More fallout from the Gulf of Mexico disaster, as oil services group Wellstream warns of a slowdown and sees its shares slump 11%.
The company said "some uncertainty" had been introduced by "recent events in the Gulf of Mexico, not surprising given the US moratorium on deep water drilling after the BP spillage. It added:
Consequently the recovery predicted for the second half of 2010 looks to be slower than expected and may result in some profit being delayed into 2011.
Even news of a contract award in Brazil from OGX has not helped, and Wellstream is currently down 55.5p at 447.5p. Evolution analyst Keith Morris said:
We are not surprised by this [warning] but the shares are unlikely to perform while the market pulls down its numbers. An increase in the [order] backlog from £190m at the first quarter [to £250m] to current levels is encouraging but the lack of visibility, especially in a world post-Macondo, will no doubt play on 2011 forecasts. For the time-being we remain neutral but highlight that historically, picking up the shares below 500p has proved a profitable strategy, with M&A potential providing downside protection.
Nick Copeman at Oriel Securities issued a hold note, saying:
Based on this update we are going to have to pull back our 2010 earnings estimate (currently £28.3mn) and note that even ahead of this Wellstream trades on a premium to its peers.
