Reuters: Hot Stocks: UPDATE 1-Subsea 7 warns of Brazil cost rising, shares plunge

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UPDATE 1-Subsea 7 warns of Brazil cost rising, shares plunge Jun 27th 2013, 07:48 Thu Jun 27, 2013 3:48am EDT * Says costs for Guará-Lula project to increase $250-300 mln * Says project delayed by weather, supply chain problems * No longer expects FY EBITDA to improve compared with 2012 * Shares drop 18 pct (Adds CEO, shares, detail) OSLO, June 27 (Reuters) - Offshore engineering group Subsea 7 cut its 2013 outlook on Thursday as it once again ran into cost overruns and delays at a large Petrobras subsea project offshore Brazil, sending its shares down by 18 percent. Oslo-listed Subsea 7 said costs at its Guará-Lula project, part of ultra-deepwater discoveries in the Santos Basin, would be between $250 million and $300 million higher than its earlier estimate, forcing it to abandon plans to make "progress" in underlying profit this year. The project, for which Subsea 7 was in 2011 awarded a $1 billion contract, has run into weather-related difficulties, adding to other woes specific to operating in Brazil. "Delays have been experienced during the quarter as a result of ongoing problems with the supply chain, the delayed commencement of pipeline fabrication due largely to customs clearance issues, and adverse weather conditions in the winter season," it said in a statement. The profit warning adds to concerns over risks in the sector after Italy's Saipem, Europe's biggest oil service company, last week issued its second profit warning in less than five months. Subsea 7, which had already warned of delays at major projects in Brazil, now no longer expects full-year adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) to improve compared with 2012. The company is concerned over its ability to operate in the South American country, which is rushing to tap its vast new oil wealth while also building an oil services and shipbuilding industry from scratch. "It is partly due to the project but to a great extent it is due to the Brazilian environment," Chief Executive Jean Cahuzac told reporters. (Reporting by Victoria Klesty and Gwladys Fouche; Editing by David Cowell) Link this Share this Digg this Email Reprints

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