UAE-based rig builder Lamprell said it is nearing the final stages of a joint-venture agreement for a maritime complex in Saudi Arabia, even as it restructures the group to reduce cost in a challenging market and lowers revenue forecast for the year.
Lamprell signed the joint development agreement in 2016 for establishing a maritime yard, at Ras Al Khair in eastern Saudi Arabia with Saudi Aramco, the National Shipping Company of Saudi Arabia (Bahri) and Hyundai Heavy Industries.
The maritime complex will provide engineering, manufacturing and repair services for offshore rigs, commercial vessels and offshore service vessels. The JV negotiations for Maritime Complex in Saudi Arabia continued to progress since the signing… and is nearing final stages, Lamprell said in a statement.
“The board has worked hard to progress one of our key strategic priorities: the step-change opportunity offered by our potential participation in the Maritime Complex in the Kingdom of Saudi Arabia,” John Kennedy, Executive Chairman for Lamprell, said. “Lamprell’s board is focused on progressing the partnership negotiations on this impressive project.”
Tight cost control measures will be a high priority in 2017 for Lamprell as the group looks to maintain its lower cost base, the builder said. It cut administration staff by 20 per cent in 2016 and other overhead cuts are expected to result in savings of $23.4 million during 2017.
Lamprell, like its peers, has been cutting costs as oil explorers have slashed spending and cancelled contracts to counter a more-than-2-year rout in oil prices.
The rig builder’s 2016 revenue fell 19.1 percent to $705 million for the year ended Dec. 31. It said the revenues for the 2017 financial year are currently expected to be in the lower half of the $400-500 million range in the absence of large project deliveries in the second half of 2017.
Lamprell said it has two new major projects scheduled to ramp up in send quarter of 2017. Currently, it has 14 rigs stacked at its facilities on behalf of clients offering potential refurbishment works in the event of redeployment of the rigs.
Meanwhile, bid pipeline decreased to $2.5 billion at the end of Dec. 2016, compared to $5.4 billion from a year ago.
“Our short-term performance will be inevitably affected by the tough market environment, but we have implemented a set of effective measures to stand the Company in good stead to navigate the sector downturn,” said Christopher McDonald, Lamprell chief executive.
“Our targeted cost-cutting and recent restructuring have aligned Lamprell with immediate challenges in a fast-paced and highly competitive bidding environment.”
Lamprell raised the total impact of the settlement related to a delay in delivery of a jackup rig to Ensco to $42.6 million as cost estimate of additional services rose to $17.6 million from $10 million.
The company said in July that it had taken a $25 million exceptional charge to its 2016 revenue due the settlement.