(EnergyAsia, Feb 25) — Australian engineering company Clough Limited has reported a net loss of A$42 million for the six months to December 31, 2004, which includes provisions totalling $45.3 million in connection with the troubled BassGas contract. (US$1=A$1.25).
The company said orders won during the period totalled A$827 million, generating work in hand worth A$925 million as at December 31. The resulting work in hand was up 81% from A$510.9 million for the previous corresponding period and more than double the A$407.6 million figure at June 30, 2004.
“The strong recovery in our order book in the first half highlights the significant progress being made in rebuilding the Company, with major oil and gas contract awards in India from both Oil and Natural Gas Corporation and BG Exploration and Production India Limited being notable highlights,” said David Singleton, Clough’s CEO and managing director.
“The current work in hand figures are before any contribution from the recently announced Saudi Aramco and Gorgon awards – contracts which open the way to new earnings growth in the next few years. I believe that these two contracts are amongst the most important to have been booked over the last few years, and should provide a major step in delivering our risk reduction strategy.
“However, the BassGas dispute has overshadowed our progress in a range of areas. The resulting reported loss is clearly disappointing,” Mr Singleton said.
The loss principally reflects a A$19.3 million provision for the bond called by Origin in November 2004, plus provisions of A$20 million reported at last year’s AGM.
“Our claims against Origin and its BassGas joint venture partners will be tested through arbitration.
However, the arbitration process will not deliver a speedy solution and we have therefore chosen to reflect the cash flow impacts from BassGas in the operating results,” Mr Singleton said.
The six-month reporting period again saw strong profit contributions from Clough’s Indonesian subsidiary PT Petrosea Tbk (A$5.6 million consolidated result) and Clough Property (A$4.7 million). The outlook for new opportunities and further growth in the performance of both Petrosea and Clough Property remains positive.
Fixed price contract activity generated a loss of $15.7 million, excluding BassGas, mostly due to the low opening order book and late award of contracts in the half-year, resulting in lower volumes and a consequent under recovery of overheads. Increased volumes in the second half of the year are expected to fully recover ongoing overhead costs.
Pre-tax profits from lower risk Engineering, Procurement and Construction Management (EPCM), engineering support and operations and maintenance contracts totalled $2.8 million. This result was achieved notwithstanding that it included substantially higher costs associated with tendering and winning the Gorgon and Saudi contracts, and other opportunities in this key growth sector for Clough.