Profit growth of 85% in pipeline at Wellstream
May 20 2008 by Graeme King, The Journal
OIL and gas pipeline company Wellstream is on target to deliver profit growth of 85% this year after recording a strong first-quarter performance.
The Newcastle company, which is investing heavily to increase capacity both at home in the North East and at its new factory in Brazil, is forecast to deliver pre-tax profits of around £77m this year, up from £41.7m last year.
And sales are expected to soar too – up 38% to around £370m from £266.8m last time. Wellstream has benefited from the unprecedented boom in the offshore oil and gas market over the last two years, which has seen the price of fuel rocket – and made it economic for oil companies to reach reserves under the world’s oceans.
That has stoked demand for the high strength pipelines manufactured by Wellstream at its headquarters on Wimcomblee Road in Walker, and at its plant in Niteroi, Brazil.
Yesterday, the company held its annual general meeting in London, to report on its progress to investors and key figures in the City.
John Kennedy, chairman of Wellstream, said: “Following the delivery of record results in 2007, Wellstream’s performance over the year to date has been encouraging and our results and financial position are in line with the board’s expectations. We continue to see strong market fundamentals overall, while on a more immediate micro basis, we see the subsea and floating production segments continuing to expand.”
Wellstream said production at its Niteroi and Newcastle facilities was ‘robust’ and it hopes to maintain the high production levels seen in 2007.
Construction work to expand the plants is currently ongoing and chief executive Gordon Chapman and his team hope to have 40% more capacity available to them by the end of March next year.
Wellstream already employs 570 staff in Walker, and expects to take that figure up to 620 when its expanded factory is complete. When the Walker company reported its full-year results for 2007 last month, its share price fell 8% despite the announcement of a 64% leap in pre-tax profits, with analysts saying there had been disappointment that the business was not expecting future performance to be at quite the stellar levels it had been achieving.
But Wellstream has still been a phenomenal success since floating on the stock market at this time last year. The company’s share price has soared from 600p to 1404p when the markets closed yesterday, though that did include a 4.62% drop during the day.
The company has won work from such global names as Petrobras, BHP Billiton, Devon Energy and Anadarko, adding up to an order backlog worth some £335.9m.
