Vallourec Said to Weigh Capital Increase to Endure Oil Rout

(Bloomberg) -- Vallourec SA, the French maker of steel tubes for the oil and gas industry, is preparing to sell about 450 million euros ($491 million) in shares to help it ride out the industry slump, people familiar with the matter said.

The capital increase may be announced as soon as next week, the people said, asking not to be identified because the sale is private. No final decision has been made and Vallourec could explore other options, the people said.

A representative for Vallourec declined to comment.

Vallourec fell 14 percent to 4.05 euros in Paris, the lowest closing price since 2001. Vallourec’s 400 million-euro bonds due 2019 rose 8 cents to 74 cents on the euro, the highest since Jan. 12. They have been among the worst-performing euro- denominated bonds in the last twelve months, according to data compiled by Bloomberg.

Companies that serve the oil and gas industry, which has been grappling with a collapse in prices, are selling assets and raising funds to stay afloat. Italian oil services company Saipem SpA unveiled a plan to sell as much as 3.5 billion euros in new shares this quarter to shore up its balance sheet. CGG SA, the French oilfield surveyor, sold new shares this month to finance a turnaround plan.

Vallourec’s management and shareholders will be asked to make sacrifices in terms of salaries and dividends as the company copes with a collapse in demand, French Economy Minister Emmanuel Macron told Parliament last month. Investors are already feeling the pinch with shares down more than 45 percent this year through Thursday.

The Boulogne-Billancourt, France-based company shed 2,500 jobs worldwide in the first nine months of 2015 to adapt to lower demand from oil explorers including Brazilian customer Petrobras Brasileiro SA, which is contending with a corruption scandal.

--With assistance from Manuel Baigorri and Luca Casiraghi.

To contact the reporters on this story: Dinesh Nair in London at dnair5@bloomberg.net; Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net; Ruth David in London at rdavid9@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net; Aaron Kirchfeld at akirchfeld@bloomberg.net Amy Thomson

Copyright 2016 Bloomberg News.

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