UPDATE 2-Aker Solutions aims to double in size by 2017

Wed Dec 5, 2012 6:24am EST

* Capacity constraints biggest hurdle

* To focus on organic growth

* To return 30-50 pct of profits to shareholders

* Targets EBITDA margin of 15 pct by 2017

By Balazs Koranyi and Henrik Stolen

OSLO, Dec 5 (Reuters) - Oil services firm Aker Solutions expects to continue to grow at a breakneck pace in the next five years, limited only by its own capacity constraints, particularly access to engineers.

Riding an offshore exploration boom that shows no sign of abating, Oslo-based Aker Solutions said on Wednesday it plans to double revenues by 2017, boost operating margins, expand capacity and still keep dividend payouts high.

"Our growth rate in almost all business areas is outperforming market growth, hence we're gaining market share," Executive Chairman Oeyvind Eriksen told a capital markets day presentation.

"The top challenge is capacity in general and qualified engineers," he said. "This year, the utilisation of our own engineering resources has been close to 100 percent and this is not sustainable."

Norway's oil industry expects that demand for engineers will rise by 40 percent between 2011 and 2016, creating a shortage of up to 8,000 engineers.

With unemployment at a barely visible 3 percent, the sector has little hope of filling that gap, so it is importing an increasing number of workers and moving more work offshore.

Aker Solutions sees annual offshore spending by energy companies rising by around 10 percent a year over the next five year as oil companies move to increasingly extreme locations like the deep waters of Brazil, West Africa, Australia, and the Arctic.

The firm had hoped to achieve some of its growth through acquisitions but has scaled back those plans after a deal to buy Dubai-based NPS Energy fell through this year.

"Most of the growth to date is organic and that trend will continue, we will reduce the focus on M&A growth," Eriksen said.

Aker solutions sees its EBITDA margin rising to around 15 percent by the end of 2017 from just above 10 percent this year and plans to continue returning 30 to 50 percent of its earnings through dividends and buybacks.

SHARE JUMPS

Shares in Aker Solutions rose over 5 percent in heavy trade in response to the firm's new targets, well outperforming a broadly flat market.

"The targets are solid ... and if they meet them, the stock should rise considerably," Fredrik Lunde, an analysts at brokerage Carnegie said. "But it's too early to buy on 2015 ambitions."

The stock is up 57 percent over the past year, well ahead of key rivals, although the firm still considers this too low.

Aker Solutions is trading at 7.2 times its enterprise value to EBITDA ratio while oilfield equipment maker Cameron is at 10.4, FMC Technologies is at 13.6 and Schlumberger Ltd is at 8.8, the firm said.

"Our ambition is to be priced in line or above the peer groups," Chief Financial Officer Leif Borge said.

To boost growth, Aker Solutions plans to focus on its best-performing business segments and will divest non-core assets to free up capital.

"We've been consuming cash the last couple of years, investing in the future," Eriksen said. "In the future, we want a better balance between capital employed and cash generation."

Although Aker Solutions does not plan to scale back any of its operations to free resources for better-performing divisions, it predicted more internal competition for cash, engineers and management resources.