By Rhiannon Hoyle
SYDNEY--As sharp declines in prices of commodities ranging from
iron ore to gold roiled the global mining industry, engineering
contractor WorleyParsons Ltd. turned to what was a still-booming
oil-and-gas sector to drive profits.
Now, the rout in global oil markets has that strategy in a
chokehold.
Shares in WorleyParsons, which has operations across America,
Europe and the Asia-Pacific region, plunged by as much as 15%
Wednesday after management forecast thinner margins and falling
revenue from an oil and gas business that accounted for nearly 90%
of its earnings in the six months through December.
The problem for WorleyParsons is that energy-industry customers
are scaling back spending on exploring for more oil and gas, and
delaying investments in new projects. In doing so, energy companies
are mirroring the response by global miners such as BHP Billiton to
falling metals prices.
"I don't think anyone was forecasting the oil price would fall
to the level that it did," said Andrew Wood, WorleyParsons's chief
executive.
The company isn't alone in feeling the pain. Earlier this month,
the chief executive of Transocean Ltd. stepped down abruptly, a
casualty of the plunge in oil prices and the deep-water drilling
company's ill-timed expansion. In mid-January, Schlumberger
Ltd.-the world's largest oil-field service company-said it laid off
9,000 workers late last year to protect profits.
WorleyParsons said its net profit fell 7% to 104.3 million
Australian dollars (US$81.7 million) in the six months through
December.
Australian investment bank Macquarie said investors were focused
on how deeply lower oil prices would eat into the company's
earnings. WorleyParsons said it only expected a modest decline in
sales and margins, but the outlook remained very uncertain.
"Impacts to date are limited, but are still playing out,"
Macquarie said in a client note.
Analysts believe several projects from Australia to North
America could be scaled back, delayed or even scrapped altogether
due to the oil-price fall.
Already, Woodside Petroleum Ltd. and partners including Shell
said they were pushing back a final investment decision on the
proposed Browse LNG project in northwestern Australia until next
year. Malaysian state-owned energy company Petroliam Nasional Bhd.,
or Petronas, has said it would delay making a final decision on
building a multibillion-dollar gas-export plant on Canada's Pacific
coast.
WorleyParsons has been cutting costs to cushion any blow to
profits from lost contracts, including axing or not replacing
thousands of workers in recent years. The company said conditions
in the minerals and metals sector "remain flat," with mining
companies continuing to cut costs and budgets for new projects as
oversupply of many commodities keeps prices low.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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