(Adds CEO, analyst comments, context, updates share movement)
Nov 16 (Reuters) - Aggreko Plc, the world’s largest temporary power provider, said it was reviewing the value of its North American fleet of oil and gas rental generators after further weakness in that market dragged down its third-quarter underlying revenue.
Aggreko, whose kits power major events and cover electricity shortfalls, has been cutting costs and jobs and reigning in its capital spending to cope with subdued demand and price pressures.
The potential writedown comes as Aggreko tries to limit its exposure to the North American oil and gas market, whose weakness has offset gains elsewhere.
Chief Executive Chris Weston said the North American fleet had a book value of 40 million pounds ($50 million) and accounted for about 3 percent of its global fleet.
Although commodities have recovered some ground from their mid-2013 fall, firms are still holding back on new investments and are limiting expenses such as renting power supplies.
Aggreko said pricing pressure in the weak North American upstream oil and gas market and a reduction in regional gas volumes caused underlying revenue to fall 7 percent in the quarter ended Sept. 30.
The North American oil and gas rental business was down 50 percent year-on-year, overshadowing some recovery in demand from the petrochemical and refining sector as deferred maintenance projects started coming online.
“Given this continued decline in gas volumes, we are reviewing the carrying value of our small gas generators, which are almost exclusively deployed into the oil and gas sector,” Weston told analysts.
Aggreko forecast full-year pretax profit before exceptional items of about 225 million pounds at current currency rates, below Morgan Stanley’s estimate of 228 million pounds.
Analysts raised concerns about 2017 profit, as Aggreko said it had bid for a 200 megawatt contract in Argentina at a “significant discount to the historic pricing”.
The outcome of the bid - crucial for the company as it would replace a 450 megawatt contract that makes Argentina Aggreko’s single largest market - was still unknown, the company said.
“Oil price volatility, emerging market uncertainty and unpredictable competitor behaviour has placed returns under pressure,” Peel Hunt analysts wrote, cutting their share target price to 700 pence from 900 pence.
“We suspect that nervousness regarding competitors and operational change will continue to result in underperformance,” they added, reducing 2017 profit guidance to 225 million pounds from 260 million pounds.
Aggreko’s shares closed down 4.6 percent at 765 pence.
$1 = 0.8033 pounds Reporting by Esha Vaish in Bengaluru; Editing by Martina D'Couto and Elaine Hardcastle