Fugro Shares Lead Oil Services Sector Rally

By MarEx 2014-11-10 21:24:00

Shares in Dutch oil services company Fugro NV jumped on Monday as the purchase of a stake by rival Boskalis fueled talk of a possible bid for the troubled company and boosted shares in the industry across Europe.

Fugro shares were up 36 percent by 1306 GMT, lifting Norwegian rival PGS for example 5 percent as the Boskalis move, announced after European stock markets closed on Friday, sparked talk of a spate of deal-making in a sector which has been squeezed by cuts to oil company investments.

Fugro, which is also deploying its undersea survey vessels in the search for Malaysia Airlines' missing flight MH370, has been hit hard by the falling oil price which has led oil majors to cut back in areas like exploration. Last month it scrapped its 2014 dividend after its third profit warning of the year.

Among other Norwegian oil industry survey firms, some of Fugro's top competitors, TGS Nopec was up 3.3 pct and Polarcus leaped 18.3 percent.

The stake purchase came days after Fugro Chief Executive Paul van Riel and Finance Director Paul Verhagen bought thousands of shares, leaving them with substantial profits. Van Riel bought 12,000 shares at 10.19 euros and Verhagen bought 6,000 at 10.03.

Asked whether the company had been aware of the impending Boskalis stakebuilding, Fugro corporate strategy director Rob Luijnenburg said: "Absolutely not. We were surprised and (the share purchase) was unexpected and unsolicited."

While Boskalis denied it was planning a takeover, the surprise purchase of the 14.8 percent stake led many to expect a bid. "The genie is out of the bottle," said Rabobank analyst Michel Aupers in a note. "Fugro management is no longer in charge of its own destiny and the company is in play."

Fugro said Boskalis's stake purchase was "unsolicited and unexpected" but it was open to cooperation on specific projects.

"Fugro is interested to discuss a partnership with respect to its subsea division with ... parties including Boskalis," it said. Boskalis said it wanted to discuss cooperation with Fugro but had no intention of making an offer.

The falling oil price particularly affects Fugro, since it specializes in difficult-to-reach oil fields deep beneath the ocean that are worth exploiting only when the oil price is high.

Boskalis has been involved in projects including removing the wreck of the stricken cruise liner Costa Concordia from the coast of an Italian island and dredging the Suez Canal.

Other oil services and engineering companies up after Boskalis's move included SBM Offshore, Subsea 7 , John Wood Group and Tecnicas Reunidas , all up between 2 and 5 percent.

By Thomas Escritt (C) Reuters 2014.

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