Plexus profit bounces back

POS-GRIP wellhead equipment supplier Plexus increased its interim revenues by 16% to £7.5m and this helped profit to bounce back but North Sea tax changes could create uncertainty. Last year's Gulf of Mexico oil spill from BP's offshore field and other spills have increased the focus on wellhead safety and blow out preventers, such as POS-GRIP. Revenues grew from £6.47m to £7.54m in the six months to December 2010, with most of the money coming from rental services. Increased exploration activity in the North Sea has helped and there have been contract wins in Australia and in Surinam. Profit jumped from £131,000 to £1.1m. That was better than expected. AIM-quoted Plexus had net cash of £676,000 at the end of 2010. There are bank facilities of £6m. There was a strong cash inflow in the first half but Plexus needs the facilities to cope with the volatility of working capital and increased R&D spending on a new POS-GRIP friction-grip subsea wellhead called HGSS. This will have higher performance and testing standards. The existing POS-GRIP technology is compliant with API Spec 6A wellhead standards and the equivalent ISO 10423. Plexus made a profit of £1.9m in 2007-08 and it is well-placed to return to that level of full year profit. There could be some short-term uncertainty, though, because of the North Sea tax changes in the Budget. Prior to the Budget, a survey suggested that capital investment in the North Sea could reach £8bn a year and carry on at that level for five years. Oil companies may have to recalculate their figures following the proposed tax changes. Westhouse reckons that the "unpredictability of fiscal conditions, and the worsening field economics the tax will create, is likely to deter investment and stimulate the search for oil and gas elsewhere". If there is less exploration in the North Sea and more elsewhere that is not necessarily bad for Plexus, though.