Aker Solutions believes the offshore Norwegian oil and gas sector could start improving by next year, although the next few months are likely to remain ‘subdued’.
“While offshore Norway is largely expected to remain subdued, there are signs that the region may start to see a gradual recovery from 2017,” said the company in its second quarter results statement released Wednesday.
Aker revealed that its greatest growth potential is outside of Norway, where the company has been expanding. The firm stated that it is “well-placed in key growth regions of the global deepwater and subsea markets to provide the capabilities and technology to tackle the challenges of lowering costs and improving recovery rates”.
The company won $404 million (NOK 3.4 billion) in orders during 2Q, including a contract of more than $118 million (NOK 1 billion) to deliver its longest-ever umbilicals system at the Zohr gas field offshore Egypt and an order from Idemitsu Oil and Gas for front end engineering design at the Sao Vang and Dai Nguyet developments offshore Vietnam. In Norway, the company secured an engineering framework agreement with Lundin and MMO contracts with Statoil and Kværner. Aker Solutions saw continued interest in its front end engineering capabilities, receiving 29 study awards for projects in Norway, Australia, Asia Pacific and West Africa.
The order backlog was NOK 35 billion at the end of the quarter, of which almost two-thirds were for projects outside Norway. Finances were “robust”, according to Aker, with a liquidity buffer of $939 million (NOK 7.9 billion) at the end of the period. Net debt fell to $154 million (NOK 1.3 billion) from $214 million (NOK 1.8 billion) a year earlier.
Aker achieved “good progress” on its goal to boost cost-efficiency across the business by at least 30 percent amid a broader effort to streamline operations and strengthen competitiveness. It plans to achieve annual cost savings of $1 billion (NOK 9 billion) by the end of next year, based on the 2015 cost base and work volumes. The company expects a quarter of this target to be achieved this year and for improvements to accelerate next year.
"In the shadow of extensive industry challenges, we continued to deliver on operational improvements and our streamlining process," said Luis Araujo, chief executive officer of Aker Solutions. "We have maintained steady margins and delivered strong execution. Our healthy backlog and solid finances will stand us well now and when the market recovers."
Revenue fell to $832 million (NOK 7 billion) in the quarter from $951 million (NOK 8 billion) a year earlier as the oil-services market slowed. Earnings before interest and taxes (EBIT) were $37 million (NOK 319 million) compared with $44 million (NOK 376 million) a year earlier.
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