Oil majors tightening their budgeting belts and pressure to lower costs could take its toll on a service company’s bottom line, according to Technip SA’s chief executive.
“There is greater uncertainty for all players,” Thierry Pilenko said on a conference call after his company reported dipped earnings.
He added: “Some of our customers are taking a much slower and more combative approach.”
The cost cutting trend has taken off after industry players including Total, Shell and Chevron all announced leaner spending strategies.
Pilenko, who heads Europe’s largest oilfield-services provider, said the about-face in spending power could make contracts fewer and harder to win as he discussed the firm’s second quarter results.
The recent onslaught of Russian sanctions have also affected the company’s financial outlook.
Due to uncertainty on how the strict sanctions will affect the Yamal LNG project in Arctic waters, Technip has raised its outlook for its subsea division while lowering the margins for its onshore-offshore business stream. It’s thought risks from “geopolitics including sanctions” could shave a percentage point from the stream’s final margin this year.
The revenue outlook for the subsea division’s year-long performance has been raised from EUR 4.6billion to EUR 4.9billion. The outlook margin for the onshore-offshore stream was lowered to a “base case” of between 5% to 6%, down one percentage point.
However, Pilenko added: “At this stage we continue to advance on Yamal LNG.”
The firm’s second quarter net income dipped to EUR 158million ($213million) down from last year’s EUR 162.4million.
Order intake for the quarter totalled up to EUR 7.1billion, contributing to a total contract backlog figure of EUR 19.9billion.
Recommended for you
