Oil services firm Subsea 7 stock set to soar as profits top estimates

The Oslo-listed oil services firm Subsea 7 reported forecast-beating core earnings on Thursday and announced plans to pay a special dividend, sending its shares surging to the highest level since 2013.

The maker of seabed equipment and pipes for oil and gas extraction has sharply cut staff numbers in recent years to contend with falling demand from energy firms following a plunge in oil prices of more than 50 per cent.

The company said its board would recommend a one-off dividend of 5 Norwegian kroner (Dh2) per share, equivalent to a total payout of about US$200 million, reflecting a strong operating performance and good liquidity.

The firm’s shares were up 10 per cent at 130 kroner at 08.42GMT, its highest level in three and a half years. The brokerage Pareto said strong project execution and the first dividend payment since 2013 helped to trigger the positive reaction. The brokers Carnegie said Subsea 7’s stock could hit 150 kroner near-term and as much as 200 kroner later this year.

Subsea 7 reported adjusted earning before interest, tax, depreciation and amortisation of $288m for the fourth quarter, 54 per cent ahead of the average forecast of $187m in a Reuters poll of analysts.

“This performance reflected successful implementation of our cost reduction measures, while maintaining high standards of execution and preserving the group’s expertise and capability,” said the Subsea 7 chief executive Jean Cahuzac said.

Since the start of 2014, the company’s workforce has been cut by over 40 per cent to some 8,000 by early 2017, while it has reduced its fleet by 12 vessels, including four mothballed vessels, to 33 vessels.

The company maintained its guidance for 2017 revenues to be in line with 2016 and for a drop in operating margins. It said there were prospects for an increase in subsea project awards within the next 12 months as oil prices have stabilised.

The brokerage Bernstein said that while the latest numbers were good, Subsea 7’s prospects were uncertain, and hence reiterated an “underperform” rating.

Siem Industries, the holding firm of the Subsea 7 chairman Kristian Siem and his family, is the company’s top shareholder with a stake of 21.3 per cent.

* Reuters

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