Subsea 7 Defies Oil Services Gloom Despite Brazilian Pain
OSLO, Aug 14 (Reuters) – Oil services firm Subsea 7 , one of the top four in its sector, unveiled a record order book on Wednesday and predicted strong earnings, sending its shares nine percent higher as investors hoped the worst of its troubles were behind it.
Subsea 7, which has fallen out of investor favour after unveiling a cost blowout at a key Brazilian project in June, said its margins held up well in the second quarter, its orders were soaring and costs were under control, a relief to markets who feared more bad news from the firm.
"The 2013 guidance now looks like an easy target to achieve, and we expect to see consensus upgrades following today's result," JPMorgan said in a note.
Subsea 7 will book a $300 million provision on its Guará-Lula project for Brazil's Petrobras, a figure at the upper end of its previous range, but excluding that charge, it predicted its adjusted EBITDA would rise this year, in line with its guidance.
Markets cheered the result, sending Subsea 7 shares up 8.5 percent at 1027 GMT and putting it within striking distance of levels last seen before its unveiling of the Brazilian troubles.
Before Wednesday's rise, it was trading at 10.5 times its expected 2014 earnings, a big discount compared to the average of about 11.3-11.5 of its peers, which include Saipem, Technip and Aker Solutions.
Still, Subsea 7, which provides offshore construction services, is down 15 percent since March as cost pressures, bottlenecks and delays across the entire offshore sector have put pressure on the entire sector.
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