UAE-based and United Kingdom-listed Lamprell is delaying a number of projects and is expecting a 26 per cent decrease in revenue for the fiscal year 2009, a top official from the company said.
Chief Executive Officer Nigel McCue told Emirates Business that due to the malfunctioning debt market as well as slowdown in demand of newbuild jack-ups, the offshore player was now looking at $500 million (Dh1.83billion) to $550m revenue this year, compared to the $740m last year.
"On the jack-up refurbishment side, we are seeing the same number of rigs to the yards between 25 and 30 in a year but a reduction in the value of the work. I think rig contractors are not proceeding with discretionary spending. They are just going ahead with mandatory spending," he said.
On the newbuild arena, the company has not received any new orders this year although its order book remains strong at $410m thanks to the boom in the jack-up market in recent years.
"The newbuild market slowed down mainly because it is linked to commodity prices and the fact that quite a big number of newbuild jack-up rigs are going to come to the market," he said.
McCue said about 50 newbuilds would come to the market between 2009 and 2011, worldwide while day rates have fallen by a third due to a drop in utilisation rates.
Last year, he said the price of premium jack-ups was $125,000 to $150,000 down from $200,000.
"The combination of a reduction in utilisation and the arrival of these new builds slowed the market down. However, having said that, there is still an interest within the Middle Eastern region for new build jack-up," he added.
Some of the orders are also being delayed due to the financing squeeze. Its second jack-up project for Scorpion Offshore Limited, the Offshore Mischief planned to be launched later this year will now be delivered in April next year.
"That particular project got slowed because Scorpion had some financing difficulties, which they now have largely resolved. They slowed that project so we have a later delivery," he said.
The newbuild jack-up rig project with Riginvest GP for the construction and delivery of a LeTourneau designed, self-elevating mobile offshore drilling platform is also on hold. "We have halted the work on that because Riginvest is also looking at some financing opportunities," McCue said.
The company has slowed the expansion of its new Hamriyah facility. The $50m project, originally planned to be completed this year, will be finished next year. When completed the new facility will have a developed area of 250,000 square metres with a deepwater berthing quay wall 1,250m in length and 9m deep. This will enable Lamprell to work on up to 10 rigs and simultaneously construct up to three new build jack-ups.
"There are partly some delays to the basic civil works and we have also actually slowed it down because of parts of the business have slowed down as well," McCue said.
Despite the tough market condition, McCue's industry and company outlook remains positive. "Last year 2008 was our best year ever. This year will still be very good," he said.
"We will still be seeing double-digit net margins and we are still trading strongly. We are very mindful of our cost base so what we are actually doing is flexing our cost base to keep in line with our revenues.
"We are cutting operational cost and we are looking at savings across the board."
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