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Technip confident of staying in work despite oil price drop

PARIS – French oil industry services group Technip raised its dividend by 8 percent on Wednesday, saying it was confident it can ride out the dive in oil prices thanks to a record order book worth almost double last year’s revenue.

Capital spending cuts by the oil companies following the more than 50 percent drop in crude prices have made life harder for oil equipment and service suppliers worldwide. Major client Total unveiled further cuts last week.

But Technip said it can count on an order backlog worth 20.9 billion euros ($23.8 billion) at the end of 2014 to cushion the impact in the next few years.

“The oil price is certainly going to have some impact on new projects being delayed but we have in the bag 21 billion euros of projects, which gives us excellent visibility not only for 2015, but also for 2016 and beyond,” Chairman and Chief Executive Thierry Pilenko told reporters.

Technip said its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) rose by 20.6 percent to 319.2 million euros in the fourth quarter, giving an EBITDA margin of 11.3 percent, up from 10.7 percent a year ago.

Reported revenue rose 13.7 percent to 2.816 billion euros with the total for the year up 16 percent at 10.7 billion euros.

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Fourth-quarter net profit fell 40.4 percent to 80.1 million euros, hit by restructuring charges which include the closure of its UK offshore wind power business. Net profit for the year was down 22.5 percent at 436.6 million euros.

But shares in the group were up 2.1 percent at 58.99 euros by 1415 GMT, having hit an earlier high of 61.55 euros, the biggest increase among French blue chip stocks and outperforming a 0.7 percent rise in the Stoxx Europe 600 oil and gas industry sector index.

“We believe the market will be pleased by this set of results,” Societe Generale analysts said in a note.

“Technip has reacted very quickly to the new environment by reducing its workforce from 40,000 (Q2 2014) to 38,200 (Q4 2014),” they added.

Technip proposed raising its dividend to 2 euros per share, with the option of a scrip dividend with a 10 percent discount.

Analysts had on average expected a fourth-quarter net profit of 136.6 million euros, EBITDA of 279.3 million and revenue of 2.65 billion, according to Thomson Reuters I/B/E/S Estimates.

One of Technip’s major projects is the engineering, procurement and construction contract for the Yamal gas liquefaction project in Russia, owned by Russian gas producer Novatek, Total and China’s CNPC.

Pilenko said the project was now about 25 percent complete.

“We have received the cash from the client on time,” he said. “This project is not affected by the sanctions.”

ACQUISITIONS

With turmoil in the sector stoking speculation of mergers, Pilenko also dismissed a suggestion on Wednesday that Technip might want to take another look at French seismic firm CGG , which rejected its advances last year.

“I think on that subject we turned the page. We will focus on our projects,” he said.

However, the group was still looking at ways to master the know-how in the reservoir mapping and seismic activities which it had hoped to acquire with CGG, he said, possibly via smaller acquisitions or alliances.

“We have largely enough (cash) to make several small acquisitions in the 10s of million euros. What’s important is the right target,” he said.

 

($1 = 0.8770 euros)

(Editing by Greg Mahlich)

This article was from Reuters and was legally licensed through the NewsCred publisher network.

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