Gemini experienced a soft second quarter relative to plan, as predicted in Q1, however recent project awards and an increase in client requests for services indicate an encouraging second half of 2010.
General economic conditions have continued to improve, and we are optimistic that the worst of the recession impact is over. There are a number of signals pointing to a stronger second half of 2010 and further recovery into 2011. Our optimism is based on an improved overall economic outlook, reasonable stability of oil prices, significant increase in drilling and completions, and recent land sales in western Canada that were the third highest since 1980. Improvement in capital markets has lead to increased capital spending supported by higher oil prices; there is renewed optimism as a number of important oilsands projects have been pulled “off the shelf”. There is also a lot of activity in the in-situ heavy oil market, which has resulted in an increase in demand for engineering services this year.
Gemini continues to implement essential and progressive strategic actions to reposition the company to achieve future growth and shareholder value. Numerous initiatives are underway focused on improving our profitability, solidifying key management positions, improving project systems and processes, growing revenues and developing our human resources. Our rebranding has increased our presence in the marketplace and helped clients understand the full depth of our services. Gemini’s structure has been reshaped in the second quarter to refine our “One Company” strategy and consolidate internal services to reduce costs. The structure has been adjusted to centralize accounting, create a unified project services team across the company, and realign our engineering resources to strengthen our discipline and project engineering service delivery. In addition, to further refine our marketing and sales efforts business development initiatives and resources have been dedicated to work within the business units.
We are pleased to welcome Paul Blaha to the Gemini team at the start of the third quarter as Vice President, Engineered Solutions. Paul will lead our Engineered Solutions business unit and brings a wealth of experience and leadership capability to the organization. The implementation of our strategic plan and reshaping of our structure resulted in the creation of two new leadership positions. We welcome Trung Luu, Director of Project Services and Michael Stark, Director of Business Development, Field Solutions to these key management roles.
Our business development initiatives were focused on increasing backlog in response to a forecasted soft second quarter. The engineering backlog is recovering; however, demand for field solutions will continue to present a significant challenge for the remainder of 2010. New project opportunities for field solutions have been slow to materialize and clients continue to be cautious in proceeding with the work. We are continuing to conceive and implement business development initiatives, and improvements to systems and processes to increase effectiveness.
The stability and strength in oil prices, increase in land sales, and improved equity markets should lead to greater capital spending for the remainder of 2010 and continue into 2011. Recent project awards are testament to these improving conditions and have increased our engineering backlog. This trend is expected to continue into 2011, which is typically a leading indicator for future demand in field solutions. Consolidated revenues for the second half of 2010 are expected to strengthen, and we are optimistic we will finish the year with profits exceeding 2009.
Our success is testament to the skill and talent of our people, who are loyal and dedicated to the success of Gemini.
On behalf of the Board of Directors,
Doug Lautermilch
President and Chief Executive Officer