Norwegian oilfield services firm Aker Solutions warned Monday that its performance during the first three months of 2013 fell below expectations.
Aker said that it expects to report revenue of $1.9 billion (NOK 11.1 billion) and profit at the EBITDA level of $148 million (NOK 868 million) for 1Q 2013. This compares to revenue of $1.7 billion (NOK 9.8 billion) and EBITDA profit of $170 million (NOK 1 billion) in 1Q 2012.
Aker said that its profit was adversely affected by increased costs at the Ekofisk Zulu platform project as work there was accelerated to ensure the platform will be transported from the Egersund yard, west Norway, to the Ekofisk field in mid-June this year so that oil production could start by mid-October. Meanwhile, extra work caused by quality issues related to cables also increased the project's costs.
The firm said that its results were also weighed down by a loss of $10.7 million (NOK 63 million) at its Umbilicals business segment. During the first quarter, Aker wrote down the value of several Umbilicals projects following a thorough review of its entire portfolio.
Aker said that many of its Umbilicals projects suffered from operational challenges in Norway. The firm is enacting a turnaround plan in this segment that is designed to generate a low but positive EBITDA margin during the second quarter.
A further loss of $9.2 million (NOK 54 million) came about at Aker's Oilfield Services and Marine Assets (OMA) business segment due to the vessels Aker Wayfarer and Skandi Aker being idle during the first quarter. This business area is expected to incur additional losses during the second quarter since the two vessels are set to remain idle until beginning operations in the summer.
Aker also reported lower EBITDA margins for its Drilling Technologies, Well Intervention Services and Mooring and Loading Systems business segments during the first quarter due to increased project costs and some delayed contract awards.
"The slow start to 2013 is truly disappointing," Aker Executive Chairman Øyvind Eriksen said in a company statement.
"As lost or postponed contract awards are part of the game, some of the quality issues are, simply speaking, unacceptable. We have worked hard to avoid such mistakes, but there is still a way to go."
Aker added that it expected greater clarity in the next three months on how significant portfolio sensitivities, such as Ekofisk Zulu and Skandi Aker, will develop. The firm expects the financial performance, excluding one-off items, to be better in the third and fourth quarters of 2013 depending on projects being completed as planned and various of its business areas having normal capacity utilization.
The company also pointed out that it has made several changes to its executive management team.