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Financial Times: Winners and losers in high prices lottery

Winners and losers in high prices lotteryBy Rebecca Breamand Mark Odell
Published: May 11 2006 03:00 | Last updated: May 11 2006 03:00

High prices for a range of commodities, from copper and gold to coal and oil, have stimulated frantic activity in the natural resources industries.

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But the increase in activity has led to severe shortages in drilling equip ent, specialist vehicles and skilled workers.

Companies benefiting from commodities boom bottleneck:

*Bateman Engineering, the mining services group, listed on Aim in October 2005 at 200p and its shares have risen strongly – closing yesterday at 386p – as it has won an increasing number of contracts. Bateman's clients include mining houses such as De Beers, Anglo American, BHP and Rio Tinto, and in March the group won its first contract in China.

*Abbot Group, the oilfield services company, said in March that it had won $430m (£230m) of new contracts in the first quarter of the year, compared with $800m for the whole of 2005. It is already the largest production drilling provider in the UK section of the North Sea but it is trying to expand in higher growth areas, such as Russia, especially Sakhalin island and the Caspian region, the Middle East and Africa.

*Rotork, which supplies more than 70 per cent of its electric valve actuators to the oil and gas and power industries, has seen sales soar. Last year, the company reported a 21 per cent jump in electric actuator sales. Bill Whiteley, chief executive, said: “This is pretty good growth for what was often seen as a pretty mature industry.” So far this year, sales are up 22 per cent.

Companies suffering from the commodities boom bottleneck:

*Shell was last year forced to admit that the cost of its flagship Sakhalin natural gas project off the Siberian coast had doubled from $10bn to $20bn. Problems at the project included the rising cost of raw materials and a shortage of contractors. Jeroen van der Veer, Shell chief executive, said the cost overruns were “absolutely staggering”.

*BP admitted last month that its Baku-Ceyhan oil pipeline project would be completed six months late and cost 30 per cent more than expected – $3.9bn rather than $2.95bn. BP gave the rising price of contract workers and raw materials as the reason.

*BHP Billiton, the world's biggest miner, is raking in record profit. But it is struggling to meet demand because of shortages of both people and equipment. BHP said at the end of last month that, while its exploration and development activities were on schedule, they were over-budget. “A shortage of people, equipment and supplies has led to tight labour markets and difficulty in sourcing construction and drilling plant and machinery, which in turn has ledto rising input costs,” it said.

*Desire Petroleum, the small Aim-listed group, is looking for oil off the coast of the Falkland Islands but has been hampered by the lack of drilling equipment available and the high rental rates for rigs. It raised funds last year but has found itself at the back of a queue for drill rigs and has so far not been able to spend its cash.

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1 Comment on “Financial Times: Winners and losers in high prices lottery”

  1. #1 Verena
    on May 21st, 2006 at 14:38

    I found this article very useful. Thank you. By the way you can find further information on Abbot Group here.
    I hope you will find it useful as well.
    Verena

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