Lamprell eyes deal opportunities after profit leaps

By Sarah Young

LONDON (Reuters) – Oil rig maker Lamprell is eyeing acquisitions in the Middle East and said it expects further growth after demand for more sophisticated rigs in the wake of the Gulf of Mexico oil spill boosted 2010 profit.

Lamprell posted on Monday a forecast-beating 76 percent jump in full-year profit and said its order book swelled to $962 million at the end of February from $725 million in October, sending its shares up more than 7 percent.

Unprecedented levels of bidding activity had led it to seek to expand capacity at one of its construction yards in the United Arab Emirates, the company added.

Lamprell, which also refurbishes rigs and builds vessels used to install wind turbines, said growth could also come from acquisitions.

Chief Executive Nigel McCue said Lamprell could make a “relatively substantial” acquisition, noting that the company ended 2010 with cash of $210 million and no debt.

“We are looking at, and this is the first time we’ve really done this, M&A opportunities within the region,” McCue said in an interview.

“Particularly for businesses which are directly related and also offer complimentary businesses … services in the downstream sector, engineering services, which would more compliment us on the downstream as well as the upstream side of the business.”

The unrest in the Middle East was not having an impact on the company’s operations, said McCue, adding that the majority of Lamprell’s customers were global players.

“Within the UAE, it’s business as normal … Most of what we construct goes into the international markets,” he said.

Shares in Lamprell, which said it would pay a final dividend of 9.50 cents per share, a 150 percent leap on what it paid out in 2009, jumped 7.5 percent to 337.4 pence at 0951 GMT, topping Britain’s mid-cap index of companies.

TURNAROUND

Lamprell posted full-year underlying operating profit of $49.1 million compared with the $27.9 million it made in 2009 ahead of a consensus forecast of $40 million from a Thomson Reuters I/B/E/S poll of five analysts.

McCue said profit was boosted by a turnaround in the new rig market in the second half of the year, partly triggered by the Gulf of Mexico oil spill at BP’s Macondo well, which upped demand for more up-to-date rigs.

“This is for higher capacity, more modern efficient rigs, to accommodate deeper and more difficult drilling,” he said.

“From a timing point of view, it seemed that Macondo sort of triggered a surge in the market.”

McCue said he believed that demand for new rigs was likely to remain buoyant in the coming years given the type of wells which are going to be drilled in future as oil firms seek to extract resources from deeper and less conventional reservoirs.

“From the liability perspective it’s clearly advantageous for owners to have newer equipment and certainly the end users will play high prices for newer equipment,” he added.

While the market for oil rigs had recovered since the global financial crisis, McCue said the windfarm vessels market was yet to see a pick-up but he expected demand to return from later this year.

(Editing by Matt Scuffham and Jon Loades-Carter)

($1=.6243 Pound)

Lamprell eyes deal opportunities after profit leaps