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ShawCor Pipes in Double-Digit Gains

Wednesday, May 18, 2011

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Global pipeline contractor ShawCor Ltd. rang up a banner first quarter for 2011, with double-digit increases in revenues, earnings and net income, compared to the year-ago period.

The company reported upticks in project activity in North America and the EMAR (Europe, Middle East, Africa and Russia) region, with some drop-off in Mexico and Brazil and delays in Asia Pacific.

The result: The first-quarter numbers shone against the year-ago period, but dimmed considerably when compared to the end of 2010.

Overview: Ups and Downs

First-quarter revenues totaled $279 million—a 24% increase from the first quarter of 2010, but a decline from the $292 million reported in the year’s fourth quarter, the company reported.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) increased by 36% to $41.4 million from the first quarter of 2010 but dropped 38% from the fourth quarter of 2010.

 
ShawCor specializes in products and services for the pipeline and pipe services, and petrochemical and industrial segments of the oil and gas industry and other industrial markets.

Net first-quarter income was $20.5 million ($0.29 per share diluted)—less than half the  $49.7 million ($0.70 per share diluted) reported in Q4 of 2010, but nearly double the performance of 2010’s first quarter ($11.7 million. $0.16 per share diluted). The fourth-quarter numbers included the recording of an $18 million gain from the revaluation of the company’s investment in its Brazil pipe coating business.

‘Significant Improvement’ 

“ShawCor’s first-quarter financial results reflect a significant improvement over the first quarter of 2010 as a result of improved small-diameter market conditions in Canada and the United States and higher project volumes in our EMAR region,” said company president and CEO Bill Buckley.

“Results were, however, negatively impacted by reduced project activity in Mexico and Brazil and delays in production on the PNG LNG project in our Asia Pacific region.

“We expect that this level of activity will continue in the second quarter, with a gradual improvement in the second half of this year based on the deferred PNG LNG production and the launch of major projects in Brazil, the Gulf of Mexico and Asia Pacific.”

ShawCor recently completed the acquisition of CSI Coating Services, which delivers coating services to the oil and gas industry from a modern facility in Nisku, Alberta and through mobile units that perform field coatings throughout Western Canada.

Outlook

“The company's long-term outlook continues to be supported by the level of outstanding firm bids in the range of $1.5 billion and by the progress we are making on key strategic initiatives, including the mobilization of our new Brigden mobile coating technology in Beaumont, TX, and the commissioning of our new subsea test facility in Toronto,” said Buckley.

ShawCor outlined this outlook for market activity.

Pipeline Segment – North America

The company has experienced improving small-diameter market conditions in Canada and the US through 2010 and the first quarter of 2011, due to increased well drilling and completions throughout North America.

This activity has bolstered demand for small-diameter pipe coating, composite pipe and joint protection products. The improvement should continue past the seasonal impact of spring break up in Western Canada. The company will also be in production on a number of large-diameter pipe coating projects during the second quarter.

In the third quarter, ShawCor will launch production on the $40 million Jack St. Malo project at the Brigden site in Beaumont, TX. The project should reach full production in the fourth quarter and continue through 2010 and the first quarter of 2011, due to increased well drilling and completions throughout North America.

This activity has bolstered demand for small-diameter pipe coating, composite pipe and joint protection products. The improvement should continue past the seasonal impact of spring break up in Western Canada. The company will also be in production on a number of large-diameter pipe coating projects during the second quarter.

In the third quarter, ShawCor will launch production on the $40 million Jack St. Malo project at the Brigden site in Beaumont, TX. The project should reach full production in the fourth quarter and continue through the first quarter of 2012. 

Pipeline Segment - Latin America

The Latin America region had very weak revenues in the first quarter. The absence of project activity in Mexico is believed to be temporary, as Pemex is planning a number of pipeline developments for the second half of 2011. In Brazil, ShawCor has secured a $20 million contract to provide pipe coating services for the P55 Risers project. That project should begin production in the third quarter. 

Pipeline Segment – EMAR

Project activity in the Europe, Middle East, Africa and Russia region showed notable strength in the first quarter, with several major projects in production, including the $93 million Total Laggan-Tormore project.

Pipeline Segment - Asia Pacific

Revenue from the Asia Pacific region reached a record level in 2010, due to partial execution of the $185 million PNG LNG and $40.0 million Epic Energy QSN3 projects, plus a number of other projects. Revenue from the PNG LNG project declined by about $26 million from the fourth quarter of 2010, due to pipe delivery delays from quake-stricken Japanese ports.

As full production resumes, however, and several other large projects in Southeast Asia begin, full-year revenue for 2011 should be in line with the prior year.
 
Petrochemical and Industrial Segment

Gradual recovery in the global economy should yield ongoing improvements in the Petrochemical and Industrial segment’s markets throughout 2011, the company said.  

Toronto-based ShawCor is a global energy services company specializing in products and services for the pipeline and pipe services, and petrochemical and industrial segments of the oil and gas industry and other industrial markets. ShawCor operates through seven wholly owned business units: Bredero Shaw, Flexpipe Systems, Shaw Pipeline Services, Canusa-CPS, Guardian, DSG-Canusa and ShawFlex.

   

Tagged categories: Earnings reports; Pipeline; Protective coatings; ShawCor

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