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UPDATE 1-Oil activity off Brazil down on Petrobras woes-supplier
February 6, 2013 / 11:47 AM / 5 years ago

UPDATE 1-Oil activity off Brazil down on Petrobras woes-supplier

* Says activity off Brazil down due to Petrobras financial aims

* Says Brazil staff, equipment still tight for existing work

* Has not experienced payment problems (Recasts lead, adds comment on Brazil by CEO, from analyst)

By Henrik Stolen and Joachim Dagenborg

OSLO, Feb 6 (Reuters) - Brazil’s Petrobras has been awarding fewer contracts than expected as it seeks to retain cash for future investments and to limit rising debt, one of its suppliers, Fred. Olsen Energy, said.

The Norwegian offshore rig company posted a fourth-quarter operating profit below expectations on Wednesday as its costs increased due to higher repair and maintenance needed on its fleet of drilling rigs.

Oil activity offshore Brazil has been a motor for growth for many offshore drillers, oilfield service firms, seismic surveyors and other companies, with Petroleo Brasileiro by far the biggest oil company to offer work.

But to fight cost overruns on its $237 billion, five-year expansion plan, limit rising debt and make up for more than $8 billion in losses in its refining unit, Petrobras is now squeezing suppliers and investors by making them wait longer to receive payment.

Fred. Olsen Energy, which has one drilling rig contracted to the state-controlled firm, said activity had dwindled over the past year as fewer contracts had been awarded.

“There has been lower activity throughout 2012, and this is related to the strategic review of projects taking place in Petrobras,” Fred. Olsen Chief Executive Ivar Brandvold told a news conference. “This is reflected in the contract activity.”

Fred. Olsen shares were down 1.92 percent at 255.5 crowns at 1120 GMT, compared with a 0.35 percent gain on the Oslo benchmark index.

“The share is down mainly because they disappoint on EBITDA,” said Oslo-based analyst Oeyvind Hagen at ABG Sundal Collier.

“I think some people had also expected an increased dividend, which they chose not to do. They are also quite conservative on future dividends.”

The company’s operating profit fell to 394 million crowns ($71.7 million) from 542 million crowns a year ago and below the 463 million expected by analysts.

It will propose an ordinary dividend of 10 crowns per share in May 2013 on top of an extraordinary dividend of the same value.

Fred. Olsen Energy, which operates nine rigs worldwide, has not experienced payment problems with Petrobras, Brandvold said, after presenting the quarterly results.

“We haven’t seen that. We have read about it, but we haven’t experienced it ourselves,” he said in an interview.

Despite the lower activity off Brazil, it is still hard to get hold of all the equipment and staff needed to do the work that is already contracted, he added. Petrobras requires that a certain amount of contracted work have local content, in other words include Brazilian suppliers.

“Everything is stretched. It applies at all levels,” Brandvold said. ($1 = 5.4929 Norwegian kroner) (Writing by Gwladys Fouche; editing by Jane Baird)

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