Friday, November 24, 2017

Aker Solutions' Shares Surge, Recovery in Sight

Posted by October 20, 2017

Shares of Norwegian oil services company Aker Solutions (AKSO.OL) surged on Friday on higher than expected quarterly earnings, a better outlook and a new contract, signalling the end of a three-year downturn in its markets.
 
The company, controlled by Norwegian billionaire investor Kjell Inge Roekke, said it saw signs of recovery, particularly offshore Norway and in so-called brownfield project portfolios, which aim to improve output from existing fields.
 
"Clients are looking into their assets and projects to see that they can lower the break-even costs," Aker Solutions Chief Executive Luis Araujo told Reuters.
 
The shares jumped 10 percent in early trade and were up by around 7 percent at 1045 GMT, outperforming a 0.3 percent increase in the European oil and gas index.
 
While the company's new orders and its backlog in the third-quarter fell to the lowest levels since 2014, it announced on Friday a 1.6 billion Norwegian crown ($200 million) contract.
 
"We have seen more final investment decisions (by oil firms) this year than last year, and far more than in 2015 which was the lowest in history with only five projects being sanctioned by oil companies," Araujo said.
 
So far in 2017, oil companies have approved 18 projects globally, and more are expected to come during the next two months, up from 12 projects in the full 2016, he added.
 
Aker Solutions' earnings before interest, tax, depreciation and amortisation (EBITDA) in the third quarter fell to 401 million crowns from 477 million crowns in the same period last year, but beat the 361 million crowns expected by analysts.
 
Despite somewhat weaker-than-expected third-quarter order intake, the earnings and outlook should lead analysts to raise their earnings forecasts, said brokerage Danske Bank, which had a "hold" recommendation on Aker Solutions shares.
 
The company kept its outlook for overall revenue to be down by 10-15 percent in 2017 from 2016, but said it expected revenues to be "somewhat" up in 2018, pending the successful outcome of some ongoing tenders.
 
It also said it expected EBITDA margins for the full 2017 to be better than previously expected.
 

Araujo also said the company was looking for "opportunistic" acquisitions as the industry continues to consolidate. 

 

By Henrik Stolen and Nerijus Adomaitis

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