(Adds analyst comment.) By James Herron Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Shares in oil services company Wellstream Holdings PLC (LSE:WSM) ( WSM.LN) fell 4% Thursday despite the company indicating a strong performance in the first half due to solid demand for its flexible oil and gas risers and flowlines.
As of June 30, the company said its total revenue backlog is GBP300 million. Citigroup analyst Fiona Maclean said in a research note that the market may take this negatively because it is down from the GBP336 million backlog at the end of 2007. The backlog is up more than 40% from GBP208 million a year ago.
The company said the expansion of its capacity remains on track to be completed in the first quarter of 2009, with current progress at 40%.
The upside from this expansion is already more than priced into Wellstream's shares, said a research note from Oriel Securities analyst Joanna Craig. "The shares offer good growth and strong leverage in the current market but we see better value elsewhere," she said.
The company is also behind some of its competitors in signing a long awaited agreement with Petroleo Brasileiros (PBR), she added. She maintained her sell rating and 1,295 pence target.
Increased exploration for oil and gas in the wake of rapidly rising prices has given a massive boost to the oil services sector. Wellstream said activity in the South Atlantic Basin, Asia and deepwater Gulf of Mexico is particularly encouraging.
Strong sector performance has led some analysts to predict a growing wave of mergers and acquisitions. Expro International Group PLC (LSE:EXR) (EXR.LN) was recently the subject of a takeover battle between U.S. oil services giant Halliburton Co. (NYSE:HAL) (HAL) and a private equity consortium led by Candover.
At 0749 GMT, Wellstream shares were down 49 pence, or 3.8%, at 1,246 pence in a weaker London market.
Company Web site: http://www.wellstream.com
-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@ dowjones.com
(END) Dow Jones Newswires 06-26-08 0413 Copyright (c) 2008 Dow Jones & Company, Inc.
