OIL services heavyweight Denholm has highlighted the recovery in the North Sea market after recording a surge in profits in the latest year.
Denholm Oilfield Services made £14.9 million profit from operations in 2018 compared with £2.1m in the preceding year as it felt the benefit of improved conditions in key markets.
The group’s experience provides a further sign that life is getting easier for firms in the North Sea supply chain as the industry emerges from the deep downturn triggered by the crude price plunge from 2014 to 2016.
Read more: Shell approves North Sea project as interest in area grows
Chairman John Denholm noted the group cut jobs and salaries amid the tough times experienced as oil and gas firms slashed spending amid the fallout from the slump in the oil price.
However, he said the outlook has become much brighter following the increase in the crude price in recent months. This has encouraged firms that operate oil and gas fields to invest in projects.
“We see across the markets we operate in some significant developments,” said Mr Denholm.
He added: “The North Sea is moving forward, new projects are coming along and work is picking up.”
Denholm Oilfield Services’ chief executive Mike Beveridge said the market had unquestionably improved. Underlining the scale of the turnaround, he noted order books for some work completed in Aberdeenshire and Glenrothes had increased seven-fold on the same time last year.
Read more: One in three North Sea oil jobs 'lost' since 2015
Employee numbers in those bases are now higher than they were before the downturn started, at around 200.
Mr Denholm provided a vote of confidence in the prospects for the oil services sector, noting that demand for fossil fuel is likely to remain strong even as investment in renewable energy increases.
He highlighted the importance of oil as a source of power for transportation and a feed stock for the production of a huge range of materials.
“We see considerable opportunities in the oil and gas sector,” said Mr Denholm.
While the North Sea market is likely to contract as growing numbers of fields run dry, Denholm Oilfield Services expects to have a significant business in the area for years to come.
Read more: North Sea clean up costs alarm MPs with bill for taxpayers set to top £24bn
Mr Denholm also underlined the appeal of other markets in which the firm has a significant presence, such as the Caspian and the Middle East.
These appear to be improving faster than the North Sea, supported by huge investment in projects by majors such as Chevron and state-owned giants, including the Abu Dhabi National Oil Company.
The group will continue with its strategy of having a balanced business, in terms of geographic spread and the maintenance and asset development cycles.
“We will look to deliver this while also continuing to add services to our portfolio, when appropriate opportunities arise, as we seek to exploit the opportunities that will emerge as the oil and gas industry recovers,” said Mr Denholm.
The group will use acquisitions to supplement organic growth. Mr Denholm said it was in preliminary talks about one deal but it was too soon to provide details.
Read more: Denholm Oilfield Services eyes flotation as Glasgow Warriors sponsorship boosts profile
Noting that the group may look to raise funds to support its expansion plans, he said it could look to complete a stock market flotation if conditions were suitable, adding: “it’s all an issue of timing.”
The group considered floating on the Aim market before investor sentiment turned against the oil services sector following the crude price slump.
It recorded a 36% increase in turnover, to £151.3m in 2018, from £111.1m in the preceding year.
Sales and profits increased across all business segments.
The group was spun out of the venerable Glasgow-based J&J Denholm shipping-to- seafood combine in 2015.
It has used expertise developed in oil and gas to build businesses in areas ranging from distillery cleaning to industrial plant hire.
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