AMSTERDAM (Dow Jones Newswires), March 4, 2011
Major oil companies are increasingly trying to push liabilities of offshore oil projects onto sub-contractors as risk awareness has grown in the wake of the BP Macondo incident last year, according to oil services group SBM Offshore's chief executive.
"Oil majors have a clear focus on the scrutiny of safety procedures," said Tony Mace, chief executive of SBM Offshore at a press conference about its 2010 results. "We have to stick firm with what is the risk split between us and the oil company," said Mace.
Last year, a rig exploded at U.K. oil giant BP's Macondo well in the Gulf of Mexico, killing 11 people and unleashing the largest marine oil spill in U.S. history.
Apart from increasing scrutiny of the risk oil companies face when carrying out offshore projects, "the incident will highlight the attention to who they do business with," Mace said, adding that he expects SBM to benefit from this.
However, SBM will not compromise on the amount of risk it finds acceptable to win contracts. "If competitors are willing to face more risk, so be it," he said, adding that the company is "quite" firm on what it finds acceptable.
While the Macondo incident raised fears of repercussions for the offshore oil industry, so far prospects improved on the back of a higher oil price, better access to financing and a generally improved economic climate. "We expect around 15 Floating Production, Storage and Offloading projects to come to the market each year for the coming years," Mace said. Activity is especially expected to be strong in West Africa and Latin America, mainly Brazil, he noted.
While oil majors have raised there capital expenditure projects for this year, Mace said timing remains uncertain, in part because of the growing complexity of projects. However, in anticipation of the increasing number of projects coming to market, "We [SBM] are reasonably optimistic to grow our fleet based on the horizon of projects coming to market in the next five years or so," he said.
After the global downturn caused commodity prices to drop steeply, many oil and raw material companies postponed decisions to invest in new capacity, but the recovery in energy prices fueled by growth in emerging markets has boosted the prospects of service providers to the energy and commodity sector.
Friday SBM Offshore released its 2010 earnings report, which impressed investors. At 1235 GMT SBM shares were up 4.6% at EUR19.16, while the benchmark AEX index was up 0.7%. "SBM Offshore results are above expectations and provide a relief to the market," says analyst Quirijn Mulder at ING Research, who has a hold rating. "This is especially well received by the market after the company hasn't been able to surprise on the upside for a couple of years," he added.
SBM reported 2010 revenues were 3.4% up to $3.056 billion from a year ago and said it expects revenue for 2011 to remain within the same range, with 90% of 2011 sales already secured through its order book.
The company's order book grew 14.7% to a record $11.5 billion at the end of 2010, with $6.3 billion of that amount to be earned in the period beyond 2013 from lease and operate contracts. "We see a trend towards lease contracts compared to turnkey," said Mace.
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