Wellstream Holdings PLC, a leading designer and manufacturer of flexible risers and flowlines for the oil and gas industry, issues the following pre-close trading update for the year ended Dec. 31, 2007. The preliminary announcement of the results for the year will be made on April 2, 2008.
The Board is pleased to report that, since the successful IPO on April 26, 2007, the company has continued its strong operational performance. Results for 2007 are expected to be significantly ahead of analysts' expectations.
Throughput at the Newcastle plant has continued to be in line with the Board's expectations at the half year, and the increase in capacity from 240 normalised km to 260 normalised km per year at that time has contributed to this achievement.
Production of the flexible risers and flowlines for the Chevron Frade project underpinned much of the plant's production in 2007. This large project continues to be executed successfully on time and to budget, and is well advanced.
Having commenced production on time in May 2007, the ramp up of production exceeded plan. Consequently, the Board announced on 25 September 2007 the introduction of an additional shift which means the plant will now operate 24 hours per day. With the training and integration of this additional shift progressing well, the Board is pleased to announce that the plant will have reached its theoretical capacity of 150 normalised km per year early in 2008.
Future production has been secured by recent major awards for Petrobras' P51 and P53 contracts. Each of these awards was in excess of £40m in value and demonstrates Petrobras' continued support for Wellstream in general and for the development of the Niteroi plant in particular.
Other highlights for the year included the award of an £18 million contract for the supply of flexible risers for the Peregrino project offshore Brazil operated by Anadarko Petroleum Corporation.
The formation of Seastream, a 50:50 joint venture between Wellstream and Sea Trucks Group in June 2007, has been well received by customers. This joint venture has enabled Wellstream to enhance our service offering by providing the capability to offer flexible pipeline products on an 'as installed' basis. Seastream won its first contract with BHP Billiton in July 2007; for the supply of flexible flowlines and the installation of the Pyrenees FPSO. This contract is valued at over £100m.
Additionally, later in the year Devon Energy Corporation awarded Wellstream an installation contract on their Polvo project in Brazil, which is currently under way.
With forward market visibility remaining robust, the Board announced on Nov. 20, 2007, the decision to expand production capacity in both Brazil and the United Kingdom. The £35million capital programme, to be funded from cash flow, is expected to increase production capacity to a total of 570 normalised km – up nearly 40% on current capabilities. This increased capacity is expected to start ramping up from the first quarter of 2009 and will result in the Niteroi and Newcastle plants having theoretical production capacities of 270 normalised km and 300 normalised km respectively.
The commercialisation phase of the onshore Flexsteel(TM) product was successfully completed during 2007. Additional production equipment was installed during the first quarter of the year and a new 6 inch pipeline product was successfully brought to market.
Customers continue to support the product in both North and South America and there are increasing levels of interest being shown in pipeline rehabilitation applications - an important emerging market segment for the industry.
The aggregate order intake for the year amounted to approximately £365 million. As of Dec. 31, 2007, total revenue backlog was approximately £330 million compared to £226.8 million at Dec. 31, 2006.
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