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WRAPUP 1-Oil services' firms surge on brighter outlook

Published 07/23/2009, 09:41 AM
Updated 07/23/2009, 09:48 AM
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* Norway's PGS posts bigger-than-expected drop in Q2 EBIT

* French Technip posts surprise rise in Q2 profits

* Both groups improved 2009 outlook

* Technip, PGS shares up as much as 10 percent

(Wraps stories, adds analyst, updates share prices)

By Aasa Christine Stoltz and Sophie Taylor

OSLO/PARIS, July 23 (Reuters) - French engineering group Technip and Norway's seismic surveyor Petroleum Geo-Services (PGS) improved their outlooks for 2009 on Thursday, boosting sentiment for the oilfield services sector and their stocks.

Technip posted a surprise rise in second-quarter profits, bucking a trend of weak demand in the oil services sector, while PGS posted a bigger-than-expected drop in the quarter, weighed by non-recurring items.

The sharp fall in oil prices from a record $147 per barrel a year ago forced exploration and production companies to slash spending. Fewer rigs and new production facilities were ordered and companies have been pressing oil services groups to offer discounts, pushing earnings and margins down.

While Technip has been less hit than many rivals because it is involved in large engineering projects which cannot be quickly cancelled, PGS's seismic scans appear in early stages of exploration projects, making it more susceptible to downturns.

PGS, which helps oil companies to find oil and gas reserves by scanning the seabed, maintained its main guidance for 2009 and said the third quarter would be the strongest of the year.

"I am more optimistic this time than I was a quarter ago," PGS Chief Executive Jon Erik Reinhardsen told Reuters.

"I think that the fourth quarter might be better than some of you expect, and the third quarter is expected to be the strongest quarter of the year," Reinhardsen told a presentation.

RECOVERING OIL PRICE

Technip said second-quarter net income rose 13 percent to 116.2 million euros ($164.9 million), helped by fatter profit margins. A Reuters poll of five analysts gave an average forecast of 88 million euros.

Analysts had expected attempts by oil groups to cut costs in response to lower oil prices to eat into Technip's margins.

Technip said a recovery in oil prices and lower costs for some equipment and services was encouraging oil companies to open their wallets again and move ahead on projects.

Operating profit for PGS fell to $34 million in the period after a $144 million profit a year earlier, below the average forecast of $55 million. Non-recurring items of a $48.2 million loss from a vessel sale was included.

Both Technip and PGS shares jumped as much as 10 percent, with Technip still up 8.17 percent at 41.16 euros and PGS up 8.02 percent at 39.85 crowns, respectively. The DJ Stoxx European oil and gas sector index rose 0.22 percent at 1232 GMT.

The results lifted shares in other Norwegian oil services groups such as Subsea 7 (by 4.6 percent), Sevan Marine (3.5 percent) and Aker Solutions (2.9 percent).

But the upbeat views come after big profit falls at rivals such as Norway's Acergy and U.S. firms Halliburton and Weatherford International..

PGS maintained guidance for 2009, including an EBITDA between $700-$800 million. It cut its capital expenditure forecast to $300-$350 million from $350 three months ago.

Danske Bank analyst Henrik Eriksen said the seismic industry as a whole was not out of the rough waters just yet. "There is too much capacity... and prices are still under pressure," Eriksen said, adding that he expected further capacity cuts.

He noted that PGS said that oil groups' budgets will rise if oil prices remains between $60-70.

Technip's high-growth and high-margin subsea engineering division, which supplies underwater pipelines and construction vessels, is performing better than analysts expected and margins for the year are now predicted to be at the top end of its earlier disclosed range of 16-18 percent.

Technip saw 2009 revenues near 6.4 billion euros, against an earlier indication of 6.1 to 6.4 billion euros. "Analysts are going to have to significantly upgrade their earnings forecasts for this year and next on the back of this," one dealer said.

PGS said June was the first month in three consecutive quarters to see an improved order book and that it had seen "some strength in July as well". ($1=6.302 Norwegian crowns) (Additional reporting by Tom Bergin in London and Joachim Dagenborg in Oslo; Editing by Mike Nesbit)

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