After investigations by EnergyReview.net, the Lakshmi gas processing project in India and the expansion of Queensland's Dalrymple Bay coal loading facility have emerged as the projects responsible for the shock profit warning.
In July 2001, Clough and Hyundai Heavy Industries were awarded a US$80 million contract to develop the Lakshmi field project by operator Cairn Energy, while Dalrymple Bay is one of Queensland's major coal export terminals and has undergone a series of expansions over the years.
Clough's share price plummeted yesterday 20c to finish at 48c after warnings that some "unexpected" project and commercial difficulties were likely to result in a first half loss and the group being unable to match last year's full net profit of $30 million. It traded even lower at 45c today (Tuesday).
"I think everyone has to consider their future when we have to go to the shareholders and tell them that we are not doing as we said we would," said Clough managing director, Dr Brian Hewitt. "We are not fulfilling our mandate. It's fundamentally distressing."
Last Friday, the company warned markets of potential significant cost over-runs on two projects. While Mr Hewitt would not disclose which projects on Clough's record workload were responsible, he did say one was an oil and gas project and the other in infrastructure management.
Many in the market believe that the company is suffering for its aggressive tendering policy over the last 12 to 18 months, which saw it underbid for new contracts and so it now must wear the additional cost.
On the issue of whether those responsible should be held accountable, Dr Hewitt said the company had to take some action. "Whether that (sackings) is it, is yet to be decided, but we've got to make some changes. The task for us now is to produce profits and regain the faith of our shareholders," he said.
One analyst, who preferred to remain nameless, described the announcement as a replay of last year's similar announcement. "Heads will have to roll, from the board level down," he said.
"They have to have a good hard look at themselves. For instance, I'd like for someone to ask what value Bill Clough brings to the company except for his surname." Clough insiders echoed that view.
The Lakshmi field is located approximately 260 kilometres north of Bombay in the Gulf of Cambay - an extension of the Arabian Sea.
Clough was responsible for all onshore work for the Lakshmi field, including the engineering, procurement, construction and commissioning of a gas treatment plant, with Hyundai looking after the offshore segment of the contract.
The onshore gas export plant will dehydrate and compress the gas through two process trains sized for a throughput of 75 mmscfd each.
First gas was supposed to be June 2002 with full completion by September 2002. Earlier this month, Cairn Energy said first gas had commenced on the first of November.
It said the field was currently undergoing a brief commissioning period with contractual plateau volumes at 120 mmscfd.
The Clough AGM starts at 10am at the Perth Parmelia Hilton.
