August 8, 2019 / 5:15 AM / 4 months ago

SBM Offshore sees better 2019 profits as turnkey division grows

(Reuters) - Dutch provider of floating oil and gas production vessels, SBM Offshore (SBMO.AS) raised on Thursday its 2019 earnings forecasts after half-year results beat expectations, boosting its shares by as much as nearly 8% up at market open.

The firm upgraded its full year outlook and now sees directional revenue above rather than around $2 billion (£1.64 billion) and directional earnings before interest, tax, depreciation and amortization (EBITDA)above $750 million, citing growth at its turnkey operations division, where revenue more than doubled over the first six months of the year.

“SBM Offshore’s financial results are trending ahead of expectation for the year as it enters a period of significant growth,” SBM’s CEO Bruno Chabas said in a statement.

“Developments of deep water reservoirs continue to rank favourably in client project portfolios,” he added.

The turnkey division builds and sells floating production and storage vessels to oil and gas firms while SBM’s lease and operate division runs and leases the vessels, which get later sold to customers after an initial lease period.

The group’s January-June directional EBITDA, which treats all lease contracts as operating leases and consolidates all vessel joint ventures, fell 4% to $399 million from the year ago figure adjusted for one-offs, while revenue rose 19% to $965 million. A company-provided poll had forecast an EBITDA of $383 million on revenues of $950 million.

The company did not report any adjustments for the first half.

SBM shares were up about 6.7% at 0813 GMT, topping the European blue-chips index .

“SBM operates in an attractive market being the preferred solution for deepwater development in fast growing oil regions,” ING analyst Quirijn Mulder said in a note to clients.

The turnkey results do not yet include significant activity related to floating production storage and offloading (FPSO) units Liza Destiny and Liza Unity, with Destiny to arrive at its mooring location in the third quarter and Unity being still in construction, which is going according to plan.

They are expected to generate profits for the lease and operate division “at first oil,” SBM says, with sale gain to be booked in turnkey once the units are sold to the client later on.

The turnkey division is expected to account for over $700 million of the annual guidance, while lease and operate contribution target is maintained at $1.3 billion.

Reporting by Piotr Lipinski in Gdynia; Editing by Tomasz Janowski

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