Norway Offshore Oil Focus Best for Kvaerner, Aker Says
(Corrects spelling of Kvaerner in seventh paragraph.)
Kvaerner ASA (KVAER), a builder of oil platforms, should focus on regaining lost market share in Norway rather than bidding for higher-risk international projects, according to Aker ASA (AKER) Chief Executive Officer Oeyvind Eriksen.
“The question is how does Kvaerner respond to the pretty brutal eye-opener that they lost all seven” engineering, procurement and construction contracts that have been awarded for projects off the coast of Norway in recent months, he told investors in Oslo today. The company should focus on Norway and re-establishing itself in “pole position in the whole market rather than take higher risks” internationally, he said. Aker owns 41 percent of Kvaerner, making it the biggest shareholder.
Kvaerner lost out to Hyundai Heavy Industries Co. on the $1.1 billion topside contract for the Aasta Hansteen natural gas project, while Daewoo Shipbuilding & Marine Engineering Co. won the 6.1 billion kroner ($1.1 billion) Dagny topside deal. Det Norske Oljeselskap ASA awarded the topside deal for the Ivar Aasen project, worth about 4 billion kroner, to a unit of SembCorp Marine Ltd. in Singapore, it said on Feb. 7.
“The turn of the year has been a challenging one for Kvaerner,” Eriksen said. The company now needs to consider how it can restructure its business model to cut costs and enhance competitiveness, he said. “That also entails working towards regaining its position with key clients, first and foremost with Statoil ASA (STL),” Norway’s largest oil and gas producer, he said.
Kvaerner, based at Fornebu near Oslo, was spun off from Aker Solutions ASA (AKSO) in July 2011.
The company had an order backlog of 21.3 billion kroner as of Dec. 31, 50 percent of which is due for execution in 2013, 30 percent in 2014 and the remainder in 2015 and later, it said on Feb. 13. That compares with 10 billion kroner a year earlier.
Kvaerner is bidding for work at Woodside Petroleum Ltd.’s (WPL) Browse LNG project in the Kimberley wilderness region of Western Australia, with a final investment decision expected in the first half of this year, Kvaerner said.
“Other than Browse my personal view is that Kvaerner should really focus on the Norwegian continental shelf,” Eriksen said.
Kvaerner will adapt its “delivery models to an increasingly competitive market,” Chief Executive Officer Jan Arve Haugan said at the company’s fourth-quarter results presentation on Feb. 13, without providing further detail.
Kvaerner posted net income of 56 million kroner, down from 81 million kroner a year earlier and beating the 35.6 million kroner average of seven analyst estimates compiled by Bloomberg.
Shares in Kvaerner rose as much as 3.8 percent and traded 3.4 percent higher as of 3:30 p.m. in Oslo, curbing its decline during the last 12 months to 15 percent and giving the company a market value of 3.6 billion kroner.
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