Expro Announces Pre-Close Trading Update
Expro International Group PLC announces that trading during the six months ending September 30, 2006 has seen a continuation of the positive momentum established in prior periods. Expro's focused organic strategy coupled with the acquisition of Power Well Services Inc. ('PWS'), has enabled the new combined business to build an enhanced platform for sustained progress.
The market for late cycle upstream oil and gas products and services remains very positive. Driven by global demand for energy, the hydrocarbon industry continues to be the only real answer to the supply equation, a situation which is likely to prevail out to 2010 and beyond. This environment has driven strong demand for oil and gas well activities and as a consequence all Expro product lines are enjoying high levels of demand.
Integration of PWS
The acquisition of PWS was a step change in the global development of Expro, adding markets and technologies to our portfolio, whilst bringing synergies to the Group and assisting our existing growth strategies. The integration of PWS is progressing well and at a pace ahead of our initial plans. Our customers have welcomed our enhanced capability and the benefits are already being seen. PWS has brought to us a strong business platform in the increasingly important markets of the Middle East and Brazil. The technology within Power Chokes is benefiting our domestic U.S. business, as well as providing good international growth prospects. In the former market, our Choke products play an essential role in the development of unconventional, land based gas reserves where flow management in association with rock fracturing is critical to commercialization of tight gas prospects. This type of gas field is increasingly important within the domestic U.S market which is becoming service intensive as more complex reservoirs are exploited.
New Contract Wins totaling £144 million
In the Regional Businesses, where the majority of PWS' products and services fit, £88 million of new business was secured in the period. Now organized on an Eastern and Western hemisphere basis, all geographic areas enjoyed new contract awards which are phased to deliver income over the coming 5 years.
In the Eastern hemisphere new contracts were secured in the North Sea with Statoil, CNR and Gaz de France totaling £16 million. In the markets of North and West Africa further progress was made in Algeria, and Libya for Total, Repsol, Woodside and Sonatrach with Total and Woodside also featuring in new business awards offshore West Africa in Angola and Mauritania. The total of new African business came to £32 million. Notable was the contract award valued at £24 million over 3 years made by Saudi Aramco as a result of the PWS acquisition. This new market position and contract for Expro offers considerable promise as a growth platform in the important Middle East region.
In the Western Hemisphere a further £16 million of new contracts were secured, the most notable being the continuation of progress in the deepwater Gulf of Mexico with welltest awards from BHP and Anadarko, complementing our existing deepwater subsea contracts. In South America, excellent progress is being made in establishing Expro as a preferred supplier to Petrobras in Brazil for welltesting services and establishing a solid distribution platform for additional Group products.
The market for our Global Businesses, where Expro has material technical positions has continued to be strong. Prior period investments in technology has resulted in contract awards totaling £56 million. The majority of these have come in the area of Subsea tools. Awards from bp in Azerbaijan, CNR in the UK, BHP and Anadarko in the Gulf of Mexico are representative of the increasing international diversification of the global subsea markets. This growing market segment also drives demand for our leading TronicMatre business. In this area we provide state of the art instrumentation and high reliability connectors to enable our customers to manage their subsea production throughout the economic life of the field. At the end of the period TronicMatre, which uses short lead time as a competitive advantage, held a healthy confirmed order backlog of £16 million.
The final part of our Global portfolio is Production Solutions where we provide fast-track, cost effective topside solutions to small field developments. The gestation period to contract award can be very long in this business as customers' decisions are driven by commerciality and, increasingly, security. In the first six months of this year the Production Solutions business secured a small contract with a total value £4 million to provide an early production facility for the Kangean concession in Indonesia. Other highlights include the imminent completion of a high specification production barge in Nigeria for Chevron. This barge was successfully constructed in country and will commence operations early in the second half of the financial year for a minimum period of 2 years. Revenue recognition of £22 million will commence with operations delivering revenues evenly over the contract life.
These awards have helped Expro maintain high levels of order backlog, which now stands at £478 million across the Group. Conversion of the backlog to revenue varies from contract to contract, with some phased over 3-5 years, improving the visibility of future revenue streams.
Graeme Coutts, Group CEO commented: 'I am very pleased with the pace and
progress of the integration of PWS. The acquisition has created a strategic
bridgehead for Expro to meaningfully participate in new and important geographic
markets as well as adding real capacity at a time when the outlook for products
and services has seldom been stronger. Our overall strategy of enhanced customer
care, technology development and geographic alignment remains as valid post the
PWS acquisition as before. In the eyes of our customers, employees and
shareholders, the value position of Expro has been retained and enhanced and I
look forward to continued progress in the second half and beyond.'
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