Production up 25% at oil pipeline firm
Jan 9 2009 by Graeme King, The Journal
OIL and gas pipeline business Wellstream has set out a positive outlook for the year after a challenging close to 2008 when falling oil prices spooked some nervous investors.
The Newcastle company, which has 600 staff on Tyneside and more than 400 in Brazil, said yesterday it would deliver revenue growth for 2008 some 35% ahead of 2007’s figures, and overall results would be in line with expectations.
Its strong performance will boost the North East’s large offshore oil and gas sector, where bullish confidence over recent years has been dented by the price of oil plunging from record highs last year and raising fears of a long slowdown in growth.
Yesterday, the pre-close statement from Wellstream attempted to reassure nervous investors and the stock finished the day’s trading up just under 4% at 459.75p
The statement said: “The group has seen strong revenue and earnings growth during 2008, has a robust balance sheet and order book, and a high quality customer base. The fundamentals of the sector continue to be attractive and our outlook for 2009 remains one of continued growth.”
Wellstream was also able to report a 25% increase in production at its sites in Walker, Newcastle and Niteroi, Brazil after substantial investment to keep up with demand. Its order book increased from £295m in June last year to around £330m on December 31, compared with £336m a year earlier.
Keith Morris, oil and gas industry analyst at Evolution Securities in London, said: “When the oil price was falling very rapidly, people were nervous about how things could go.
“There has been lots of nervousness about the slowdown in Brazil, and lower oil prices, but most people are now reassured. After concern in October and November, things are now getting back to normal.
“Wellstream are obviously in close contact with their major customers on a very regular basis, so we are prepared to listen to what they have got to say.”
George Rafferty, chief executive of sector body NOF Energy, said: “These trading figures highlight the real possibility that, despite the current general economic difficulties, businesses involved in the oil and gas and energy sector might be cushioned from the worst effects of the downturn – that’s certainly the message we are getting from our members.”
One small disappointment for Wellstream in recent months has been its decision not to go ahead with a planned new research and development centre in Newcastle.
The company is understood to have investigated building the centre within the bounds of its Walker headquarters, and enquired about obtaining grant funding for the project. However the executive team postponed the scheme until the economy lifts.
