Subsea Reinforces Aker Solutions Strong Market Position

Aker Solutions’ revenue rose to NOK 11.2 billion in the first quarter of 2014 from NOK 10.3 billion a year earlier, driven by sales of subsea products and services, single drilling equipment and umbilical systems in the U.S. and Norway.

Revenue also increased in the process systems unit, bolstered by strong demand in Norway, the Americas and the Asia Pacific, and in OMA, which had three vessels on charter in the quarter.

EBITDA rose to NOK 1.05 billion in the quarter, helped by stronger project execution, particularly in the subsea and umbilicals areas, as well as increased capacity utilization for the engineering division in London and the U.S. umbilicals plant.

The EBITDA was NOK 767 million in the same quarter of last year, when earnings were affected by costs at the Ekofisk Zulu project and losses in the umbilicals and oilfield services and marine assets (OMA) businesses.

The EBITDA margin increased to 9.3 percent in the quarter from 7.4 percent a year earlier.

“Demand for our subsea products and services remained strong and our engineering unit boosted its activity as employees were mobilized in London and Oslo to start work on the Johan Sverdrup contract awarded by Statoil in December,” said Øyvind Eriksen, executive chairman of Aker Solutions. “In contrast, the offshore maintenance and modification market slowed down in Norway and an oversupply of drilling rigs curbed new-building activity globally.”

Subsea, the biggest business area, had a record-high EBITDA margin of 11.5 percent in the quarter, up from 10.6 percent a year earlier. The engineering unit’s margin was 8.7 percent, compared with 7.2 percent a year earlier. The maintenance, modifications and operations (MMO) unit’s margin narrowed to 6.2 percent from 6.6 percent, and the drilling technologies margin weakened to 9.1 percent from 10 percent. Oil companies scaled back spending on maintenance and drilling activities amid concern over rising costs and stagnant oil prices.

Aker Solutions secured new orders worth NOK 8.7 billion in the quarter, bringing the backlog to NOK 55.6 billion. Subsea had the strongest intake at NOK 3.9 billion, followed by drilling technologies, which won NOK 1.9 billion in contracts.

“Subsea also secured two major contracts with key customers after the quarter’s end, reinforcing our strong position in this fast-growing market,” Eriksen said.

Aker Solutions in April won a contract worth NOK 14 billion from Total to provide a subsea production system for the Kaombo development offshore Angola and a more than USD 300 million order from Petrobras to supply subsea manifolds for Brazil’s pre-salt fields.

The company in the first quarter booked a gain of NOK 2.8 billion from the sale of two business areas – well-intervention services and mooring and loading systems.

Outlook

Aker Solutions is well positioned in the global energy industry’s key growth markets, subsea and deepwater. The company expects strong growth in subsea spending as it continues to develop unique subsea factory solutions.

This will also create opportunities for the umbilicals and process systems areas. Aker Solutions is tendering for subsea contracts and umbilicals in key markets, including the North Sea, Brazil, Africa, the U.S. and the Asia Pacific region.

Demand has been healthy for most of the products and services, including conceptual and front-end engineering and design studies for offshore field developments. The high order backlog gives the confidence in a robust medium-term outlook. Key wins in Brazil, Angola and Norway, including the contract for Johan Sverdrup, also bolster the longer term outlook for the company.

The company sees opportunities for the MMO business from aging facilities in the North Sea and other markets, even as more restrained capital spending from exploration and production companies is expected to weigh on revenue this year and next.

A high number of available drilling rigs is curtailing building of new rigs. At the same time there is healthy tendering activity for rigs to be delivered in the next two to three years, particularly in the jack-up market, which creates opportunities for the drilling technologies business. Aker Solutions also expects good demand for the drilling services this year.

Global offshore spending on exploration and production is seen leveling off at record levels in the short term.

Aker Solutions will continue its focus on boosting the return on capital employed and improving the quality, predictability and efficiency of operations.

Press Release, April 30, 2014; Image: Aker Solutions