Oil services: choppy waters - FT.com Brazil has sorted things out on the football field, as Sunday's 3-0 defeat of Spain showed. Things are less straightforward elsewhere. European oil services group Subsea 7 last week blamed the difficulty of operating in the country as it took a third hit on a $1bn contract in Brazilian waters. With Petrobras and its supply chain creaking under the weight of expectations, and stringent local content rules, difficulties in the country from time to time are not surprising. But that may not be the whole story. Subsea's announcement knocked 15 per cent off its shares last Thursday. Coming after Saipem spooked the sector with two profit warnings so far in 2013, such a reaction may be merited, if a little extreme. Subsea had already warned of problems in Brazil that it said would cost it $100m; it has now raised its estimate by up to another $300m. That is a lot of red ink on a contract that makes up just 5 per cent of its backlog. Subsea's problem looks relatively isolated to the contract in the Guará-Lula field. Saipem's problems, which mainly relate to contracts in Algeria, also look company-specific. But investors should bear two things in mind. One is that a track record counts for a lot in the oil services business. The sector does a tough job in demanding circumstances. If a company screws up, it can be hard to win back the trust of clients. The other is that lump-sum contracts such as Subsea's work in Guará-Lula are especially risky in a price-competitive environment. European oil services companies may have overestimated the profit margin on contracts won in 2009 and 2010, when the market was intensely competitive. Some of them, including Subsea and Saipem, obviously got their pricing wrong. The operating environment in Brazil may get worse before it gets better. But it is not the oil services industry's only problem.