When a significantly-sized company like Wellstream reports its results, it usually gives a geographical breakdown of at least its sales. Wellstream has not done so - neither in its latest trading statement nor in its presentation. This lack of information is a problem for investors because it's well known that Brazil and its state oil company, Petrobras, is its number one customer at the moment.
Wellstream started manufacturing flexible pipelines in Rio state in 2007. It then completed an expansion programme earlier this year and has plans for further expansion there when more land becomes available in 2010. The link with Petrobras is clearly close, as earlier this year it completed a contract to supply Petrobras's TUPI extended well test with flowlines down to a depth of over 2,100 metres; TUPI could contain between 5m and 8m barrels of recoverable oil. But by not publishing geographic sales data, there are fears that not only does Brazil dominate, but that the news elsewhere is particularly poor. Fortunately, Wellstream has completed its major capital spending programme (in the latest half year, capex almost halved to £13.8m) and last month refinanced with a £150m debt facility.
The price of Wellstream's shares fell sharply on news of the latest results and the warning of "challenging" conditions in the current six months. Broker Bank of America has cut earnings expectations by another 18 per cent, so 2009's diluted figure may fall from 52.3p to 35.9p. The broker also makes the point that Wellstream's contracts are largely secured on a fixed price basis: not good news on significant cost overruns or project delays.
WELLSTREAM (WSM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 486p | MARKET VALUE: | £484.7m | |
| TOUCH: | 482.75-489.125p | 12-MONTH HIGH: | 1,288p | LOW: 259p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 175p | NET DEBT: | 42% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 181 | 40.8 | 28.1 | 4.00 |
| 2009 | 203 | 24.5 | 16.9 | 4.00 |
| % change | +12 | -40 | -40 | – |
Ex-div: 9 Sep Payment: 13 Oct Sector: Oil & gas equipment and services | ||||
