet in May, after the tie-up in Halliburton was cancelled.

Halliburton itself reported a 2Q net loss of $3.2bn last week, a third as much again as its January-June 2015 loss.

France's Technip said July 28 that its 2Q adjusted revenue was 9% lower year-on-year at €2.8bn, but made a net profit of €123mn – in contrast to a net loss of €307mn in 2Q 2015. It also said it had received a successful early conclusion of the antitrust review from US regulators of its planned merger with FMC. Order backlog however fell to €13.5bn at end-2Q 2016, from €18.8bn a year before.

The Castorone pipelay vessel (Photo credit: Saipem)

Italian contractor Saipem July 27 reported 1H2016 revenues of €5.3bn, almost flat year-on-year, with a net profit of €53mn, compared to a 1H 2015 loss of €920mn. Order backlog was €13.9 bn at end-June 2016, compared to €15.8bn six months earlier. CEO Stefano Cao said “robust” results were due to “excellent performance in the execution of offshore engineering and construction projects.”

Norway-listed Subsea7 achieved a “good 2Q” as, despite revenues down 29% year-on-year to $961mn, its net 2Q profit increased 55% to $136mn and its order backlog at end-June of $7.1bn was $0.6bn up on three months earlier. Among highlights for 2Q announced July 28, its work on the Tullow-operated TEN oil and gas field development off Ghana was “substantially completed” – with first oil expected next month. Offshore Egypt, first gas was achieved in May at Ha’py field on the East Nile Delta project with fabrication and testing underway on the West Nile Delta phase one project.

Mark Smedley