WorleyParsons Ltd., Australia’s largest oil services business, said second-half earnings will fall about 50% from the first half as it cuts 2,000 jobs and reduces work due to falling commodity prices.
There will be about A$125 million (US$98 million) in one-time costs to pay for redundancies and cancel rental contracts early, in particular in North America, the Sydney-based engineer said Monday in a statement. The forecast drop would result in net income of about A$52 million, about 62% below the A$137 million median of three analyst estimates for the period compiled by Bloomberg.
Falling oil and gas prices are challenging the profitability of the energy companies that buy WorleyParsons’ services, with a tally of U.S. oil rig numbers falling 55% over the past 12 months. The company gets about 73% of its revenue from oil and gas and just over 50% of its sales are in Canada and the Americas.
“WorleyParsons has experienced deterioration in workload since February,” the company said. The changes were needed “to adjust its business to market conditions.”
Shares in the company fell as much as 12%, the biggest drop in nearly 18 months, and were down 10% at A$10.31 at 11:16 a.m. in Sydney. The stock has risen 2.3% so far this year, trailing an 8% gain in the S&P/ASX 200 benchmark.
West Texas Intermediate crude oil futures have risen 6% this year but remain 35% below their level a year earlier. U.S. oil production, which has nearly doubled since 2009, has leveled off so far during 2015.
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