WorleyParsons (WOR) has yet to see enough improvement in activity to agree with its larger rivals, Halliburton and Schlumberger that the slide in the oil and gas business is over and 2017 will see slow rebound.
Halliburton and Schlumberger both revealed their raised confidence levels for 2017 at briefings last week following the release of their September quarter earnings reports.
But yesterday WorleyParsons shareholders heard a more restrained view of the outlook for next year at the company’s annual meeting.
That is perhaps why shares in WorleyParsons fell 3.4% to $8.85 on the day.
The company told the meeting that trading conditions in the first quarter remained challenging, despite a rebound in the prices of some commodities, with the company’s revenue still under pressure.
And that means the company again relying on its ongoing cost reduction program to produce any improvement in its bottom line, with underlying earnings expected to be weighted to the second half of the financial year (which is usual with WorleyParsons).
While the prices of some commodities (coal, iron ore, oil and gas, nickel) have seen a partial recovery in prices in recent months, WorleyParsons has not yet seen any impact on its order book.
"What matters to us is not oil prices, its the activity levels in the industry," CEO Andrew Wood told the AGM in Sydney.
"Our customers generally take a longer term view of their expectation of prices. What is important for us is the perception of where the medium-term or longer-term picture stands and how it impacts the balance sheets and cash flows of our customers."
Like its peers and many of their customers, WorleyParsons has been under pressure for the past two years amid a prolonged downturn in commodities markets that provide the bulk of its business.
Despite slashing expenditure, closing offices and cutting jobs, it reported an 11% drop in revenue and a 37% slide in underlying profit in 2015-16.
That forced the company to suspend dividends last financial year.
The company in August said it would expand its cost cutting program to $350 million, from the previous target of $300 million.
Mr Wood said WorleyParsons’ priority for the current financial year is to improve its position in providing professional services to the hydrocarbons, heavy oil, and oil sands sectors.
He told shareholders the company is looking to expand in the sub-sectors of chemicals and new energy, and in particular sees opportunities in Saudi Arabia, as well as near term opportunities in investments related to China’s One Belt One Road regional development plan.
"We know unless investment increases from where it is in the market today to a higher level, the world’s needs for resources and energy will not be satisfied. The activity levels will come back, but when exactly, I can’t say," Mr Wood said.
