French oil industry engineer Technip SA said intensifying competition would make 2010 a difficult year, sending its shares lower on Friday.
It said it would meet targets for 2009 but chief executive Thierry Pilenko told a conference call that competition from new ship companies and Korean onshore companies would hit Technip’s profits in 2010.
“Fewer on-shore projects have been sanctioned in the last 18 months to two years,” he added, saying that Korean companies were bidding particularly hard for contracts in Kuwait, Saudi Arabia and the United Arab Emirates.
Oil prices hit an all-time high of $147 in July, 2008, but plunged to $35 six months later. The instability made oil companies skittish about investing in new projects.
Oil majors have pressed oil and gas services groups to cut prices as the economic downturn has pushed down steel and labour costs and contractors have competed for fewer projects.
Technip said it would quantify the possible fall in revenue and profit margin in 2010 when it reports results in February. It said it expected to see an upturn in revenues in the second half of 2010, if oil prices remained stable.
By 1210 GMT, Technip shares were down 1.54 percent at 47.60 euros, having fallen to a session low of 46.53 euros.
Technip kept its 2009 group revenue target of 6.4 billion euros, as expected, compared with 7.5 billion euros a year ago.
In the high-margin subsea engineering division, which supplies underwater pipelines and construction vessels, the company said operating margins would likely be 18 percent for the full year, at the top end of Technip’s earlier disclosed range of 16-18 percent.
Subsea revenue should also show moderate growth for the year the company said, although it did not specify by how much.
For the third quarter, the company met or exceeded analyst expectations with net income down 11.1 percent from a year earlier at 108 million, and the operating margin at 10.1 percent compared with 9.3 percent a year ago.
In a note, Citigroup said that the order backlog, which came in at 7.541 million euros, looked a little light, due to fewer small and unannounced orders. “Expectations were for backlog to exceed 8 billion euros,” the analyst said.
Regarding the TKSJ scandal, Pilenko said the company was cooperating with U.S. officials, but had no specific comment.
In 2004, U.S. authorities began a probe into the TSKJ consortium– comprising Technip and Japan’s JGC Corp, Snamprogetti and KBR Inc — in relation to the construction of LNG facilities in Nigeria.
Investigators have alleged TSKJ broke anti-bribery laws with kickbacks to Nigerian officials. In Febuary 2009, KBR Inc, a former subsidiary of Halliburton, paid $579 million to settle the case.
“This is part of our legacy and the sooner we put it behind us the better,” Pilenko said.