Shares of Aberdeen-based oil and gas engineering services company Plexus Holdings fell around 20% on Wednesday afternoon after it warned in a trading update that its revenue for the current financial year was running behind expectations.
“With continued difficult trading conditions in the oil and gas industry as indicated in our recent AGM trading update, the company notes that its revenue for the current financial year, ending 30 June 2017, is currently running materially behind expectations,” said Plexus.
“The company is in negotiations for the conclusion of several new contracts which if they fall within this financial year will go some way to recovering this shortfall for the year, or will help to underpin visibility for the next financial year.”
Plexus CEO Ben Van Bilderbeek said: “As we have indicated previously, while the downturn has undoubtedly significantly impacted on our progress and financial performance, we are confident that once sentiment within the sector begins to recover and operators renew their appetite for exploration, Plexus will in turn regain the momentum that existed before the downturn set in.
“Consensus is building that such a turnaround is underway, and it was only a few weeks ago that Mr Khalid-al-Falih the Saudi energy minister stated that the (down) cycle is now switching to the opposite extreme, and warned that the world needs $1 trillion of fresh investment in oil projects each year just to keep up with growing demand.
“Whilst the sector as a whole continues to experience challenging trading conditions, it is our view that the bottom of the cycle has now been reached and Plexus will be well placed to capitalise on a more positive and robust trading environment.
“Alongside the views of major producing countries like Saudi, I was also encouraged to see that the Saudi warning was echoed by Fatih Birol, head of the International Energy Agency who fears a looming oil shortage after a collapse in spending on exploration and development, and was quoted as saying that ‘Alarm bells will be ringing if there is no major new investment this year.’
“The new business opportunities that Plexus is seeing at present are increasing, with pricing levels in line with our expectations.
“The continued underinvestment in the sector will, we believe, result in an increased level of activity from operators in the second half of 2017 onwards, which Plexus is undoubtedly well placed to capitalise on.“