WRAPUP 1-Oilfield firms' Q2 lifted by thirst for oil

OSLO/PARIS, July 31 (Reuters) - Oil industry contractors Aker Solutions and Technip posted above-forecast second-quarter earnings and said their markets would stay strong as the world seeks to quench its thirst for oil and gas, lifting the shares.

French Technip (TECF.PA) posted a 19 percent rise in earnings before interest, tax, depreciation and amortisation (EBITDA) to 195 million euros ($304.6 million) and revised up its 2008 operating margin outlook to around 8 from 7.6 percent.

Norwegian Aker Solutions (AKSO.OL) reported an EBITDA of 1.13 billion crowns ($218.8 million) for April-June, up 13 percent year-on-year and maintained its 2008-2010 guidance.

Shares in Aker Solutions, formerly Aker Kvaerner, jumped 14.8 percent to 120.50 crowns at 1017 GMT in Oslo, while Technip was up 6.7 percent to 55.46 euros in Paris. "Very strong results for both companies and good news on their outlooks," ABN AMRO analyst Thomas Deitz said.

"We are in the midst of an energy and infrastructure super-cycle, especially in oil and gas where we have seen significant underinvestment," he added.

Surging oil and gas prices have spurred demand and benefited companies providing oilfield services, including engineering and construction companies such as Aker Solutions and Technip.

A step change in long-term oil price expectations during the second quarter has made investors increasingly bullish on the ability of the oilfield services sector to sustain its five-year upswing into the next decade.

But valuations have fallen sharply from late-May highs due to global stock market weakness and concerns about rising costs and project delays eroding margins.

FUNDAMENTALS AND BACKLOG

Aker Solutions said its market fundamentals were driven by an expected 2 percent annual rise in global oil production until around 2015, and 7 percent growth in mid- and deep-water production required to cover this additional demand.

It said the world's fleet of oil and gas rigs was fully utilised and not enough new rigs are being built to increase deepwater production, boding well for the market.

"The high level of investment in the oil, gas and process industries is expected to continue for the next years due to ... the gap between supply and demand, high oil prices and exploration moving to deeper and harsher waters," Aker said.

Technip said its order backlog fell to 8.1 billion euros at end-June from 9.67 billion euros at the same time last year, amid a drive by the management to lower execution risks associated with large-scale projects.

"There may be some relief that Technip posted no writedowns this quarter, and that the results were clean," said Citigroup analyst David Thomas, while broker Oddo Securities upgraded the stock to "buy", citing an "excellent Q2 and reassuring outlook".

Technip had booked charges of 270 million euros in January, a reminder that although the sector has enjoyed strong demand, tightness can make it hard to translate orders into profits.

Technip confirmed it expected full-year sales of between 7.4 and 7.6 billion euros despite the lower order intake. In May, it had cut its sales target from around 8 billion euros.

Aker Solutions said its order backlog stood at 53.4 billion crowns on June 30, down from 54.5 billion three months earlier.

"The real order backlog is well above 60 billion," Chief Executive Simen Lieungh told reporters, noting that some deals could not be announced yet due to formalities. "The market is strong and we are in negotiations on several big contracts."

CONSOLIDATION PLAY?

Technip Chief Executive Thierry Pilenko said his group could make acquisitions in the hot subsea business, playing into a trend of consolidation across the sector aimed at building bulk and reach to better suit the needs of oil and gas producers.

"As far as M&A is concerned, we obviously don't want to be specific here, but the subsea business is a business that could consolidate, and if there are opportunities for consolidation in that business, we will be looking at them," said Pilenko, who has refocused Technip on higher-margin offshore activities.

Analysts have said Technip's potential targets may include the likes of Oslo-listed Subsea 7 SUB.OL and Acergy ACY.OL, although it is not clear if Pilenko would favour a big purchase.

"The market would want to see a bigger acquisition but it could be a sequence of smaller deals," ABN AMRO's Deitz said.

According to Reuters data, Technip trades around 12.3 times forecast 2009 earnings, below bigger peers such as Schlumberger (SLB.N) at 15.8 times and Italy's Saipem (SPMI.MI) at 13.5 times. Aker Solutions' P/E is on the low side at 8.3 times. (Editing by Paul Bolding)