Norway's Aker Solutions ASA raised its 2019 revenue outlook on expected higher spending on the offshore oil services and reported better than expected first-quarter profits, lifting its shares on Tuesday.
The upbeat sentiment on oilfield spending is a result of record cashflows accumulated by oil companies on the back of cost-saving measures instigated since the 2014 oil slump and rising crude prices as the market has recovered.
Oslo-listed Aker now expects revenue to rise by close to 10 percent in 2019, citing a strong order intake and continued high tendering activity, with its underlying core profit margin also rising year on year.
It had previously expected only a slight revenue gain and flat margins.
Order intake for the first three months of the year amounted to 5.5 billion Norwegian crowns ($635.51 million), above an average forecast of 4.9 billion crowns in a Reuters poll of analysts.
Earnings before interest, tax, depreciation and amortization (EBITDA) excluding one-offs rose to 636 million crowns from 384 million crowns a year earlier, beating a forecast of 615 million crowns.
Shares in Aker Solutions rose 2.8 percent by 0942 GMT.
The company is currently bidding for tenders worth 55 billion Norwegian crowns and expects some key projects to be approved in six to 12 months, finance chief Svein Stoknes told a news conference.
"Offshore spending is forecast to increase by up to 5 percent in 2019 and accelerate to 5-15 percent in 2020 according to industry estimates," CEO Luis Araujo said.
Rival Halliburton this month said that it expects global offshore spending to rise 14 percent in 2019, double the estimates given by sector leader Schlumberger NV.
Aker still faces fierce competition as industry overcapacity looms after years of restraint by oil companies after the 2014-16 oil price crash, with pricing for subsea equipment still under pressure.
"We expect markets to remain competitive in certain segments. But we still see prices improving long-term," Araujo said.
The subsea equipment industry has reduced capacity in some particularly labor-intensive segments during the downturn, but Araujo said that overcapacity remains in areas such as rigs, seismic vessels and supply boats, making it hard to push up prices for the time being.
($1 = 8.6545 Norwegian crowns)
(Additional reporting by Terje Solsvik Editing by Rashmi Aich and David Goodman)
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