Technip May Spend $1.5 Billion Cash Pile on Dividend Brazil

Technip SA (TEC), Europe’s second-largest oilfield-services provider, may spend “hard-earned” cash on raising dividends and investment in Brazil, and will consider acquisitions, the company’s chief financial officer said.



“The amount of cash that we can truly call our own has grown” to about 1 billion euros ($1.5 billion), Julian Waldron said in an interview in Paris last week. “We’ve worked very hard to get the company’s balance sheet to where it is today.”



Technip, which makes equipment for oil and gas exploration and builds liquefied natural gas installations, is seeking to broaden the range of its services to producers including Exxon Mobil Corp. (XOM), Royal Dutch Shell Plc, Total SA (FP) and Saudi Aramco. Increasing investment and shareholder payouts are higher priorities than carrying out any large-scale acquisition, Waldron said.



“If there are opportunities we don’t rule them out,” the CFO said. “If one comes up at least we know we have the balance sheet. I think we would have shareholders’ support to do something.”



Technip built up its cash reserves after working through a series of orders that soured when oil prices jumped, pushing up labor and construction costs and leading to 2008 provisions on Qatar and Asia-Pacific contracts. Chief Executive Officer Thierry Pilenko has since pledged to shield the company from exposure to the building industry.



Share Performance

Investors rewarded Technip’s improved prospects, pushing the share price up 7.2 percent this year. The company joined the benchmark CAC 40 index in 2009 and was the best performer that year when the stock price more than doubled. It raised the dividend for 2010 by 10 cents to 1.45 euros a share.



Technip, whose competitors include Saipem SpA and General Electric Co.’s Wellstream Holdings, bought offshore wind energy cable installer Subocean Group earlier this year and two Brazilian-flagged pipelay vessels last year. These “small” purchases successfully tested Technip’s ability to react “very fast” with cash offers for assets, said Waldron, who was educated at Cambridge in Britain and came to Technip from Thomson SA, the French electronics company now called Technicolor.



Last month, the company reported an 8.8 percent increase in first-quarter profit. The market for flexible pipelines made by Technip for offshore oil exploration and production is growing at a pace that is “probably beyond our expectations,” Pilenko said on a conference call with analysts at the time. “Very large” contracts for the equipment may be awarded in Brazil.



Brazilian Prospects

Technip will raise investment in the next few years in Brazil, where planned expansion of energy output from offshore discoveries offers the most growth “visibility” compared with other regions like the Gulf of Mexico, Ghana, India and the Arctic, Waldron said.



In Brazil, the French company is expanding a manufacturing plant for flexible pipes, betting that last year’s order from Petroleo Brasileiro SA (PETR4) to supply a pilot system for the deep offshore Tupi field will grow.



“Under a really aggressive case, the potential is for twice worldwide installed capacity just for Brazil alone,” Waldron said of the technology. “Under a more reasonable case you are still at a multiple of what is available in Brazil today, substantially above anything that could be produced out of today’s world capacity.”



The oil services company also plans to bid for a contract for two 550-ton flexible pipelay vessels for Brazilian offshore fields and is expanding installations at Angra Porto.