By TARA PATEL
oilfield-services provider by market value, warned that
energy companies are putting pressure on
suppliers to lower costs and said profit margins may be
trimmed by Russian sanctions.
There is greater uncertainty for all players, CEO
Thierry Pilenko said on a conference call after the
Paris-based company reported a decline in second-quarter
earnings. Some of our customers are taking a much
slower and more combative approach.
Technip, which supplies equipment and builds installations
for oil and natural-gas producers, had until now maintained
orders were strong even as some companies reduced investment
and pledged to lower costs.
With Total, Royal Dutch Shell and Chevron among
Technips clients that plan to rein in spending, Pilenko
acknowledged contracts could be fewer and harder to win.
Technip changed financial targets for this year, raising the
outlook for margins in the subsea division and lowering it
for the onshore-offshore section, in part due to uncertainty
about how sanctions on Russian companies could affect the
Yamal LNG project
in Arctic waters.
Second-quarter net income declined to 158 million euros ($213
million) from 162.4 million euros a year earlier, the company
said in an earnings statement. That beat the 154.1
million-euro average of 15 analyst estimates compiled by
Order intake was 7.1 billion euros, bringing the contract
backlog to a record 19.9 billion euros. Technip won contracts
in recent months for project
s in Angola, China, Russia
and the UK.
The pace of new orders will slow over the next
year and the backlog may have reached a peak end-June,
Bertrand Hodee, an analyst at Raymond James in Paris who has
an underperform rating on the shares, wrote in a
note. Technip could see limited growth beyond
Technip reported operating margins in the subsea division
narrowed to 15.3% in the quarter from 15.8% a year earlier
and 5.5% in the first quarter. The margin for
onshore-offshore operations was 5.3%, compared with 6.7%
The oil-services provider raised some targets for this year
and lowered others. The company retained a goal for the
subsea margin to be at least 12% in 2014 and raised the
revenue outlook for that division to 4.6 billion euros to 4.9
billion euros, compared with the previous 4.35 billion euros
to 4.75 billion euros.
Next year revenue is expected to be well above 5
billion euros with an operating margin of 15% to 17%.
The onshore-offshore revenue is expected to be 5.55 billion
euros to 5.80 billion euros, compared with 5.4 billion euros
to 5.7 billion euros. The outlook for margins within that
division was lowered to a base case of 5% to 6%,
compared with a previous 6% to 7%. Next year, revenue is
expected to be around 6 billion euros with a
stable operating margin.
Risks from geopolitics including sanctions on the
Yamal LNG project in the Russian Arctic could shave a
percentage point from the onshore/offshore margin this year,
At this stage we continue to advance on Yamal
LNG, CEO Pilenko said on a conference call. He declined
to speculate on how any further trade restrictions could
affect the project