Fugro Expectations Stable for 2010
The year 2010 showed the characteristics of a transition year for Fugro (Netherlands). Final 2010 figures are not available yet, but Fugro expects a profit of over EUR260 million which is at about the same level as in 2009. Revenues are expected to exceed EUR2.2 billion. This means a revenue increase of about 8% over the previous year. This was reported by Mr. Wester in his New Year's speech to the Fugro employees. For 2011, growth is expected.
On the one hand, there is the obvious aftermath of a global economic slowdown which started late in 2008 with the financial crisis, and on the other hand, there are signs of economic recovery, particularly in the Far East. This is also reflected in the results. The growth in revenues primarily occurred in the second half of last year. In particular the Survey and Geoscience divisions, which experienced a slight decline in their revenue in the first half year, picked up growth again in the second half. However, price pressure that started in some market segments in the course of 2009, continued in the past year. This particularly affected marine seismic surveys, partly due to newly built vessels starting to operate in a stagnant market.
In some regions the marine construction and installation related services faced lower capacity utilisation due to delays in starting up new projects after the collapse of the oil price at the end of 2008.
As for the oil and gas market, attention was focused on the problems and subsequent impact caused by the Macondo oil spill in the Gulf of Mexico. Approximately 6% of Fugro's revenue is generated in this region. However, problems related to the oil spill have had no adverse effect on the 2010 performance, because stagnation in new field development was offset by additional work related to resolving the spill. Meanwhile, the drilling moratorium has been removed, but granting of new drilling permits is still slow, so it is unclear when work will resume at a normal pace.
At the end of the year Fugro saw a revival in sales of multi-client seismic data in the Gulf of Mexico. During 2010, the company extended its multi-client 3D library, including offshore Australia. This was supported by a substantial increase in sales of such data worldwide.
The extension of the seismic fleet was completed in the third quarter with the Geo Coral becoming operational, which means that the goal to build one of the most modern 3D fleets in the seismic industry has been accomplished.
In the first half of 2011, two newly-built vessels will be added to the fleet, one survey vessel (Fugro Galaxy) and one ROV-support vessel (Fugro Symphony). Where necessary, fleet capacity will be adapted to market demand by adding / terminating short term charters.
In recent months backlog has reached a higher level than one year ago and it is expected that revenues will increase in 2011. However, in some market segments contracts are being awarded with a very short lead time, or are postponed at the very last moment, which makes efficient planning of available capacity difficult.
Looking ahead, one can say that the outlook for the oil and gas industry is positive. The oil price is around USD90 per barrel and external reports for 2011 again indicate continued growth in investment in the oil and gas sector of over 10%. The larger international oil and gas companies, especially, have plans to increase their investments. The search for new production fields will continue, including in new areas such as offshore Africa. Further recovery in the market for exploration activities (marine seismic surveys) may also create room for price recovery in this segment in the course of the year.
The market for marine construction and installation related services is expected to pick up after the winter season as the number of projects entering the construction phase is expected to increase during the year.
In other sectors in which Fugro operates, such as mining and large infrastructure projects, a further gradual recovery is expected in the regions where we operate, except in Europe. In the United States, the opportunities also depend on how the reduction of stimulus programmes will be offset by the economic recovery. As for offshore wind farms, some stabilisation in the Northwest European market is expected, while the interest in such projects elsewhere in the world increases, according to Mr. Wester.
