- Persistently challenging market environment weighs on result, but increasing signs of bottoming of the cycle reached
- Positive operating cashflow and fundamentally strong balance sheet structure
- Integration of newly acquired Downhole Technology running to schedule

 

Ternitz / Vienna, 23 November 2016. The oilfield service industry has been marked by the steepest decline in more than 30 years. Like the entire industry, Schoeller-Bleckmann Oilfield Equipment AG (SBO), listed on the ATX market of the Vienna Stock Exchange, has been hit by this development. Since the beginning of the downturn, the number of globally active drilling rigs has gone down by more than 60 % to its lowest level in the second quarter of 2016. In the past months, increasing signs have suggested that the cycle has reached its bottom. However, oil companies have again significantly cut back on their spending for exploration and production (E&P spending), following a reduction by 21 % in 2015. The low demand weighs on the result of SBO.

 

In this extremely difficult environment, SBO generated a positive operating cashflow. Thanks to its fundamentally strong balance sheet structure and high liquidity base, SBO remains in a position to continue targeted investments in its long-term growth strategy. Following the acquisition of Canadian "Resource Well Completion Technologies Inc." (Resource) in November 2014, SBO took over US based "Downhole Technology LLC" (Downhole Technology) on 1 April 2016. Downhole Technology has delivered positive contributions, and in line with expectations, to SBO's business development. At the same time, SBO continues to optimise its cost base.

 

"It seems that the most challenging and longest downcycle in our industry has reached its bottom. However, also the fourth quarter of 2016 will be challenging", comments Gerald Grohmann, CEO of SBO. "Supply and demand in the oil market are gradually moving towards a balance. We assume that the first market to respond to an upswing will be the North American market where we are well positioned based on our drilling motor business and acquisitions in the Well Completion business".

 

Results for the first three quarters of 2016

 

Due to low demand, sales went down by 48.3 % in the first three quarters of 2016, to MEUR 133.1 (1-9/2015: MEUR 257.6). In the first three quarters of 2015, SBO had still benefited from record bookings received in 2014. While bookings fell compared to the previous year, reflecting the strong customer restraint in ordering, by 24.5 % to MEUR 116.5 (1-9/2015: MEUR 154.2), they improved from the first and the second quarters of 2016. At the end of the third quarter of 2016, the order backlog stood at MEUR 17.4, following MEUR 40.2 as at 30 September 2015.

 

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) were MEUR minus 7.2 (1-9/2015: MEUR 55.0). The operating result (EBIT) before one-off effects came to MEUR minus 44.0. By considering one-off expenses for due diligence of MEUR 2.3 and expenses for impairment on property, plant and equipment, and goodwill as well as restructuring of MEUR 4.6, therefore totalling MEUR 6.9, reported operating result (EBIT) came to MEUR minus 50.9 (1-9/2015: MEUR minus 7.1). The financial result went to MEUR 14.6 (1-9/2015: MEUR 7.4), therein considered the result from the revaluation of option commitments of MEUR 16.9. Profit before tax was MEUR minus 36.2 (1-9/2015: MEUR 0.3), profit after tax came to MEUR minus 22.9 (1-9/2015: MEUR minus 2.0). Earnings per share arrived at EUR minus 1.43 (1-9/2015: EUR minus 0.13). The margins reflect the market collapse: The EBITDA margin was minus 5.4 % (1-9/2015: 21.4 %), and the EBIT margin was minus 38.2 % (1-9/2015: minus 2.8 %). The pre-tax margin stood at minus 27.2 % (1-9/2015: 0.1 %).

 

Regardless of the persisting downturn, SBO generated a positive operating cashflow of MEUR 28.9 (1-9/2015: MEUR 86.1) in the first three quarters of 2016.

 

The balance sheet structure of SBO remains fundamentally strong. Liquid funds as at 30 September 2016 amounted to MEUR 141.6 (31 December 2015 – prior to the acquisition of Downhole Technology: MEUR 196.3). Net debt stood at MEUR 56.1 (31 December 2015: Net cash position of MEUR 26.2). Spending for property, plant and equipment and intangible assets (CAPEX) was cut by 48.7 % from the first three quarters of 2015 to MEUR 9.4 (1-9/2015: MEUR 18.3). Purchase commitments for expenditure in property, plant and equipment as at 30 September 2016 amounted to MEUR 0.2 (30 September 2015: MEUR 1.1). The equity ratio stood at 54.8 % (31 December 2015: 60.8 %).

 

Outlook

 

Since the fourth quarter of 2014, the oilfield service industry has been affected by a massive downturn which is still persisting. Global spending for exploration and production will probably be curbed by another 26 % in 2016. In North America, the decline is projected to come to 41 %, and internationally to 21 %.

 

At the same time, global oil oversupply is decreasing gradually. Global demand for oil is rising constantly. It is widely believed that the balance of supply and demand should be reached in 2017. If OPEC members decide to introduce the discussed production ceiling on 30 November 2016, this should accelerate the process. Given the lack of E&P spending in recent years, expectations are that the decreasing oil supply cannot meet the growing oil demand in the future. At this point in time, at the latest, new investments will be necessary.

 

The year 2016 will remain challenging also in the fourth quarter. However, SBO is prepared to cope well with the steepest downturn in decades. The strong cash balance, low net debt and high equity ratio provide the company with a basis to make targeted investments in its long-term growth strategy even in the downturn. With the establishment of its Well Completion business and its activities in research & development, SBO is preparing systematically for the next upswing. At the same time, ongoing cost-cutting programmes are implemented consistently and capacities adjusted to the market situation. SBO is well positioned to benefit fully from the next upswing as technology and market leader.

 

Comparison of key figures

 

 

Schoeller-Bleckmann Oilfield Equipment AG is the global market leader in high-precision components and a leading supplier of oilfield equipment for the oilfield service industry. The business focus is on non-magnetic drillstring components and high-tech downhole tools for drilling and completing directional and horizontal wells. As of 30 September 2016, SBO has employed a workforce of 1,184 worldwide (30 September 2015: 1,231), thereof 318 in Ternitz / Austria and 521 in North America (including Mexico).

 

Further inquiry note:

 

Andreas Böcskör, Head of Investor Relations

Schoeller-Bleckmann Oilfield Equipment AG

A-2630 Ternitz, Hauptstraße 2

Phone: +43 2630/315 ext 252, fax ext 101

e-mail: a.boecskoer@sbo.co.at