Cape plc, the international provider of essential, non-mechanical support services principally to the energy and mineral resources sectors, today provided an update on its GL3-Z LNG project in Arzew in Algeria.
The contract, awarded to Cape in 2010 by Snamprogetti Chiyoda s.a.s. di Saipem S.p.A., is for the provision of the total insulation works for the Sonatrach GL3-Z LNG Project. Based on the results of a review in February 2012, and as indicated in the Company’s 2011 results announcement in March 2012, the timing of the work releases on the Arzew Project had been slower than expected with revenues in 2011 less than one-third of planned levels. With the mechanical completion date being unchanged, it was also explained that it had been necessary to significantly increase our manpower on the project.
A further project review was held in mid-April during which no material concerns were highlighted by the project team. Given the size, location and management of the project, Acting CEO Brendan Connolly deemed it appropriate to conduct an operational audit in mid-May. This further review has identified additional costs arising within the Arzew Project, which as a result is currently projected to produce a significant loss. The Board has instigated a plan to mitigate the potential losses on the Arzew Project including the injection of a new project team, the introduction of additional skilled workforce and the rigorous application of Cape processes. However, based on the latest available estimates, Cape intends to recognise a one-off charge of £14 million in respect of current and estimated future losses on the contract, which will be charged in the Interim Accounts for the six months ending 30 June 2012.
The Company now anticipates that its profit before tax for the full year ending 31 December 2012 will be reduced by the above one-off charge. Cape reiterates its previously issued guidance for revenues for the full year ending 31 December 2012, which is unchanged.
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LNG World News Staff, May 25, 2012