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Shawcor provides 4Q16 results and a 2017 outlook

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World Pipelines,

Shawcor Ltd. has announced its 4Q16 financial results and provided a pipeline-related outlook.

Steve Orr, CEO of Shawcor Ltd. commented: “Shawcor’s 4Q16 results showed a solid improvement over the company’s performance in 2Q16 and 3Q16, which had been impacted by depressed activity levels in all of the company’s global regions. A modest pick up in North American well completion activity, coupled with a ramp up of production at our Asia Pacific facilities and increased US transmission pipeline weld inspection all contributed to the 27% quarter over quarter gain in revenue, which, in turn, delivered higher Adjusted EBITDA.”

He added: “In 1Q17, we have commenced production of the concrete coating work for the Sur de Texas-Tuxpan pipeline project (Mexico). Volumes on this CAN$350 million project are expected to ramp up during the first half and reach full production by June 2017. As a result, the company expects to sustain a trend of improving its results in 2017.”


Since global oil and gas prices first declined in 2H14, Shawcor has faced weak market conditions that have impacted demand for the company’s products and services.

Lower expenditures by customers on drilling and well completion has affected Shawcor’s Pipeline and Pipe Services segment - North America region. Moreover, the curtailment in capital spending on new oil and gas development projects has also impacted this segment. These trends were evident in Shawcor’s financial performance.

However, commencing in 4Q16, the company’s financial performance suggested an improving market demand, which, combined with growth in the company’s order backlog, offers the potential that Shawcor will now sustain a trend of improving results. Critical to this outlook are two factors. First is the level of North American upstream activity, and specifically the number of new oil and gas wells drilled and completed. While the second factor driving Shawcor’s outlook is the level of capital spending on pipeline infrastructure projects by the company’s customers.

The decline in oil and gas prices resulted in the delay or curtailment of large oil and gas greenfield development projects. In 2016, capital spending reductions translated into substantially lower levels of small project activity. With both large greenfield developments and smaller production sustaining capital projects, customers continue to limit commitments to new projects to ensure that capital spending is in line with reduced operating cash flow.

Shawcor sees work proceeding on natural gas infrastructure, which is supported by strong economics and supportive political mandates to reduce hydrocarbon emissions in electricity generation. One such example is the US$2.1 billion Sur de Texas-Tuxpan natural gas pipeline in Mexico, which is expected to generate approximately CAN$350 million in pipe coating revenue for Shawcor in 2017. This project, along with a modest but steady improvement in North American well completion activity, is expected enhance Shawcor’s growth in financial performance in 2017.

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