FUGRO: Lack of activity in Gulf of Mexico putting pressure on margins

AMSTERDAM (Dow Jones)–Dutch oil and gas-services provider Fugro NV (FUR.AE) Friday warned that current economic uncertainty is causing delays in the awarding of projects, while margins are under pressure from difficulties in utilizing its vessels.

Economic uncertainties, the euro-zone debt crisis and political unrest in North Africa and the Middle East “led to deferral of projects and a tendency by clients to award projects at the last minute,” Fugro said. As a result it had problems optimizing the planning of resources, which led to more transit time for vessels between projects.

The company’s survey division is most vulnerable to project delays, according to chief executive Klaas Wester, adding that these contracts are more short term. “In addition, all government contracts are under pressure, due to government spending cuts and ongoing economic and financial uncertainty.”

Fugro Friday said net profit for the first half of the year dropped slightly to EUR100.4 million, but missed analyst expectations for a EUR104.9 million net profit.

Sales rose by 12.7% to EUR1.18 billion. Four acquisitions in the first six months of this year accounted for 7.2% of revenue growth. Since the end of the second quarter the company made two acquisitions. Wester said the company is still actively looking for possible acquisitions in the coming six months and is looking at companies with expertise on technologies used to collect data on the earth’s crust.

Rates for some of its services remained under pressure during the first half of 2011, mainly as a result of overcapacity of vessels in the segment for collecting seismic data and lack of activity in the Gulf of Mexico.

“Normally, 15% of global capacity in this segment is deployed in the Gulf of Mexico, but since the oil spill last year, activity in this area has not yet returned to old levels,” said Wester during a meeting.

On the contrary, the chief executive said the company should benefit from new legislation issued by the U.S. energy regulator for more detailed survey work in the Gulf of Mexico.

Looking ahead, Fugro expects revenue for 2011 to increase 9.6% to about EUR2.5 billion, while net profit is expected to drop by 4.4% to around EUR260 million.

The order backlog for the coming six months amounts to EUR1.08 billion up from EUR1.04 billion a year ago.

Analysts are unanimously disappointed by the interim results and the outlook for the group. Around 1220 GMT shares are down 7.4% at EUR38,24.

– By Patrick Buis; Dow Jones Newswires