Aker Solutions, a Norway-based oilfield services provider, has reported a net loss for the fourth quarter of 2015, and it has decided not to pay dividend for 2015.
The loss was NOK 250 million, compared to a net profit of NOK 359 million a year ago. Converted to US dollars 4Q net loss was $29 million, while 4Q 2014 profit was $41.9 million.
Revenue fell to NOK 7.9 billion in the fourth quarter of 2015 from NOK 9.2 billion a year earlier amid a market slowdown, particularly in the North Sea.
During the quarter, the company booked NOK 373 million in restructuring and capacity reduction costs, mainly due to cuts in the Norwegian MMO unit and global subsea business.
It also had impairment charges of NOK 123 million on technology and property that impacted depreciation and amortization. The company took a provision of NOK 114 million for onerous leases on vacant office space in Norway, UK and Asia.
Order intake in the fourth quarter rose to NOK 6.4 billion from NOK 6.2 billion a year earlier.
‘Prudent’ divident cut
On the dividend note, The board of directors proposes that no dividend payment be made for 2015.
“While Aker Solutions had a solid financial position at the end of 2015, the board deems it prudent to exercise caution amid uncertainty about the outlook for the oil and gas industry. The company maintains its policy of paying a dividend of between 30 and 50 percent of net profit over time,” the company said.
Going forward, Aker Solutions sees the market outlook as challenging as the steep and sustained decline in oil prices curtails oil companies’ capital investments.
Project postponements are increasingly seen across the industry and the commercial environment is tough with increasing pressure on prices. At the same time, Aker says, there are signs that cost-cutting efforts across the industry are starting to have an effect as project break-even costs are coming down. This may enable some major projects to be sanctioned in the next 12-18 months, the company added.
Looking outside Norway
Expect for the North Sea Johan Sverdrup project, offshore activity in Norway is expected to remain subdued over the next year.
Due to this fact, Aker Solutions says its greatest growth potential is outside of Norway, where the company has been expanding in recent years. This is also reflected in the company’s tendering activity, which remains steady and currently totals about NOK 50 billion, the company added.
Worth noting, regarding the company’s prediction that the Norwegian market will be sluggish, during the fourth quarter Aker Solutions did not manage to obtain a new main supplier contract to provide maintenance and modifications services to Statoil in Norway.
An existing agreement for these services expires in the summer and, Aker says, the absence of a new contract has serious implications for Aker Solutions’ MMO business in Norway. The company anticipates overcapacity in the workforce and lower work volumes representing about NOK 500-600 million in revenue in 2016 when the agreement ends.