Vard Sees Biggest Orders Since 2007 on Exploration Demand

Vard Holdings Ltd. (VARD), a builder of offshore support vessels, said it will close 2013 with its biggest annual order in six years as oil and gas companies boost spending on energy exploration.

“We’re confident that we’ll be able to secure one or two orders at least” in the coming weeks, Holger Dilling, an executive vice president at Vard, said in a phone interview. “We are expecting the best order intake since 2007.”

Demand from North Sea, Brazil and West Africa and explorations in new areas such as the Arctic Sea may help boost orders for Vard’s specialized ships, Dilling said. Investment in exploration and production may rise to $750 billion next year as companies seek to add reserves and expand output, the IFP Energies Nouvelles policy group said last month.

Vard, based in Alesund, Norway, won contracts worth 11.9 billion kroner ($2 billion) in the first nine months, 45 percent more than a year earlier. That boosted its total orderbook to 19.6 billion kroner with deliveries stretching into 2017. In 2007, the company had received orders worth 15.5 billion kroner.

Shares of Vard fell 0.6 percent to S$0.84 as of 9:35 a.m. in Singapore. The stock has declined 35 percent this year, compared with a 0.6 percent gain in the benchmark Straits Times Index.

The company’s third-quarter net income slumped 67 percent from a year earlier because of increased costs at its two yards in Brazil. Sales dropped to 2.37 billion kroner in the period.

Production Delays

The Brazilian yards lost money because quality of some of the work done by their suppliers fell short of expectations and caused production delays, Dilling said in the Nov. 8 interview.

“We are now scaling back the degree at which we use other parties to supply major sections of a ship,” he said. “At one time we had an ambition to grow on the back of such supplier relationships. That assumption didn’t go through.”

The yards in Brazil are expected to become profitable as early as in the second half of next year as they reach a “higher level of utilization,” Dilling said. The facilities have an orderbook worth 6 billion kroner to build 14 vessels, including eight liquefied petroleum gas carriers and two pipe lay support vessels.

The company changed its name to Vard from STX OSV Holdings Ltd. this year after Fincantieri SpA, the world’s biggest builder of cruise ships, bought it from South Korea’s debt-ridden STX Group for 455 million euros ($610 million). It has shipyards in Norway, Romania, Vietnam and Brazil.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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