With no signs of a let-up in the austerity measures implemented by oil and gas companies, Singapore-based offshore oilfield service company Pacific Radiance’s earnings over the next two years are likely to be lower than previously anticipated.
UOB Kay Hian Securities said in a report issued on 8 May that it has cut its 2015-17 profit forecast for Pacific Radiance by 33%, 25%, and 19%.
The stockbroking firm now estimates Pacific Radiance to earn USD40.2 million in 2015, USD57.75 million in 2016, and USD63.18 million in 2017, compared with its previous forecast of USD60 million, USD77 million, and USD78 million. The last forecast was issued on 27 February after Pacific Radiance posted a fourth-quarter 2014 profit of USD6.2 million, which was 63% lower year on year.
UOB Kay Hian analysts Nancy Wei and Foo Zhiwei said, “An austerity drive now permeates the entire industry – oil companies, service providers, and shipyards. Oil companies are shifting from new oilfield capital expenditure to existing production [in particular shallow-water] operating expenditure.”
Instead of spending on new oilfields, oil companies are focusing on maintaining or raising their oil production from existing fields.
UOB Kay Hian’s survey of shipbrokers pointed to a 5-20% fall in vessel daily rates, depending on vessel types, with the platform supply vessels in the worst situation.
New contracts for diving support vessels were stalled even though these vessels are usually employed for the inspection, repair, and maintenance of pipelines, which is in the production phase of the oilfield lifecycle.
The stock prices of offshore oilfield service companies have plunged in tandem with the oil shock, and have been slow to recover despite Brent crude prices stabilising at around USD69/barrel.
Consensus expects oil prices to rebound by 2016-17. Bloomberg’s consensus median projections for Brent oil price are USD69/barrel in fourth-quarter 2015, USD75/barrel in 2016, and USD79.80/barrel in 2017.