UAE oil rig firm sees drilling as usual
Dubai, November 27, 2008
Oil service stocks have taken a hit as crude prices slump and the economy slows, but UAE-based Lamprell expects no slowdown in drilling plans in the world's top oil exporting region.
US crude has fallen nearly $100 to around $53 from its July peak as the economic slowdown eats into oil demand. Lamprell's shares have tumbled over 85 percent from the high this year to trade at around 80 pence ($1.25) on Thursday.
"We all got caught in the panic as investors rushed for the doors," chief executive Peter Whitbread told reporters on a visit to Lamprell's yards this week.
"But nobody is cutting back on drilling in this region. There is no significant cutback in the areas we are focused on."
Lamprell refurbishes and upgrades rigs, and has recently started building them. The world's rig fleet is ageing and in need of renewal, ensuring business even if new rig orders slow, Whitbread said.
Rigs were being redeployed to the Middle East from offshore Gulf of Mexico as the world's big oil producers expand capacity to meet future demand.
Energy projects take several years to complete, so the industry typically lags changes in oil prices. Energy companies use conservative price forecasts to budget new projects to ride out short-term volatility. Lamprell expanded its facilities in the United Arab Emirates. Thousands of welders and fitters toil in the desert heat in yards crowded with oil rig legs, platforms and even a helipad. The giant steel structures under assembly will straddle offshore oil and gas fields from Saudi Arabia to Canada.
The direct impact on Lamprell of the global financial crisis has been minimal as the company has no bank debt to refinance, executives said.
But analysts have flagged concerns about future availability of financing for clients ordering new rigs. The company has noticed the impact of the slowdown on one area of its business -- in orders to build facilities added to tankers to create deepwater floating production and storage and offloading units (FPSOs), Whitbread said.
FPSO buyers were slowing down tenders and looking to renegotiate contracts with suppliers to reflect cheaper prices of raw materials, he added.
Lamprell had no exposure to Saudi state giant Aramco's moves to force down prices on big contracts for megaprojects at the Moneefa oil field and the Karan gas field, corporate communications director David Moran said.
Italian oil service provider Saipem, which has a contract at Moneefa, was told by Aramco last week not to take any more work as the project came under review.
Saipem is a Lamprell client, but there was no work on order for Moneefa, Moran said. - Reuters