Wednesday 28 September 2016

Middle East rig builder Lamprell has said that it plans to further cut its costs in a bid to shore up finances as it faces up to an increasingly tough business climate. It follows a move to reduce workforce numbers earlier this year, which reduced costs by an estimated US$5 million.

Last week, however, the company announced in its half-yearly update that it plans to trim costs again amid forecasts that annual revenues are likely to fall below market projections.

Lamprell has been hit hard by operators and contractors delaying or cancelling their projects in the face of lower oil prices, which has had a knock-on effect on rigdemand. Its performance has also been impacted by a delay in the delivery of the Ensco 140 rig, which resulted in heavy penalties. As part of this, Lamprell is seeking to recover these costs and claim damages from one of its own suppliers, Cameron.

Based in the UAE, the company builds shallow-water jack-ups, life boats, land rigs, process modules and fixed platforms from its yards in Hamriyah, Sharjah and Jebel Ali. It also has a joint manufacturing base in Saudi Arabia.

CEO James Moffat insisted Lamprell remains in a “strong position” and that it would “ride out the storm” despite the challenging market conditions. Moffat will be replaced in his role by Christopher McDonald, who takes charge on October 1.

Lamprell found some respite with revenues up toUS$451 million for the first half of 2016, up from US$351 million in the same period last year.

As of June 30, its order backlog stood at US$297 million, with a bid pipeline totalling US$3.9 billion.

Among the highlights for the period was the signing of a Joint Development Agreement (JDA) with Saudi Aramco, Bahri and Hyundai Heavy Industries for the construction of a new major maritime yard in Saudi Arabia. It follows a memorandum of understanding (MoU) announced in January 2016.

Lamprell chairman John Kennedy called the deal “a major project” with the potential to have a “transformational impact” on the firm’s future.