Slow recovery in oil and gas sector makes life sluggish for Northbridge
The slow rate of improvement in the critical oil and gas sector is continuing to make life difficult for industrial services and rental company, Northbridge.
In a trading statement in advance of its interim results announcement, the group said that while sentiment in the oil and gas market had maintained its gradual improvement since 2016, the pace of recovery remains slow, investment in exploration and production still lagged and, despite reductions in supply, surplus oil stocks were at a high level.
“As a result, we have only seen a modest improvement in the trend of oil tool rental revenues from the record lows of 2016. Having taken the necessary steps to right-size the business, we continue to generate cash despite the ongoing sluggishness in energy related industries,” it said.
Overall, it said recent trading had been consistent with internal forecasts and, consequently, the group expected the first half results to be in line with management expectations.
Northbridge has two core activities, Crestchic Loadbanks and Tasman Oil Tools. Crestchic is a specialist electrical equipment business which manufactures and rents loadbanks and transformers from its base in Burton on Trent, with depots in France, Germany, Belgium, UAE and Singapore. It also has satellite locations in China and the USA.
Tasman rents drilling equipment to the oil, gas and geothermal industries from its sites in Australia, New Zealand and the UAE.
The company said the power reliability side of its European, UK and USA activities had continued to be resilient. New markets in the USA are expected to provide a long-term growth opportunity for Crestchic and the growth of renewable power generation in advanced economies is providing profitable opportunities.
This is in contrast with its other overseas markets, which have continued to experience low levels of activity in power projects, particularly in the oilfields and shipyards where the use of its loadbanks and transformers is prevalent.
It is hopeful of a long term recovery in these markets.
The company said it had also agreed a new joint venture in Malaysia with its local partner, Olio Resources. The new company, called Olio Tasman Oil Tools, will be 51% owned by Olio and 49% by Northbridge, and will service the oil tool rental market in the region. It will begin trading on October 1.
The group expects to release its interims for the half year ended June 30 during the week commencing September 25.
