-     Persistently challenging market environment weighs on business result

-     Positive operating cashflow and fundamentally strong balance sheet structure with high equity ratio

-     Integration of newly acquired Downhole Technology running to schedule

-     Further cost reduction: Restructuring of Singapore operations kicked off

 

Ternitz/Vienna, 24 August 2016. Schoeller-Bleckmann Oilfield Equipment AG (SBO), listed on the ATX market of the Vienna Stock Exchange, was, like the entire oilfield service industry, confronted with a continued deterioration of the market environment in the first half of 2016. Oil companies cut back their spending even further, the number of globally active drill rigs thus dropped once again. Since the downturn started in 2014, the rig count has contracted by more than 60 %.

 

In this extremely difficult environment, SBO generated a positive operating cashflow and has a fundamentally strong balance sheet structure. Due to its financial strength, SBO is in a position to pursue targeted investments in implementing its long-term growth strategy even in the current cycle, such as illustrated by the acquisition of US-based “Downhole Technology LLC” (Downhole Technology) on 1 April 2016. Integration of Downhole Technology is running to schedule. At the same time, SBO continues to optimise its cost structure. Hence, the company decided, at the end of the second quarter, to restructure its business activities in Singapore.

 

"The downturn is not over yet. While signs are increasing that supply and demand in the oil market will gradually move towards a balance, we cannot really speak of a reversal of the trend yet", comments Gerald Grohmann, CEO of SBO. "Our focus is on navigating SBO safely through the cycle. We are aligning the company to ensure it is perfectly prepared for the next upswing based on an improved cost structure and strengthened market position. If demand for oil continues to rise and spending of the oil companies remains low, it is only a matter of time when overproduction turns into undersupply."

 

HY 2016 Results

 

Sales in the first half of 2016 went down by 52.9 % to MEUR 88.0 (1-6/2015: MEUR 186.9). In the first half of 2015, SBO had still profited from the record bookings posted in 2014. As customers showed strong restraint in ordering, bookings dropped by 28.4 %, to MEUR 75.0 (1-6/2015: MEUR 104.8). The order backlog at the end of the first half of 2016 stood at MEUR 21.1, following MEUR 34.3 as at 31 December 2015 and MEUR 60.9 as at 30 June 2015. Downhole Technology has delivered positive contributions to SBO's business development from the beginning of the second quarter of 2016.

 

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) were MEUR minus 5.7 (1-6/2015: MEUR 45.1). Operating result before one-off effects came to MEUR minus 28.9. 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 5.0, therefore totalling MEUR 7.3, reported operating result (EBIT) came to MEUR minus 36.2 (1-6/2015: MEUR 19.3). The financial result in the first half of 2016 came to MEUR 9.4 (1-6/2015: MEUR minus 14.6), including a positive one-off effect of MEUR 10.5 from the revaluation of an option commitment. Profit before tax stood at MEUR minus 26.8 (1-6/2015: MEUR 4.8). Profit after tax was MEUR minus 16.9 (1-6/2015: EUR 0.0). Earnings per share arrived at EUR minus 1.06 (1-6/2015: EUR 0.0). The market collapse was reflected also in the margins: The EBITDA margin was minus 6.5 % (1-6/2015: 24.1 %), the EBIT margin was minus 41.1 % (1-6/2015: 10.4 %). The pre-tax margin came to minus 30.4 % (1-6/2015: 2.6 %).

 

Regardless of the difficult market conditions, SBO generated a positive cashflow from operating activities of MEUR 18.5 in the first half of 2016 (1-6/2015: MEUR 57.1). The company has a profoundly strong balance sheet structure: Even after the acquisition of 68 % of the shares in Downhole Technology at a purchase price of MUSD 103, SBO's equity ratio as at 30 June 2016 totalled a sound 54.7 % (31 December 2015: 60.8 %). Liquid funds stood at MEUR 137.9 (31 December 2015: MEUR 196.3), and net debt at MEUR 59.7 (31 December 2015: net liquidity MEUR 26.2). Spending for property, plant and equipment and intangible assets (CAPEX) was curtailed by 54.0 % to MEUR 5.9 (1-6/2015: MEUR 12.9) compared to the first half of 2015. Purchase commitments for expenditure in property, plant and equipment as at 30 June 2016 were MEUR 0.2 (30 June 2015: MEUR 2.5).

 

Outlook

 

The downturn that has hit the oilfield service industry since the fourth quarter of 2014 is not over yet. Oil companies are continuously and heavily cutting back on their investments: Following their massive reduction of spending for exploration and production (E&P Spending) by 21 % in 2015, further reductions of 26 % are expected for 2016. Assuming that we continue to see a decline in production combined with rising demand for oil, it is fair to expect that we are heading towards a significant global supply deficit. At that point in time, new spending will be required. It remains unclear when exactly this will be the case. It is widely believed that a balance between demand and supply should be reached in 2017. In any event, past experience in the oilfield service industry has told us one thing: The sharper and longer the downturn, the steeper the next upswing usually is.

 

With its strong cash balance, low net debt and high equity ratio, SBO is prepared even for a lengthy downturn. The company is carefully reviewing potential cost saving measures and continues the course initiated in 2014 and 2015 to combat the decline in 2016. SBO is improving its cost base and makes targeted investments for growth: Cost-cutting programmes are consistently implemented, and capacities are adjusted further to the market situation. The strategy to develop new markets for the products of SBO in the Oilfield Equipment segment will be pursued.

 

Following the acquisition of Canadian "Resource Well Completion Technologies Inc." (Resource) in November 2014, SBO took over US-based Downhole Technology on 1 April 2016. With Resource and Downhole Technology, SBO now has become a leading provider of products in the fields of "sliding sleeve" and "plug-n-perf", the two dominating completion technologies.

 

Based on targeted investments to expand the Completion business and the implementation of ongoing restructuring activities, SBO will be well prepared 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 June 2016, SBO has employed a workforce of 1,183 worldwide (30 June 2015: 1,279), thereof 317 in Ternitz/Austria and 520 in North America (including Mexico).

 

Further inquiry note:

 

Andreas Böcskör, 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