Problems at Cape's GL3-Z LNG (liquefied natural gas) Project in Arzew, Algeria appear to be worse than originally thought.
The energy and mineral resources services provider has revealed that its full-year profits will be held back by a £14m charge related to the project.
As previously indicated in its 2011 preliminary results announcement in March, the timing of the work releases on the Arzew Project had been slower than anticipated with revenues in 2011 less than one-third of planned levels. The firm also had to significantly increase its manpower on the project, which was awarded to Cape in 2010 by Snamprogetti Chiyoda.
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After an operational audit of the project in mid-May, additional costs were identified, with are currently expected 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," the firm said.
However, in respect of current and estimated future losses, the group expects to take a one-off charge of £14m in the first half of the year ending June 30th.
The company reassured that its previously issued revenue guidance for the full year remains unchanged.
BC
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