Wellstream reports record revenue but profits plunge
Mar 16 2010 By Karen Dent, The Journal
TYNESIDE oil and gas pipeline company Wellstream reported record revenues today but its profits plunged by almost 45% as the industry was hit by the global recession.
The Walker-based firm said profits fell from £77.5m in 2008 to £42.8m in the 12 months to the end of December last year but its income jumped by more than 8% to £400.7m.
Wellstream, which said in January it was looking to axe 200 jobs in Newcastle because of project delays and a shrinking order book, said the stage was set for a recovery in the offshore industry.
However, apart from its major market in Brazil, the company was hit by the worldwide financial crisis and the falling price of oil.
Chairman John Kennedy said: “The rapid fall in oil prices at the end of 2008, and the on-going financial crisis in the first half of 2009, significantly interrupted the investment phase and pace of offshore developments outside Brazil.
“However, a recovery during the second half of 2009 has left current oil prices substantially above the level required to ensure offshore developments are economic.
“This and returning customer confidence as the global economy recovers, leaves the board more optimistic regarding the outlook for the business.”
Wellstream said it is in a strong position to benefit from the economic recovery after expanding its production capacity and improving efficiency across the group, which operates in the US and Australia as well as the UK and Brazil.
Acting chief executive, Alasdair MacDonald, said: “The repercussions of the financial crisis and the dramatic fall in oil prices at the end of 2008 were felt throughout the oil and gas industry during 2009.
“These two factors combined to cause delays in project awards throughout the year. However, a recovery in the second half of 2009 has seen oil prices stabilise.
“Long term, the fundamentals of the sector in which Wellstream operates remain very positive, and current oil prices are substantially above the level required to ensure floating production projects are economic and this should set the stage for a recovery.”
Almost 60% - or 36 projects ranging in value from £0.3m to £55m - of the company’s business was secured from Brazilian energy giant Petrobras.
Mr MacDonald said most of the company’s work is with a “relatively small number” of high value customers but Wellstream is aiming to diversify and broaden its client base.
