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RPT-UPDATE 1-Order-starved Cape pins hopes on Australia LNG
August 29, 2013 / 10:16 PM / 4 years ago

RPT-UPDATE 1-Order-starved Cape pins hopes on Australia LNG

LONDON, Aug 29 (Reuters) - Oil, gas and mining-focused industrial services group Cape Plc pinned its hopes for an order book revival on two giant Liquefied Natural Gas (LNG) projects in Australia as it reported “subdued” orders for the first half of 2013.

Its orders in the half fell to 239 million pounds ($371 million) from 363 million a year earlier, Cape said, blaming weakness in Asia and Australia and warning that its Asia Pacific business would be loss-making this year.

It took a 15.6 million pound exceptional charge mainly connected to reducing the scale of its Australian business.

Costs in Australian LNG development have rocketed, partly due to high wages and a strong currency, and so have put the brakes on development there over the past year and hurt contractors like Cape.

Near-term demand urgency for LNG supplies have also slackened to some extent because of increasing domestic supply from unconventional resources in the United States - once seen as a principle destination for LNG.

Australian mining, where Cape also has exposure, also saw cutbacks in capital spending programmes last year by companies such as Rio Tinto and BHP Billiton.

Shares in Cape dropped by more than 10 percent at one point in morning trade as analysts pencilled in reduced forecasts for 2014 based on the downbeat result for a region that represented about 20 percent of Cape’s business last year.

This was despite the company’s reassurance that its 2013 performance would be in line with expectations.

“That’s (2014 downgrade) not a stupid thing to have done. I think given the order book cover we’ve got for next year, that’s a pretty prudent thing to do. I‘m not surprised by it and it’s hard to argue against it,” Chief Executive Joe Oatley told Reuters by telephone.

He said the company’s immediate fortunes depend on it being able to secure work on two major LNG projects in Australia - Chevron’s Wheatstone and Inpex’s Ichthys. The company is bidding on work on both in Australia, where the bulk of the contract value will be, and in Asia, where modules for the projects are being built. Wheatstone awards are expecting in the next couple of months. Ichthys contracts might not be made until next year.

The British company reported a first half profit before tax of 4.2 million pounds, down from 9.7 million, and maintained its dividend at 4.5 pence.

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