Oil spill uncertainty hits Pressure

The Sheffield-based group, whose high pressure cylinders are used in semi-submersible oil rigs, said the giant spill will inevitably lead to a slowdown in development of deepwater oil fields in US waters.

President Barack Obama has called a moratorium on offshore drilling while BP battles to plug the leak, considered the worst in US history.

Pressure said customers are now placing orders with little warning, compared to a year ago when they would place orders 12 months before delivery.

"The big issues we have got are all short term," said chief executive John Hayward. "Everybody is waiting for the next set of orders.

"There are signs of things picking up but it's just when are orders being placed.

"But we believe that whatever goes on in the Gulf of Mexico is only going to be short term."

Shares fell four per cent to close the day down 7.5p at 175p.

The group is diversifying through acquisitions and organically to reduce its dependence on its two big oil and gas customers, who provide 80 per cent of its revenues.

Pressure yesterday said revenues in the 26 weeks to the start of April fell 3m to 9.7m, mainly because of protectionism in South East Asia, as shipyards awarded contracts worth around 4m to local suppliers instead of Pressure.

Pre-tax profits slumped 37 per cent to 1.5m, as the group maintained its high fixed cost base on lower workloads.

Pressure said its results will be skewed towards the second half, when higher-margin defence work comes through.

The group said volatility caused by the oil spill gives it just five or six months visibility on the offshore oil sector. Its order book has fallen to 11.4m.

But Mr Hayward said despite the tough market, he expects the market to recover in 2011. He said concerns over energy security and oil industry jobs mean drilling must resume in the Gulf of Mexico. "The USA needs to develop these deep water oil reserves," he said.

Nor does he expect the problems to affect drilling off the coast of West Africa or Brazil. "There's more capacity coming offstream than there is coming on. It's got to continue."

Mr Hayward said Pressure has seen a surge in inquiries in recent weeks from major customers. It has quoted 2m of oil rig work for its second-largest customer in the past fortnight. However, with a six-month lead time on its cylinders, any uptick in orders will not help this year's results.

Brazilian oil giant Petrobras is expected to be close to starting its next programme of rig building, which Mr Hayward said will be the trigger for increased confidence and orders.

The group increased its interim dividend by nine per cent to 2.4p per share, which it said was a sign of confidence in its prospects.

Pressure is also on the hunt for acquisitions, following the purchase of Cardiff-based niche manufacturer Al-Met for up to 2.25m in February.

It is ploughing investment into marketing at Al-Met, which makes specialised valve parts for the oil industry.

The group is also on the hunt for other acquisitions, and will spend some of its 5.2m net cash on these.