Oil rig refurbishment and construction outfit Lamprell (LAM) slumps 8.4% to 92.75p as it says 2017 revenue will be at the lower end of the guided range of $400m to $500m.
For 2016 revenue of around $700m is expected, down from 2015’s $871.1m and below consensus forecasts for around $750m.
LAGGING RECOVERY
The update from the company is a reminder that oil services companies typically experience a lag from a recovery in industry sentiment and oil prices and this brighter outlook being reflected in terms of orders and contract awards.
Lamprell’s executive chairman John Kennedy puts it pretty well: ‘The board recognises and welcomes recent change in oil & gas market sentiment and the likelihood of stronger product pricing in 2017, especially as the year elapses.
‘However, we also recognise that all our customer 2017 capital budgets are already established and in place, and that there is little expansive flexibility in the associated expenditures.’
SHARE PRICE STRENGTH
The FTSE 350 Oil Equipment Services & Distribution sector is up nearly a quarter in the last 12 months as oil prices recovered from early 2016 when they hit multi-decade lows.
In a newly published piece of research on the space, Investec analyst Thomas Rands comments: ‘For an industry that has been operating largely in survival mode given the contraction in spending and pressure on costs in recent years, the production cut announcements by both OPEC and non-OPEC members are a definite positive and herald a more disciplined market.
‘However, we do not expect it to significantly reduce pricing pressure in the medium-term or improve the near-term capex outlook.’
Rands reckons Petrofac (PFC), Lamprell and Enteq Upstream (NTQ:AIM) are all ‘buys’, has ‘hold’ recommendations on Amec Foster Wheeler (AMFW) and Wood Group (WG.) and rates Hunting (HTG) and Weir (WEIR) as ‘sells’.
