13 Nov 2014 07:00
13 November 2014
LAMPRELL PLC("Lamprell" and with its subsidiaries the "Group")
TRADING UPDATE
Lamprell (ticker: LAM), a leading provider of diversified engineering and contracting services to the onshore and offshore oil & gas and renewable energy industries, today publishes a trading update for the period from 1 July to 12 November 2014.
Summary
· The Group continues to make good progress building on the strong performance in H1 2014
· Four major projects to be delivered in the coming months; currently all on schedule
· Productivity improvements and cost efficiency initiatives on track
· New contract award for two jackup rigs from National Drilling Company
· Performance for 2014 expected to be in line with our expectations, as disclosed following the timely delivery of the second Caspian Sea rig
· Previous guidance for 2015 reiterated in light of recent contract win
Operational update
The strong operational and financial performance that we delivered in H1 2014 has continued into the second half of the year in relation to the ongoing projects. Our portfolio of projects is progressing well and we are scheduled to deliver four major projects between November 2014 and March 2015, all of which are currently on schedule. The productivity improvements and cost efficiency initiatives being implemented across the Group are on track, which is contributing to our strong financial performance this year.
Since 1 July, Lamprell has successfully completed several key projects, notably the second Caspian Sea jackup rig, the "Mercury", earlier in October. Successful completion of that project was important to the Group and the Board is pleased that the Group was able to implement the lessons learned from the first Caspian Sea jackup rig effectively on the second project.
We also converted the jackup drilling rig, "MOS Frontier", into an accommodation support vessel and delivered the rig to the client in July. This was the largest rig conversion and refurbishment project in Lamprell's history and we have seen significant operational achievements on this project including excellent safety and quality. We are now seeing similar accomplishments consistently across the Group's various business units.
Financial performance
In August, the Group successfully completed a major debt refinancing and, in conjunction with the rights issue completed during the course of June, this provides a strong financial platform to enable delivery of the Group's growth strategy.
Our net cash position at 30 June 2014 was US$ 280 million. The net cash position is expected to trend broadly downwards towards the year-end in line with normal project cycles and in light of expected expenditure arising from our capital investment programme to support our strategy.
Board
On 17 October Joanne Curin stood down from the Board of Lamprell plc and from her role as Chief Financial Officer. A search to find a successor is under way and an announcement will be made in due course. In the meantime, Tony Wright has been appointed to the role of Deputy Chief Financial Officer.
Outlook
As announced on 21 October 2014, the timely delivery of the "Mercury" rig will have a material positive impact on the Group's performance for the year and this guidance remains unchanged.
As at 30 June 2014, the Group's order book was valued at US$ 1.2 billion. A substantial proportion relates to the construction of the four new build jackup drilling rigs for Ensco and Shelf Drilling. We continue to see high demand for all of our core services with a strong pipeline of opportunities reflecting a broad range of outstanding bids (approximately US$ 4.9 billion at the end of H1 2014). The timing of contract awards and phasing of construction cycles is critical to the Company's performance and financial outlook. We are in active dialogue with a number of prospective clients for new orders and conversion of our bid pipeline into further contract wins remains the highest priority for the Group.
As announced on 12 November 2014, the Company has secured a new major contract award for the construction of two new jackup rigs for its long-standing client, National Drilling Company. The Board maintains its view that revenue for 2015 is expected to be broadly flat on 2014 but notes that the favourable phasing in the construction cycle experienced in 2014 will not be replicated in 2015 as most projects will be in their early stages of construction.
Jim Moffat, Chief Executive of Lamprell, commented:
"We have entered a second busy period for major deliveries this year and our project execution remains of a consistently very high standard. We are committed to making timely and safe deliveries of these projects to our clients in support of their business needs and I am pleased to see that all the projects are expected to be delivered as planned to the Lamprell high level of quality. Our initiatives to improve business efficiencies and reduce overheads are both tracking well.
Looking ahead, we recognise the ongoing significance of winning major new orders in our key markets, which are required in order to deliver on the Group's projected outlook and on its longer-term growth strategy. While some of our core markets have softened in recent months, we remain confident of our ability to win our share of new orders as proven by the announcement yesterday of the major NDC contract win."
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