Tesco gives weak 4th-quarter profit and revenue outlook, citing falling energy prices

IndustriesAssociated Press

Tesco pulled back significantly on its expectations for the last quarter of the year amid delayed and cancelled orders from clients in the energy sector and as the Russian economy is pummeled by tumbling energy prices.

The oil and natural gas drilling service company said last year it would shift its focus to international markets, "especially to Russia and Latin America," with the number of active rigs in North America declining.

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Those are the regions that are getting hit the hardest this year as crude prices have fallen from $107 per barrel in June, to around $55. Prices fell another 3 percent Monday.

The company said it now expects earnings of 10 to 15 cents per share in the four quarter, excluding charges related to the declining value of the ruble and other non-recurring costs.

That's well short of the 29 cents that Wall Street had expected, according to FactSet.

The company said its revenue won't improve from its third-quarter total of $141.9 million.

Shares of Tesco Corp. lost 94 cents, or 6.9 percent, to $12.66 in afternoon trading.

The Houston company said that some customers have asked to defer shipments and that order cancellations will have an impact in the fourth quarter and next year.

"We will use this market condition as an opportunity to lower our cost structure and streamline our organization," said CEO Fernando Assing. "This will lower costs in 2015 and will improve our leverage when the market recovers. We are well positioned to deal effectively with the uncertain times and our priority remains cash generation and preservation until such conditions improve."

Companies across the energy sector are slashing spending to ride out the downturn in crude prices.

BP said earlier this month that it would take $1 billion in restructuring charges over the next year and is considering reducing its spending on development by as much as $2 billion in 2015. ConocoPhilips said it would cut capital spending next year by 20 percent.