Loss of Qatari Oil Contract Piles Pressure on Maersk Profits

Reuters

COPENHAGEN/LONDON, June 28 (Reuters) - Denmark's A.P. Moller-Maersk has lost a major oil production contract in Qatar this week, just days after the shipping and oil group said it was considering a break-up due to worsening market conditions, shipping and banking sources say.

Maersk, which also announced last week the replacement of its chief executive and tasked the new CEO with a "strategic" review of its business, is battling on two fronts.

It is trying to deal with a container shipping market which is suffering its worst ever downturn and an oil business dealing with around a 60 percent fall in prices.

"Replacing a CEO via an intra-day announcement and announcing a strategic review - you are not doing it for nothing. It is not because the numbers look that good," said ABN AMRO analyst Thijs Berkelder.

"We have to see what the company now really delivers for the remainder of this year in all of its activities: that's not really clear to me," said Berkelder, who maintained a Hold rating for the group.

Maersk Oil said this week it had lost the contract to operate Al-Shaheen, Qatar's largest oil field, which accounted for up 40 percent of Maersk Oil's output last year.

It had held the contract since 1992, which analysts at Clarksons Platou estimated could mean a fall in group net profits of $150 million to $200 million, based on the current oil price of around $50 a barrel.

The group reported a net profit of $224 million in the first quarter of this year, down from $1.6 billion in the same period last year.

"They're being hit in most parts of the business at the same time," a senior oil banker at a European bank said. "The big worry is about their shipping business."

Maersk Line, the group's container shipping unit, is trying to remain the world's biggest carrier as new challengers, particularly in Asia, try to grab a bigger share of a depressed market.

Maersk veteran Soren Skou, 51, will replace Nils Smedegaard Andersen as group chief executive. Andersen, who will leave the group, had been in the job since 2007.

One senior shipping industry source said there were questions over whether Skou, who will also remain CEO of Maersk Line and who has been with the group for 33 years, would be able to tackle so many challenges at the same time.

"Skou is coming from inside the Maersk group and no one knows whether there is enough vision in terms of what is required. They really needs to be an overhaul," the source said.

"There are still question marks over the timing of the appointment and what lies ahead with so much turmoil."


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