* Higher oil prices raising expectations for recovery
* Saipem, Aker report better-than-expected Q3 results
* Shares in both companies rise strongly on results
By Stephen Jewkes and Nerijus Adomaitis
MILAN/OSLO, Oct 24 (Reuters) - Major European oil service groups Saipem and Aker Solutions gave investors in the struggling sector a rare ray of hope on Wednesday by signalling signs of recovery.
The oil service industry was badly hit by falling crude prices in 2014-2016 when oil companies cut exploration and new developments to preserve cash for dividends.
“The market is showing signs of a change in trend compared to recent years,” Saipem’s chief executive Stefano Cao said, adding that challenges remained.
A recent rise in oil prices has raised hopes that oil service clients could decide to speed up investments and shares in Italy’s Saipem rose 5.7 percent while those of Norway’s Aker Solutions were up 7.6 percent after they reported better than expected quarterly results.
“The (Saipem) outlook comments are incrementally optimistic stating signs of turnaround and good visibility in E&C (engineering and construction) opportunities,” Morgan Stanley said in a note following the results.
Saipem, controlled by oil major Eni and state lender CDP, is focused on E&C work and counts Saudi Aramco as its biggest client.
It is considering strategic options for its drilling businesses that could include a sale or partnerships, amid consolidation in the oil service sector in recent years as companies look for critical mass to offset waning margins.
Aker Solutions said it has doubled its order intake in the third-quarter from a year ago, helped by new contracts in Brazil, Angola and China, and was bidding for contracts totalling 45 billion Norwegian crowns ($5.4 billion).
“We see good reasons to expect the growth, but we are careful in our guidance,” Aker Solutions Chief Executive Luis Araujo told a news conference.
Aker Solutions said it expected revenues next year to be “slightly” higher than this year, but earnings margins to be around the same level, despite the company having to bid for work at lower prices in the past few years.
“The market remains very competitive, there is still a lot of capacity available, especially when it comes to subsea systems, so we need to continue our efforts to reduce the costs,” Araujo said.
Saipem, a leader in subsea engineering and construction, is looking to develop new lines of business to boost order books, including floating wind power farms and rig decommissioning.
Aker Solutions said it also saw floating offshore wind as its new growth area, expecting to win an offshore wind lease in California as part of a wider consortium. ($1 = 0.8723 euros) ($1 = 8.3212 Norwegian crowns) (Reporting by Stephen Jewkes; Editing by Tom Hogue and Alexander Smith)