Oil and gas pipeline group Wellstream delivered strong revenue and profit growth based on contract wins and increased capacity and production levels. The most significant of the contract wins is a four-year framework agreement with Brazilian oil giant Petrobras. This is worth more than £600m over four years and the Brazilian order book already exceeds £150m.
The overall group order book represents over 70 per cent of anticipated 2009 revenue, suggesting current-year revenue of around £470m, which would be significantly ahead of analysts' expectations. Year-end backlog (not-yet-recognised income from signed and likely contracts) was down just 1.3 per cent at £331m.
The Newcastle-upon-Tyne operation performed strongly, increasing capacity to 270 'normalised' (n) km (based on a standard eight-inch offshore pipe or four-inch onshore pipe). Capacity is expected to build up to 300'n' km by the end of the month. Throughput increased rapidly at the Niteroi plant in Brazil in its first full year of operation. The group remains on schedule to add 40 per cent to its production capacity in early 2009.
Looking ahead, chief executive Gordon Chapman sees indications that national and international oil companies are mostly maintaining their upstream (extraction) spending levels, with continuing emphasis on deep-water projects, although smaller operators are deferring or curtailing projects.
Broker Evolution Securities forecasts 2009 pre-tax profits of £86.4m and EPS of 58.3p, subject to revision following these results.
| WELLSTREAM (WSM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 394p | MARKET VALUE: | £392m | |
| TOUCH: | 393.5-394.25p | 12-MONTH HIGH: | 1,472p | LOW: 300p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 162p* | NET DEBT: | 41% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 147 | 25.4 | 34.6 | nil |
| 2007 | 267 | 41.7 | 31.8 | nil |
| 2008 | 370 | 77.5 | 52.9 | 10 |
| % change | +39 | +86 | +66 | - |
Ex-div: 20 May Payment: 12 Jun *Includes intangible assets of £39.1m, or 39p a share | ||||
