Interim results

RNS Number : 8645X
Petrofac Limited
24 August 2009
 




PETROFAC LIMITED


INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009



Petrofac Limited (Petrofac, the group or the Company), a leading international provider of facilities solutions to the oil & gas production and processing industry, today announces its interim results for the six months ended 30 June 2009.


FINANCIAL HIGHLIGHTS


  • First half order intake(1) of US$5.8 billion (2008: US$1.7 billion) with backlog(2) of US$8.4 billion at 30 June 2009 (31 December 2008: US$4.0 billion)

  • EBITDA(3) up 16% to US$207.5 million (2008: US$179.2 million)

  • Net profit(4) for the period up 20% to US$145.6 million (2008: US$121.2 million) on revenue up 1% to US$1,586 million (2008: US$1,576 million)

  • Earnings per share (diluted) up 22% to 42.70 cents (2008: 35.13 cents)

  • Interim dividend up 43% to 10.70 cents (6.46 pence(5)) per share (2008: 7.50 cents)

  • Gross cash balances at 30 June 2009 of US$900.2 million (31 December 2008: US$694.4 million)


Commenting on the results, Ayman Asfari, Petrofac's group chief executive, said:


"Overall, we are very pleased with the group's achievements in the first half of the year, and our excellent growth prospects.


"Notwithstanding the significantly lower oil price environment experienced in the first half of the year the group has performed well and, subject to any unforeseen circumstances, we are confident that we will deliver earnings growth for the full year of at least 20 per cent. With over US$6 billion of new contract awards secured in the year to date the group has record backlog giving outstanding revenue visibility and underpinning the group's confidence that strong growth in earnings will continue well beyond the current year."


OPERATIONAL HIGHLIGHTS


Engineering & Construction

  • Successful in securing US$5.9 billion of new contract awards in the year to date (US$5.4 billion during 1H 2009), including lump-sum contracts in Abu Dhabi, Algeria, Oman and Saudi Arabia


Offshore Engineering & Operations

  • Following increasing tender activity as the year has progressed, success in July in securing a £75 million 3-year contract with Apache to provide engineering and construction services for the Forties field in UK North Sea


Engineering, Training Services and Production Solutions 

  • Continued strong operational performance in service operator role for production of Dubai's offshore oil & gas 


Energy Developments

  • Commencement of oil production from West Don field in April 2009, less than 1 year from Field Development Programme approval, followed by commencement of production from Don Southwest field in June 2009

  • In July, acquired AH001 floating production facility with a view to upgrade, modification and redeployment


OUTLOOK


In Engineering & Construction, our largest reporting segment, recent contract awards are expected to support strong growth in revenue in the second half of the year. The terms on which these contracts were secured and our progress to date on these awards together with the continued good performance from the rest of our contract portfolio gives us confidence that we can maintain net margins in this segment of around 10% over the medium-term. Furthermore, our ongoing bidding activity in key markets in the Middle East and Africa and the Commonwealth of Independent States continues to position us well for the future.


Revenues in Offshore Engineering & Operations are expected to remain resilient in constant currency terms for the balance of the year. Bidding activity has increased recently and we would look to secure additional business over the coming months which will help position us for growth over the medium-term. However, we do recognise that cost control remains a high priority for our customers, particularly in high-cost markets such as the UKCS, and, as a consequence, we have implemented programmes to reduce our own fixed costs and particularly our property costs. We expect margins for the full year to be somewhat lower than last year.


In Engineering, Training Services and Production Solutions we are also seeing an increase in new business opportunities. However, activity levels in Engineering Services and Training Services are expected to remain subdued for, at least, the balance of this year.


Our near-term focus in Energy Developments remains on tying in the injection wells on the Don assets and commissioning the gas lift on the floating production facility, which is expected to lead to an increase in production levels as the year progresses. In 2010, the second phase of the development should enable us to access additional reserves, following recent discoveries in the Don Southwest field. In addition, we continue to evaluate a number of upstream and energy infrastructure opportunities. 


Notes


(1)    Order intake comprises new contracts awarded, growth in scope of existing contracts and the rolling increment attributable to contracts which extend beyond five years. Order intake is not an audited measure.


(2)    Backlog consists of the estimated revenue attributable to the uncompleted portion of lump-sum engineering, procurement and construction contracts and variation orders plus, with regard to engineering services and facilities management contracts, the estimated revenue attributable to the lesser of the remaining term of the contract and, in the case of life-of-field facilities management contracts, five years. The group uses this key performance indicator as a measure of the visibility of future earnings. Backlog is not an audited measure.


(3)    EBITDA means earnings before interest, tax, depreciation and amortisation and is calculated as profit from continuing operations before tax and net finance costs adjusted to add back charges for depreciation, amortisation and impairment.


(4)    Net profit for the period attributable to Petrofac Limited shareholders.


(5)    The group reports its financial results in US dollars and, accordingly, will declare any dividends in US dollars together with a Sterling equivalent. Unless shareholders have made valid elections to the contrary, they will receive any dividends payable in Sterling. Conversion of the 2009 interim dividend from US dollars into Sterling is based upon an exchange rate of US$1.6575:£1, being the Bank of England Sterling spot rate as at midday on 21 August 2009.


 

Ends


 

Analyst presentation:


A presentation for analysts will be held at 9.30am today, which will be webcast live via
http://www.investorcalendar.com/IC/CEPage.asp?ID=148670.


 

For further information, please contact:


Petrofac Limited                                                  +44 (0) 20 7811 4900

Ayman Asfari, Group Chief Executive

Keith Roberts, Chief Financial Officer

Jonathan Low, Head of Investor Relations


Bell Pottinger Corporate & Financial                +44 (0) 20 7861 3232

Ann-marie Wilkinson

Olly Scott



Notes to Editors

Petrofac


Petrofac is a leading international provider of facilities solutions to the oil & gas production and processing industry, with a diverse customer portfolio including many of the world's leading integrated, independent and national oil & gas companies. Petrofac is quoted on the London Stock Exchange (symbol: PFC).  


The group delivers services through seven business units: Engineering & Construction, Engineering & Construction Ventures, Engineering Services, Offshore Engineering & Operations, Training, Production Solutions and Energy Developments.


Through these businesses Petrofac designs and builds oil & gas facilities; operates, maintains and manages facilities and trains personnel; enhances production; and, where it can leverage its service capability, develops and co-invests in upstream and infrastructure projects. Petrofac's range of services meets its customers' needs across the full life cycle of oil & gas assets.


With more than 11,000 employees, Petrofac operates out of five strategically located operational centres, in Aberdeen, Sharjah, Woking, Chennai and Mumbai and a further 19 offices worldwide. The predominant focus of Petrofac's business is on the UK Continental Shelf (UKCS), the Middle East and Africa, the Commonwealth of Independent States (CIS) and the Asia Pacific region.


For additional information, please refer to the Petrofac website at www.petrofac.com.


The attached is an extract from the group's interim condensed consolidated financial statements for the six months ended 30 June 2009.


Results 


We are pleased to report that the group has had a strong first half of 2009, with growth in net profit of over 20% combined with substantial new contract awards. Backlog at 30 June stood at US$8.4 billion, having more than doubled over the period.


In the six months ended 30 June 2009, revenue was broadly unchanged at US$1,586.4 million (2008: US$1,576.2 million), however, net profit increased by 20.1% to US$145.6 million (2008: US$121.2 million) and EBITDA increased by 15.8% to US$207.5 million (2008: US$179.2 million).


The net cash generated from operations during the period was US$529.6 million (2008: US$167.8million), representing 255.2% of EBITDA (2008: 93.6%).  The group's net cash increased to US$787.6 million over the six months to 30 June 2009 (31 December 2008: US$551.8 million) as a result of:

  • operating profits generated of US$223.8 million

  • net working capital inflows of US$305.8 million, including over US$397 million of advance payments received in relation to new Engineering & Construction awards less approximately US$185 million of cash outflows in relation to the growth of work in progress on other Engineering & Construction projects

  • taxes paid of over US$35 million

  • investing activities, including approximately US$176 million in relation to capital expenditure on Energy Developments' portfolio of assets, particularly on the Don fields 

  • less financing activities, in particular, payment of the 2008 final dividend of approximately US$62 million.


Net cash (US$ million)

30 June 2009

30 June 2008

31 December 2008

Cash and short term deposits

900.2

565.2

694.4

Interest-bearing loans and borrowings

(112.6)

(104.5)

(142.6)

Net cash

787.6

460.7

551.8






Interest-bearing loans and borrowings at 30 June 2009 were lower at US$112.6 million (31 December 2008: US$142.6 million) after repayment of an overdraft facility previously utilised by the Offshore Engineering & Operations and Training business units. Since 30 June 2009, further advance payments on Engineering & Construction projects secured in the first half of the year have been received, totalling approximately US$200 million. A further US$150 million is expected to be received over the coming weeks.


Net finance income for the period increased to US$3.6 million (2008: US$3.1 million) due principally to higher average net cash balances.  


The tax charge for the six months ended 30 June 2009 of US$28.8 million (2008: US$39.6 million), based on the anticipated reporting segment effective tax rates for the year ending 31 December 2009, represents an effective tax rate for the period of 16.5% (2008: 24.6%).  The principal reason for the decrease in the group's effective tax rate is confirmation during the period of the applicability of a lower tax rate in relation to the group's projects in Oman. Other contributing factors include a higher proportion of Engineering & Construction profits being earned in lower tax rate jurisdictions.  


Diluted earnings per share for the six months ended 30 June 2009 increased by 21.5% to 42.70 cents per share (2008: 35.13 cents per share) reflecting the group's improved profitability.


During the first six months of 2009, order intake across the group was very strong at US$5.8 billion (2008: US$1.7 billion), taking the group's combined backlog to US$8.4 billion at 30 June 2009 (31 December 2008: US$4.0 billion). Since 30 June 2009, the group has been awarded a further US$0.6 billion of new contracts1.


At 30 June 2009, the group had approximately 11,400 employees, compared to around 11,100 at 31 December 2008, with the growth attributable to the Engineering & Construction reporting segment.


1In July, Engineering & Construction's joint venture with Mudabala Petroleum Services LLC, Petrofac Emirates, secured, in partnership with GS Engineering & Construction of South Korea, a US$2.1 billion project to build a natural gas liquids (NGL) train in Abu Dhabi. Petrofac Emirates share of the scope is approximately US$1.0 billion, and Petrofac has a 50% interest in the Petrofac Emirates joint venture. As described in more detail in the Segmental Review, Offshore Engineering & Operations secured a £75 million project (£25m per annum for three years) in the UK North Sea in July.

  Dividend


The Board has declared an interim dividend of 10.70 cents per share (2008: 7.50 cents), an increase of 42.7%, which will be paid on 23 October 2009 to eligible shareholders on the register at 25 September 2009. Shareholders who have not elected to receive dividends in US dollars will receive a Sterling equivalent of 6.46 pence per share. The Board will set the total dividends payable for the year to 31 December 2009 according to the group's earnings and, as previously announced, expects to distribute approximately 35% of full year post tax profits by way of dividend.



Segmental review


On 1 January 2009, the group reorganised its operations into seven business units, reporting under four segments:


Business unit


Reporting segment

Engineering & Construction, Sharjah

>

Engineering & Construction

Engineering & Construction Ventures

Offshore Engineering & Operations

>

Offshore Engineering & Operations

Engineering Services

>

Engineering, Training Services and Production Solutions

Training Services

Production Solutions

Energy Developments

>

Energy Developments


We present below an update on each of the group's reporting segments:


US$ million

Revenue

Operating profit2

Net profit 

EBITDA

For the six months ended 30 June

2009

2008

2009

2008

2009

2008

2009

2008










Engineering & Construction

1,060.7

922.8

129.5

99.6

121.2

88.7

140.5

102.6

Offshore Engineering & Operations

294.9

377.1

4.5

6.9

2.9

4.7

4.8

7.7

Engineering, Training Services and Production Solutions

184.0

271.0

17.4

24.3

14.8

17.8

21.1

31.1

Energy Developments

82.2

77.7

24.8

29.6

9.8

16.3

46.7

40.8

Corporate, consolidation & elimination

(35.4)

(72.4)

(5.5)

(2.7)

(3.1)

(6.3)

(5.6)

(2.9)


______

______

______

______

______

______

______

______

Group

1,586.4

1,576.2

170.7

157.7

145.6

121.2

207.5

179.2


______

______

______

______

______

______

______

______


Growth/margin analysis %

Revenue growth

Operating margin

Net margin

EBITDA margin

For the six months ended 30 June

2009

2008

2009

2008

2009

2008

2009

2008










Engineering & Construction

14.9

91.6

12.2

10.8

11.4

9.6

13.2

11.1

Offshore Engineering & Operations

(21.8)

13.9

1.5

1.8

1.0

1.3

1.6

2.0

Engineering, Training Services and Production Solutions

(32.1)

47.0

9.5

9.0

8.1

6.6

11.5

11.5

Energy Developments

5.8

12.8

30.2

38.1

12.0

21.0

56.9

52.6


______

______

______

______

______

______

______

______

Group

0.7

49.1

10.8

10.0

9.2

7.7

13.1

11.4


______

______

______

______

______

______

______

______

 

2 Profit from operations before tax and finance costs.

  Engineering & Construction

The Engineering & Construction reporting segment includes the group's Sharjah-based Engineering & Construction business unit and Engineering & Construction Ventures, which has been established to replicate the success of the Sharjah business, but in new markets, such as Abu Dhabi and Saudi Arabia. Together, the Engineering & Construction businesses secured US$5.4 billion of new contract awards in the first half of the year, and a further US$0.5 billion of new awards since 30 June 20093.

 

3 See Footnote 1 above

 

Good progress continues to be made on the current contract portfolio, including mobilisation activities on the new contracts secured during the first half:


Asab field development, Abu Dhabi

  • Awarded in January 2009, the Asab field development is a 44-month US$2.3 billion lump-sum engineering, procurement and construction (EPC) project with Abu Dhabi Company for Onshore Oil Operations (ADCO) to upgrade facilities at the onshore Asab oil field in Abu Dhabi.


Karan utilities and cogeneration package, Saudi Arabia

  • Awarded in February 2009, the Karan utilities and cogeneration package is a 34-month project with Saudi Aramco to build utilities and cogeneration facilities at the Khursaniyah gas plant in Saudi Arabia. The capacity of the plant is being extended to accommodate approximately 1.8 billion cubic feet of high pressure sour gas from the offshore Karan field.


El Merk central processing facility, Algeria

  • Awarded in March 2009, El Merk is a 44-month US$2.2 billion EPC project for a consortium led by Sonatrach and Anadarko. The group will design and build the El Merk central processing facility in the Berkine Basin, which will have a design capacity of approximately 100,000 barrels of oil per day, 29,000 barrels of condensate per day, 31,000 barrels of liquid petroleum gas (LPG) per day together with a natural gas liquids (NGL) train with a nominal capacity of 600 million standard cubic feet of gas per day.


Kauther gas compression, Oman

  • Awarded in late June 2009, the Kauther gas compression contract is a US$0.4 billion EPC project for a gas compression system and associated facilities at the Kauther gas plant. The contract scope also includes commissioning and six months of initial operations. The project follows on from the successful completion of the Kauther gas plant in 2007, which Petrofac built on an EPC basis for PDO Oman. In early 2008, Petrofac was asked to carry out the front end engineering and design for a gas depletion-compression project and then invited to submit a commercial proposal for the EPC on a negotiated basis.


Engineering & Construction's revenue increased by 14.9% to US$1,060.7 million (2008: US$922.8 million) compared to the corresponding period in 2008, reflecting increased levels of activity. Net profit increased by 36.6% to US$121.2 million (2008: US$88.7 million), representing a net margin of 11.4% (2008: 9.6%). The growth in net margin is due to continued strong operational performance, augmented by the recovery of prior year bid costs of approximately US$10 million from a joint venture partner, the contribution from projects nearing completion and the first-time profit recognition on a project awarded in 2008. 


During the first half, Engineering & Construction grew its headcount from 3,400 to 3,800, with the majority of the growth in Engineering & Construction Ventures.


At 30 June, the Engineering & Construction backlog stood at US$6.9 billion, just under three times the 2008 year-end level (US$2.4 billion), reflecting the high level of order intake during the first half. 


  Offshore Engineering & Operations

The Offshore Engineering & Operations business provides operations, maintenance and brownfield engineering services, predominantly in the UK Continental Shelf (UKCS) principally on a reimbursable basis, but often with incentive income linked to the successful delivery of performance targets. Many of its operations contracts are long-term (typically three to five years) and in the case of the provision of Duty Holder services4 are generally open-ended.


Bidding activity increased over the period both in the UKCS and international markets. Whereas in prior years contracts were often 'rolled-over' with the existing supplier, under similar terms and conditions customers are now more likely to retender contracts on their expiry as they seek improved efficiencies in the current lower oil price environment. In July, we were pleased to announce the award of an engineering and construction contract with Apache for the Forties field in the North Sea. The contract is expected to generate revenue of approximately £25 million per annum. During the first half of 2009, Offshore Engineering & Operations extended its engineering and construction contract with Venture Production to the end of March 2010.


As a consequence of the strength of the US dollar against Sterling, reported revenue for the period decreased by 21.8% to US$294.9 million (2008: US$377.1 million) and revenue excluding 'pass-through' revenue5 decreased by 27.8% to US$209.3 million (2008: US$290.0 million). Approximately 90% of Offshore Engineering & Operations' revenue is generated in the UKCS and those revenues are generally denominated in Sterling. The US dollar was stronger against Sterling in the first half of 2009 compared to the corresponding period in 2008, thereby having a significant impact on the US dollar value of reported revenues for the Offshore Engineering & Operations reporting segment. On a constant currency basis, revenue excluding pass through revenue decreased by approximately 6%.


Financial reporting exchange rates

US$/Sterling

6 months ended 30 June 2009

Year ended 31 December 2008

6 months ended 30 June 2008

Average rate for period

1.49

1.85

1.98

Period-end rate

1.64

1.46

1.99


Net profit was lower at US$2.9 million (2008: US$4.7 million), again reflecting the strengthening of the US dollar against Sterling as well as the more challenging trading environment. On a constant currency basis, net profit was approximately 3% lower. Net margin on revenue excluding pass-through revenue was marginally lower at 1.4% (2008: 1.6%). Net margins in the first half of the year are typically lower than those expected in the second half of the year due to the timing of the recognition of incentive income, which is usually based on performance over a calendar year.


During the first half, headcount was broadly unchanged at 4,200.


Backlog for Offshore Engineering & Operations remained broadly unchanged over the period, standing at US$1.1 billion at 30 June (31 December 2008: US$1.1 billion), however, on a constant currency basis backlog would be marginally lower at US$1.0 billion.


 

4 Contracts where the group takes full responsibility for managing a customer's asset and is responsible for the safety case of the asset, reporting to the Department of Energy and Climate Change.

5 Pass-through revenue refers to the revenue recognised from low or zero margin third-party procurement services provided to customers.

 

 

Engineering, Training Services and Production Solutions

Engineering Services, Training Services and Production Solutions are reported within this segment. These businesses provide services primarily on a reimbursable basis. The Production Solutions business unit includes the group's operations and maintenance contract with Dubai Petroleum and encompasses many of the group's consultancy businesses which have particular expertise in optimising the performance of mature phase production. In addition to continuing to provide these consultancy services on a stand-alone basis, the group is in the early stages of developing a new commercial offering for customers whereby they will be packaged together and offered on a tariff or quasi-equity basis.


Engineering Services predominantly provides early stage engineering studies such as conceptual studies or front-end engineering and design (FEED). With the rapid fall in oil prices in the second half of 2008 and a more uncertain economic outlook, a significant number of customers have postponed such studies or re-phased work, resulting in a reduction in activity. While the level of staff employees in our Woking engineering office has remained broadly unchanged, we have made a substantial reduction in the number of self-employed contractors. In Training Services, there has been a reduction in technical and other training activities as customers have sought to defer discretionary expenditure. Activity levels for Production Solutions, which are principally focused on the group's service operator role for Dubai Petroleum, have remained robust.


Reported revenue for the period decreased by 32.1% to US$184.0 million (2008: US$271.0 million) and revenue excluding 'pass-through' revenue decreased by 31.6% to US$166.8 million (2008: US$243.7 million). While a proportion of the reporting segment's revenues are non-US dollar denominated and were therefore impacted by the strengthening of the US dollar, the decrease is primarily due to the decrease in activity levels for Engineering Services and Training Services.


Net profit was lower at US$14.8 million (2008: US$17.8 million), again reflecting the reduction in activity in Engineering Services and Training Services and the strengthening of the US dollar. Net margin on revenue excluding pass-through revenue increased to 8.9% (2008: 7.3%), reflecting an increase in net margins in Engineering Services, due to an increased contribution from the lower-cost Mumbai and Chennai engineering offices, and in Production Solutions due to excellent operational performance in the first half particularly on the Dubai Petroleum contract.


At 30 June 2009, headcount, which includes long term contractors, was broadly unchanged at 3,000 (31 December 2008: 3,000), although this includes an increase in our engineering offices in Mumbai and Chennai of around 200 employees6, offset by a reduction in self-employed contractors at our Woking engineering office, predominantly due to lower activity levels.


Backlog for the Engineering, Training Services and Production Solutions reporting segment was lower at US$0.3 billion at 30 June (31 December 2008: US$0.5 billion) due to expected lower activity in Production Solutions' well operations management business.


6 Engineering offices in Mumbai and Chennai are managed by Engineering Services, and headcount statistics are reported within the Engineering, Training Services and Production Solutions reporting segment; however, these offices principally provide engineering services to support Engineering & Construction.  At 30 June 2009, the Mumbai and Chennai offices had a total of approximately 1,200 employees.

 

Energy Developments 

Where the group can leverage its service capabilities to mitigate risks and reduce costs, Energy Developments selectively co-invests alongside the group's partners in oil & gas upstream developments and energy infrastructure to create additional value for the group. Good progress was made on Energy Developments' existing portfolio of operational assets (Don Southwest, West Don, Chergui, Cendor, Ohanet and the Kyrgyz Petroleum Company refinery) during the period.


The highlight of the first half was the commencement of production from both the Don Southwest and West Don fields in the UK North Sea. This represents a very significant milestone in the development and was achieved in less than a year from field development programme (FDP) approval. The first of two planned production wells on West Don came on-stream in late April, followed by two production wells on Don Southwest in late June, although one of the wells requires further intervention to remove a suspected completion blockage prior to bringing it on-stream. The second production well on West Don was brought on-stream in August and the injection well on West Don and two injection wells on Don Southwest are expected to be brought on-stream during the next few weeks. During the drilling of the Don Southwest water injection wells, two cost-effective pilot holes were drilled into adjacent reservoir structures, both of which discovered oil. One of the pilot holes was drilled into an area known as the "Horst". This area has excellent reservoir quality with high oil saturations. The other pilot hole was drilled into Area H, which revealed a 60 feet oil column in the Brent formation. These areas are being interpreted and are expected to be exploited during further stages of development of the field. 


The Cendor field, in Block PM304, offshore Peninsular Malaysia, produced an average of 14,400 bpd of oil over the period (2008: 14,800 bpd) and achieved production uptime of over 99 per cent. As operator (with a 30% interest), Energy Developments, along with its partners (Petronas, PetroVietnam and Kuwait Foreign Petroleum Exploration Company (KUFPEC)) is assessing a second phase of development of Block PM304. FEED studies will be commenced in the fourth quarter of 2009 and a field development plan to develop the near field opportunities is expected to be submitted for approval in the second half of 2010.


The Ohanet development in Algeria, in which Energy Developments has a 10% share of a Risk Service Contract (alongside BHP Billiton, Japan Ohanet Oil & Gas Co and Woodside Energy) with Sonatrach, continues to perform in line with expectations, as does the 10,000 bpd capacity KPC refinery (in which Energy Developments has a 50% share).


In Tunisia, the Chergui gas plant (in which the Energy Developments has a 45% operating interest) produced an average of 24.3 million standard cubic feet per day (mmscfd) of gas during the period, which is in excess of the nameplate design capacity of 20 mmscfd following commissioning of a refrigeration unit and debottlenecking of the plant. Following recent seismic studies, it is planned to tie a pre-drilled third well into the plant over the coming months. 


During July, Energy Developments acquired a floating production facility, AH001, from Hess and Endeavour Energy UK. The AH001 had been deployed on the Hess operated Ivanhoe and Rob Roy Fields, in the UK North Sea, since 1989 with the Renee and Rubie Fields produced over it since 1999. The vessel, weighing approximately 17,000 tonnes, has a processing capacity of 70,000 bpd of oil and 42.5 mmscfd of gas with water injection capability of 72,000 bpd and treatment of 75,000 bpd. The vessel will remain in dry dock at the McNulty offshore facility in Newcastle-upon-Tyne, while options for its upgrade, modification and redeployment on fields, including those where Energy Developments has or can take an interest are considered.


Despite oil prices during the first half of 2009 averaging less than half those of the corresponding period in the prior year7, Energy Developments' revenue increased to US$82.2 million (2008: US$77.7 million), reflecting commencement of exports from the Chergui gas plant in the second half of 2008 and the sale of the first tanker shipment of production from West Don in June 2009. Despite the commencement of production from the Chergui gas plant and the Don area development, net profit for the period was lower at US$9.8 million (2008: US$16.3 million) due principally to lower oil prices.


7 Brent, a benchmark crude, averaged US$52 per barrel for the six months ended 30 June 2009, compared to US$109 per barrel for the corresponding period in 2008.  Energy Developments policy is to hedge an appropriate proportion of its oil price exposure on a rolling 12-month basis, typically between 50% and 75% of its lower estimate of forecast production, for those assets that have achieved steady-state production.  At 30 June 2009, a series of commodity price collars and swaps had been entered into for the Cendor and Chergui assets.

 

 

Key risks and uncertainties


The key risks and uncertainties for the group are as described on pages 28 and 29 of the group's Annual report and accounts 2008.



Outlook


Notwithstanding the significantly lower oil price environment experienced in the first half of the year the group has performed well and, subject to any unforeseen circumstances, we are confident that we will deliver earnings growth for the full year of at least 20 per cent. With over US$6 billion of new contract awards secured in the year to date the group has record backlog giving outstanding revenue visibility and underpinning the group's confidence that strong growth in earnings will continue well beyond the current year. 


In Engineering & Construction, our largest reporting segment, recent contract awards are expected to support strong growth in revenue in the second half of the year. The terms on which these contracts were secured and our progress to date on these awards together with the continued good performance from the rest of our contract portfolio gives us confidence that we can maintain net margins in this segment of around 10% over the medium-term. Furthermore, our ongoing bidding activity in key markets in the Middle East and Africa and the Commonwealth of Independent States continues to position us well for the future.


Revenues in Offshore Engineering & Operations are expected to remain resilient in constant currency terms for the balance of the year. Bidding activity has increased recently and we would look to secure additional business over the coming months which will help position us for growth over the medium-term. However, we do recognise that cost control remains a high priority for our customers, particularly in high-cost markets such as the UKCS, and, as a consequence, we have implemented programmes to reduce our own fixed costs and particularly our property costs. We expect margins for the full year to be somewhat lower than last year.


In Engineering, Training Services and Production Solutions we are also seeing an increase in new business opportunities. However, activity levels in Engineering Services and Training Services are expected to remain subdued for, at least, the balance of this year. 

 

Our near-term focus in Energy Developments remains on tying in the injection wells on the Don assets and commissioning the gas lift on the floating production facility, which is expected to lead to an increase in production levels as the year progresses. In 2010, the second phase of the development should enable us to access additional reserves, following recent discoveries in the Don Southwest field. In addition, we continue to evaluate a number of upstream and energy infrastructure opportunities. 


Overall, we are very pleased with the group's achievements in the first half of the year, and our excellent growth prospects.



Rodney Chase                        Ayman Asfari

Chairman                                Group Chief Executive



INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2009


6 months ended


6 months ended


Year 

ended



30 June


30 June


31 December



2009


2008


2008



Unaudited


Unaudited


Audited


Notes

US$'000


US$'000


US$'000















Revenue

4

1,586,408


1,576,154


3,329,536








Cost of sales

5

(1,321,858)


(1,318,633)


(2,751,063)








Gross profit 


264,550


257,521


578,473








Selling, general and administration expenses


(94,912)


(101,395)


(227,765)

Other income


2,729


2,027


7,421

Other expenses


(1,666)


(439)


(2,543)








Profit from operations before tax







  and finance income/(costs)


170,701


157,714


355,586








Finance costs


(3,586)


(4,251)


(13,906)

Finance income


7,210


7,354


16,688








Profit before tax


174,325


160,817


358,368








Income tax expense    

6

(28,754)


(39,577)


(93,379)















Profit for the period


145,571


121,240


264,989








Attributable to:







Petrofac Limited shareholders


145,571


121,240


264,989















Earnings per share (US cents)

7













- Basic


43.22


35.64


78.03

- Diluted


42.70


35.13


77.11





The attached notes 1 to 17 form part of these interim condensed consolidated financial statements.


 

 


INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2009


6 months ended


6 months ended


Year 

ended



30 June


30 June


31 December



2009


2008


2008



Unaudited


Unaudited


Audited



US$'000


US$'000


US$'000





As restated










Profit for the period


145,571


121,240


264,989















Foreign currency translation


15,249


(512)


(84,232)








Net gains on maturity of cash flow hedges







  recycled in the period


(6,732)


(23,460)


(32,103)








Net changes in fair value of derivatives and







financial assets designated as cash flow hedges


49,838


12,720


(25,907)

    







Net changes in the fair value of available-for-sale







financial assets


-


(112)


(879)








Impairment of available-for-sale financial assets


-


-


355

  







Other comprehensive income (loss)


58,355


(11,364)


(142,766)















Total comprehensive income for the period


203,926


109,876


122,223








Attributable to:







 Petrofac Limited shareholders


203,926


109,876


122,223












































The attached notes 1 to 17 form part of these interim condensed consolidated financial statements.


 


INTERIM CONDENSED CONSOLIDATED BALANCE SHEET

At 30 June 2009









30 June


30 June


31 December



2009


2008


2008



Unaudited


Unaudited


Audited


Notes

US$'000


US$'000


US$'000

ASSETS




As restated



Non-current assets







Property, plant and equipment

9

599,724


317,570


413,064

Goodwill

10

96,668


71,882


97,534

Intangible assets

11

61,068


9,527


38,353

Available-for-sale financial assets


537


1,337


566

Derivative financial instruments

12

29,064


277


7,227

Other financial assets


2,223


1,531


1,899

Deferred income tax assets


53,353


15,563


46,444



842,637


417,687


605,087








Current assets







Inventories


5,665


2,244


4,077

Work in progress


437,461


206,893


252,695

Trade and other receivables 


636,810


657,407


700,931

Due from related parties

17

2,805


3,408


2,907

Derivative financial instruments

12

19,153


26,052


5,631

Other financial assets


3,020


2,472


4,078

Cash and short-term deposits

13

900,177


565,206


694,415



2,005,091


1,463,682


1,664,734








TOTAL ASSETS


2,847,728


1,881,369


2,269,821















EQUITY AND LIABILITIES







Equity attributable to Petrofac Limited shareholders







Share capital


8,636


8,636


8,636

Share premium


68,203


68,203


68,203

Capital redemption reserve


10,881


10,881


10,881

Shares to be issued


1,988


-


1,988

Treasury shares

14

(57,246)


(44,049)


(69,333)

Other reserves

15

24,417


87,241


(39,292)

Retained earnings


662,597


459,526


577,739



719,476


590,438


558,822

Minority interests


2,659


209


209

TOTAL EQUITY


722,135


590,647


559,031















Non-current liabilities







Interest-bearing loans and borrowings


86,345


76,513


88,188

Provisions

9

79,998


23,104


29,663

Other financial liabilities


11,317


14,395


32,265

Deferred income tax liabilities


33,398


37,590


38,196



211,058


151,602


188,312








Current liabilities







Trade and other payables


530,995


413,585


513,329

Due to related parties

17

459


578


559

Interest-bearing loans and borrowings


26,265


27,956


54,412

Derivative financial instruments

12

2,126


7,250


6,244

Other financial liabilities


12,689


1,005


118

Income tax payable


115,372


43,232


110,428

Billings in excess of cost and estimated earnings


607,711


145,592


285,527

Accrued contract expenses


618,918


499,922


551,861



1,914,535


1,139,120


1,522,478








TOTAL LIABILITIES


2,125,593


1,290,722


1,710,790








TOTAL EQUITY AND LIABILITIES


2,847,728


1,881,369


2,269,821



The attached notes 1 to 17 form part of these interim condensed consolidated financial statements.


 


INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2009


6 months ended


6 months ended


Year 

ended



30 June


30 June


31 December



2009


2008


2008



Unaudited


Unaudited


Audited


Notes

US$'000


US$'000


US$'000








OPERATING ACTIVITIES







Profit before tax


174,325


160,817


358,368








Adjustments for:







Depreciation, amortisation, impairment and  write-off


36,802


21,523


63,366

Share-based payments

14

6,111


4,331


9,448

Difference between other long-term employment benefits 







paid and amounts recognised in the income statement


4,339


4,324


9,007

 Net finance (income) 


(3,624)


(3,103)


(2,782)

Loss (gain) on disposal of property, plant and  equipment


100


(71)


41

 Other non-cash items, net


5,698


(1,193)


11,303








Operating profit before working capital changes


223,751


186,628


448,751








 Trade and other receivables


68,254


(148,946)


(194,817)

 Work in progress


(184,766)


63,288


17,486

 Due from related parties


102


(261)


240

 Inventories


(1,588)


12


(1,821)

 Current financial assets


639


(133)


(1,680)

 Trade and other payables


32,062


15,171


104,708

Billings in excess of cost and estimated earnings


322,184


(62,513)


77,422

 Accrued contract expenses


67,057


116,551


117,505

 Due to related parties


(100)


(166)


(185)










527,595


169,631


567,609

Other non-current items, net


1,957


(1,821)


(1,927)








Cash generated from operations


529,552


167,810


565,682








Interest paid


(2,276)


(3,191)


(11,526)

Income taxes paid, net


(35,247)


(44,566)


(67,418)








Net cash flows from operating activities


492,029


120,053


486,738








INVESTING ACTIVITIES







Purchase of property, plant and equipment

9

(176,430)


(82,117)


(255,542)

Acquisition of subsidiaries, net of cash acquired


-


-


(40,774)

Purchase of intangible oil & gas assets

11

(20,290)


(1,400)


(37,036)

Additions to other intangible assets


(1,127)


-


-

Proceeds from disposal of property, plant and equipment


358


184


1,031

Proceeds from disposal of available-for-sale financial assets



95



137



-

Purchase of available-for-sale financial assets


(103)


-


-

Interest received


7,263


7,702


16,704








Net cash flows used in investing activities


(190,234)


(75,494)


(315,617)


 


6 months ended


6 months ended


Year

 ended



30 June


30 June


31 December



2009


2008


2008



Unaudited


Unaudited


Audited


Notes

US$'000


US$'000


US$'000








FINANCING ACTIVITIES







Proceeds from interest-bearing loans and borrowings


-


-


25,000

Repayment of interest-bearing loans and borrowings


(5,000)


(3,713)


(6,213)

Treasury shares purchased

14

-


(16,969)


(42,500)

Equity dividends paid


(61,756)


(38,015)


(64,135)








Net cash flows used in financing activities


(66,756)


(58,697)


(87,848)








 







NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS


235,039


(14,138)


83,273








Cash and cash equivalents at 1 January


649,159


565,886


565,886








CASH AND CASH EQUIVALENTS AT PERIOD END 

13

884,198


551,748


649,159




The attached notes 1 to 17 form part of these interim condensed consolidated financial statements.


INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2009

Attributable to Petrofac Limited Shareholders



    

Issued


Capital









share

Share  

redemption

Shares to

*Treasury

Other 

Retained


Minority

Total


capital

premium

reserve

 be issued

shares

reserves

earnings

Total

interests

equity


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000






(note 14)

(note 15)





For the six months ended 30 June 2009

































Balance at 1 January 2009

8,636

68,203

10,881

1,988

(69,333)

(39,292)

577,739

558,822

209

559,031

  











Net profit for the period

-

-

-

-

-

-

145,571

145,571

-

145,571












Other comprehensive income

-

-

-

-

-

58,355

-

58,355

-

58,355












Total comprehensive income 

-

-

-

-

-

58,355

145,571

203,926

-

203,926












Share-based payments charge (note14)

-

-

-

-

-

6,111

-

6,111

-

6,111












Shares vested during the period (note14)

-

-

-

-

12,087

(11,706)

(381)

-

-

-












Transfer to reserve for share-based payments

(note 14)

-

-

-

-

-

10,949

-

10,949

-

10,949












Dividends

(note 8)

-

-

-

-

-

-

(60,332)

(60,332)

-

(60,332)












Movement in minority interest

-

-

-

-

-

-

-

-

2,450

2,450












Balance at 30 June 2009 (unaudited)

8,636

68,203

10,881

1,988

(57,246)

24,417

662,597

719,476

2,659

722,135













*Shares held by Petrofac Employee Benefit Trust.


The attached notes 1 to 17 form part of these interim condensed consolidated financial statements.

Attributable to Petrofac Limited Shareholders



    

Issued


Capital









share

Share  

redemption

Shares to

*Treasury

Other 

Retained


Minority

Total


capital

premium

reserve

 be issued

shares

reserves

earnings

Total

interests

equity


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000






(note 14)

(note 15)





For the six months ended 30 June 2008






















Balance at 1 January 2008 as











previously reported

8,636

68,203

10,881

-

(29,842)

50,467

377,450

485,795

209

486,004

Restatement

-

-

-

-

-

36,966

-

36,966

-

36,966












Balance at 1 January 2008 as restated

8,636

68,203

10,881

-

(29,842)

87,433

377,450

522,761

209

522,970












Net profit for the period

-

-

-

-

-

-

121,240

121,240

-

121,240












Other comprehensive loss

-

-

-

-

-

(11,364)

-

(11,364)

-

(11,364)












Total comprehensive income 

-

-

-

-

-

(11,364)

121,240

109,876

-

109,876












Share-based payments charge

(note 14)

-

-

-

-

-

4,331

-

4,331

-

4,331












Shares vested during the period

(note 14)

-

-

-

-

2,762

(2,762)

-

-

-

-












Treasury shares purchased (note 14)

-

-

-

-

(16,969)

-

-

(16,969)

-

(16,969)












Transfer to reserve for share-based payments (note 14)

-

-

-

-

-

9,603

-

9,603

-

9,603












Dividends (note 8)

-

-

-

-

-

-

(39,164)

(39,164)

-

(39,164)












Balance at 30 June 2008 (unaudited)

8,636

68,203

10,881

-

(44,049)

87,241

459,526

590,438

209

590,647















Attributable to Petrofac Limited Shareholders



    

Issued


Capital









share

Share  

redemption

Shares to

*Treasury

Other 

Retained


Minority

Total


capital

premium

reserve

 be issued

shares

reserves

earnings

Total

interests

equity


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000







(note 15)
















Balance at 1 January 2008 as previously reported

8,636

68,203

10,881

-

(29,842)

50,467

377,450

485,795

209

486,004

 Restatement

-

-

-

-

-

36,966

-

36,966

-

36,966

 Balance at 1  January   2008











as restated

8,636

68,203

10,881

-

(29,842)

87,433

377,450

522,761

209

522,970

  











 Net profit for the year

-

-

-

-

-

-

264,989

264,989

-

264,989












Other comprehensive loss

-

-

-

-

-

(142,766)

-

(142,766)

-

(142,766)












Total comprehensive income 

-

-

-

-

-

(142,766)

264,989

122,223

-

122,223












Shares to be issued on acquisition

-

-

-

1,988

-

-

-

1,988

-

1,988












Share-based payments charge (note 14)

-

-

-

-

-

9,448

-

9,448

-

9,448












Shares vested/forfeited during the year (note 14)

-

-

-

-

3,009

(3,009)

-

-

-

-












Treasury shares purchased (note 14)

-

-

-

-

(42,500)

-

-

(42,500)

-

(42,500)












Transfer to reserve for share-based payments (note 14)

-

-

-

-

-

9,602

-

9,602

-

9,602












Dividends (note 8)

-

-

-

-

-

-

(64,700)

(64,700)

-

(64,700)












Balance at 31 December 2008

8,636

68,203

10,881

1,988

(69,333)

(39,292)

577,739

558,822

209

559,031













*Shares held by Petrofac Employee Benefit Trust.


The attached notes 1 to 17 form part of these interim condensed consolidated financial statements.


 

 

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

For the six months ended 30 June 2009


1    CORPORATE INFORMATION


Petrofac Limited is a limited liability company registered in Jersey under the Companies (Jersey) Law 1991 and is the holding company for the international group of Petrofac subsidiaries (together "the group"). The group's principal activities are the provision of facilities solutions to the oil & gas production and processing industry and appraisal, development and operation of oil & gas production and refining projects. The interim condensed consolidated financial statements of the group for the six months ended 30 June 2009 were authorised for issue in accordance with a resolution of the Board of Directors on 21 August 2009.


2    BASIS OF PREPARATION AND ACCOUNTING POLICIES


Basis of preparation


The interim condensed consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and available-for-sale financial assets that have been measured at fair value. The presentation currency of the interim condensed consolidated financial statements is United States dollars (US$) and all values in the interim condensed consolidated financial statements are rounded to the nearest thousand (US$'000) except where otherwise stated. Certain comparative information has been reclassified to conform to current period presentation. 


Statement of compliance


The interim condensed consolidated financial statements of Petrofac Limited and all its subsidiaries for the six months ended 30 June 2009 have been prepared in accordance with IAS 34 'Interim Financial Statements' and applicable requirements of Jersey law. They do not include all of the information and disclosures required in the annual financial statements and should be read in conjunction with the consolidated financial statements of the group as at and for the year ended 31 December 2008.


Accounting policies


The accounting policies and methods of computation adopted in the preparation of these interim condensed consolidated financial statements are consistent with those followed in the preparation of the group's financial statements for the year ended 31 December 2008, except as noted below.


The group has adopted new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on or after 1 January 2009. The principal effects of the adoption of these new and amended standards and interpretations are discussed below:


IFRS 8 Operating Segments

This standard requires the disclosure of operating segments as reviewed by the chief operating decision maker of the group and replaces the requirements to disclose primary and secondary operating segments. The group announced the restructuring of its operating segments in late 2008 and segment information according to the new structure is presented in note 3.


IAS 1 Revised Presentation of Financial Statements

The revised standard gives guidance on disclosure of owner and non-owner changes in equity as well as introduction of statement of comprehensive income, either separately or as part of statement of changes in equity. The group has opted to disclose comprehensive income as part of the statement of changes in equity.


  3    SEGMENT INFORMATION


With effect from 1 January 2009, the group's management was restructured on a worldwide basis to deliver the group's services through seven business units, Engineering & Construction, Engineering & Construction Ventures, Engineering Services, Offshore Engineering & Operations, Training, Production Solutions and Energy Developments. As a result the segment information has been realigned to fit the new group organisational structure which now comprises four operating segments being Engineering & Construction, Offshore Engineering & Operations, Engineering, Training Services and Production Solutions and Energy Developments, rather than as was historically the case, split between three operating divisions Engineering & Construction, Operations Services and Energy Developments.


The following tables represent revenue and profit information relating to the group's primary business segments for the six months ended 30 June 2009 and the comparative segmental information has been restated to reflect the revised group structure.


Included within the Engineering, Training Services and Production Solutions segment are three diverse businesses none of which have ever met the quantitative thresholds set by IFRS 8 'Operating Segments' for determining reportable segments.


The consolidation adjustments and corporate columns include certain balances which due to their nature are not allocated to segments.



Engineering,








Training Services &






Engineering

Offshore

Production 



Consolidation



&

Engineering &

Solutions

Energy

Corporate

adjustments & 



Construction

Operations


Developments

& others

eliminations

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

 Six months

 ended 30June2009 (unaudited)
















Revenue








External sales

1,060,711

288,891

154,627

82,179

-

-

1,586,408

Inter-segment sales

-

6,055

29,324

-

-

(35,379)

-









Total revenue

1,060,711

294,946

183,951

82,179

-

(35,379)

1,586,408









Segment results

129,472

4,479

17,440

24,845

(611)

(174)

175,451









Unallocated corporate costs

-

-

-

-

(4,750)

-

(4,750)









Profit / (loss) before tax and








finance income/ (costs)

129,472

4,479

17,440

24,845

(5,361)

(174)

170,701









Finance costs

-

(154)

(1,342)

(4,782)

(3,269)

 5,961

(3,586)

Finance income

8,521

10

86

63

4,964

  (6,434)

7,210









Profit / (loss) before 








  income tax

137,993

4,335

16,184

20,126

(3,666)

   (647)

174,325









Income tax (expense) / income

(16,835)

(1,387)

(1,367)

(10,298)

1,000

133

(28,754)









Profit / (loss) for the period

121,158

2,948

14,817

9,828

(2,666)

(514)

145,571









Other segment information








Depreciation & amortisation

11,058

335

3,680

21,881

124

(276)

36,802

Other long-term employment benefits

4,509

788

198

27

32

-

5,554

Share-based payments

2,880

774

763

642

1,052

-

6,111



 

        



Engineering,








Training Services &






Engineering

Offshore

Production 



Consolidation



&

Engineering &

Solutions

Energy

Corporate

adjustments & 



Construction

Operations


Developments

& others

eliminations

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Six months

ended 30June  2008 (unaudited)
















Revenue








External sales

900,477

373,832

224,157

77,688

-

-

1,576,154

Inter-segment sales

22,310

3,257

46,858

-

-

(72,425)

-









Total revenue

922,787

377,089

271,015

  77,688

-

(72,425)

1,576,154









Segment results

99,646

6,911

24,311

 29,562

(159)

(454)

159,817









Unallocated corporate costs

-

-

-

-

(2,103)

-

(2,103)









 








Profit / (loss) before tax and finance

income / (costs)

99,646

6,911

24,311

29,562

(2,262)

(454)

157,714









Finance costs

-

(368)

(1,679)

(32)

(4,675)

2,503

(4,251)

Finance income

8,162

283

189

117

2,722

(4,119)

7,354









 

Profit /(loss) before








  income tax

107,808

6,826

22,821

29,647

(4,215)

(2,070)

160,817









 Income tax(expense) / income

(19,084)

(2,087)

(5,029)

(13,312)

(65)

-

(39,577)









Profit / (loss) for the period

88,724

4,739

17,792

16,335

(4,280)

(2,070)

121,240









Other segment information








Depreciation & amortisation

2,917

755

6,764

11,274

226

(413)

21,523

Other long-term employment benefits

3,854

334

580

93

27

-

4,888

Share-based payments

1,744

758

671

496

662

-

4,331


        



Engineering,








Training Services &






Engineering

Offshore

Production 



Consolidation



&

Engineering &

Solutions

Energy

Corporate

adjustments & 



Construction

Operations


Developments

& others

eliminations

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Year ended

31December 2008 (audited)
















Revenue








External sales

1,968,522

767,795

439,862

153,357

-

-

3,329,536

Inter-segment sales

25,017

8,769

70,542

-

-

(104,328)

-









Total revenue

1,993,539

776,564

510,404

153,357

-

(104,328)

3,329,536









Segment results

241,160

23,172

48,258

51,713

(1,176)

(215)

362,912









Unallocated corporate costs

-

-

-

-

(7,326)

-

(7,326)









Profit/ (loss) before tax and








finance

income/ (costs)

241,160

23,172

48,258

51,713

(8,502)

(215)

355,586









Finance costs

-

(914)

(3,656)

(8,247)

(7,547)

6,458

(13,906)

Finance income

19,395

32

998

224

8,075

(12,036)

16,688









 

Profit/(loss) before 








  income tax

260,555

22,290

45,600

43,690

(7,974)

(5,793)

358,368









Income

tax (expense)

(54,206)

(5,847)

(12,507)

(21,810)

(571)

1,562

(93,379)









Profit / (loss) for the year

206,349

16,443

33,093

21,880

(8,545)

(4,231)

264,989









Other segment information








Depreciation & amortisation

11,210

1,504

13,632

22,254

425

(840)

48,185

Impairment

-

-

-

5,355

-

-

5,355

Write-off of intangible oil & gas assets

-

-

-

9,826

-

-

9,826

Other long-term employment benefits

7,867

816

1,427

60

53

-

10,223

Share-based payments

3,855

1,485

1,679

1,059

1,370

-

9,448



The significant movements of total group assets as at 30 June 2009 compared to total assets as at 31 December 2008 is primarily in the following segments:

Engineering




&


Energy


Construction


Developments


US$'000


US$'000





Total assets as at 30 June 2009

2,006,507


666,429

Total assets as at 31 December 2008

1,593,925


488,541


  • Increase in Engineering & Construction segment assets is primarily due to an increase in cash and bank balances of US$193,088,000 as a result of advances received from customers on long-term contracts and an increase of US$186,995,000 in work in progress mainly as a result of progress on newly awarded contracts and on existing contracts where variation orders have been agreed but not yet billed. The corresponding impact of the receipt of cash advances from customers is an increase in billings in excess of cost and estimated earnings shown in current liabilities of US$322,282,000.
  • Increase in Energy Developments segment assets during the period is primarily due to an increase in the net book value of property, plant and equipment of US$177,865,000 mainly as a result of further capitalisation of development costs related to the segment's Don area assets (see note 9).


4    REVENUES

6 months ended


6 months ended


Year 

ended


30 June 2009


30 June 2008


31 December 2008


Unaudited


Unaudited


Audited


US$'000


US$'000


US$'000







  Rendering of services

1,524,098


1,518,338


3,214,782

Sale of crude oil & gas

58,983


52,182


102,036

Sale of processed hydrocarbons

3,327


5,634


12,718


1,586,408


1,576,154


3,329,536


Included in revenues from rendering of services are Operations Services revenues of a "pass-through" nature with zero or low margins amounting to US$102,804,000 (six months ended 30 June 2008: US$114,371,000; year ended 31 December 2008: US$275,947,000).



5    COST OF SALES


Also included in cost of sales are forward points and ineffective portions on derivative financial instruments designated as cash flow hedges of US$2,346,000 gain (six months ended 30 June 2008: US$13,453,000 loss; year ended 31 December 2008: US$11,826,000 loss).



6    INCOME TAX


Income tax expense is recognised based on management's best estimate of each segment's annual income tax rate expected for the full financial year. 


The major components of the income tax expense are as follows:

6 months ended


6 months ended


Year 

ended


30 June


30 June


31 December 


2009


2008


2008


Unaudited


Unaudited


Audited


US$'000


US$'000


US$'000







Current income tax






Current income tax charge

51,489


40,445


128,243

Adjustments in respect of current income tax of previous years

(14,218)


-


4,373







Deferred income tax






Relating to origination and reversal of temporary differences

(5,935)


(868)


(33,393)

Adjustments in respect of deferred income tax of previous years

(2,582)


-


(5,844)


28,754


39,577


93,379


The group's effective tax rate for the six months is 16.5% (six months ended 30 June 2008: 24.6%; year ended 31 December 2008: 26.1%). The principal reason for the decrease in the group's effective tax rate is the confirmation during the period of the applicability of a lower tax rate in relation to the group's projects in Oman. Other contributing factors include a higher proportion of Engineering & Construction segmental profits being earned in lower tax rate jurisdictions.


With effect from the 2009 year of assessment Jersey abolished the exempt company regime for existing companies. Profits arising in the Company for the 2009 year of assessment and future periods will be subject to tax at the rate of 0%.


In the prior year the Company was exempt from taxation under the provisions of Article 123A of the Income tax (Jersey) Law 1961 as amended.



7    EARNINGS PER SHARE 


Basic earnings per share amounts are calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.


Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary shareholders, after adjusting for any dilutive effect, by the weighted average number of ordinary shares outstanding during the period, adjusted for the effects of ordinary shares granted under the employee share award schemes which are held in trust.  


The following reflects the income and share data used in calculating basic and diluted earnings per share:

6 months ended


6 months ended


Year 

ended


30 June 2009


30 June 2008


31 December 2008


Unaudited


Unaudited


Audited


US$'000


US$'000


US$'000








Net profit attributable to ordinary shareholders for basic and diluted earnings per share



145,571




121,240




264,989





6 months ended


6 months ended


Year 

ended


30 June 2009


30 June 2008


31 December 2008


Unaudited


Unaudited


Audited


'000


'000


'000

Weighted average number of ordinary shares for basic 






  earnings per share

336,776


340,176


339,585

Effect of diluted potential ordinary shares granted under share-based payment schemes


4,172



4,952



4,072

Adjusted weighted average number of ordinary shares for diluted earnings per share


340,948



345,128



343,657



8    DIVIDENDS PAID AND PROPOSED

6 months ended


6 months ended


Year 

ended


30 June 2009


30 June 2008


31 December 2008


Unaudited


Unaudited


Audited


US$'000


US$'000


US$'000

Declared and paid during the period












Equity dividends on ordinary shares:






  Final dividend for 2007: 11.50 cents per share

-


39,164


39,164

  Interim dividend 2008: 7.50 cents per share

-


-


25,536

  Final dividend for 2008: 17.90 cents per share

60,332


-


-


60,332


39,164


64,700


The Company proposes an interim dividend of 10.70 cents per share which was approved by the Board on 21 August 2009 for payment on 23 October 2009.



9    PROPERTY, PLANT AND EQUIPMENT


During the period, the group incurred capital expenditure of US$184,475,000 (30 June 2008: US$33,842,000; 31 December 2008: US$167,265,000) on the development of its Don area assets, US$8,606,000 (30 June 2008: US$13,674,000; 31 December 2008: US$24,939,000) on the Chergui gas concession in Tunisia, appraisal well costs of US$4,255,000 (30 June 2008: US$5,132,000; 31 December 2008: US$6,020,000) on Cendor in Malaysia and US$3,055,000 (30 June 2008: US$ nil; 31 December 2008: US$ nil) on the Ohanet asset in Algeria.


Included in the Don capital expenditure above are capitalised decommissioning costs of US$45,791,000 (30 June 2008: US$ nil; 31 December 2008: US$ 1,257,000).


10    GOODWILL


The net decrease in the goodwill balance in the current period represents foreign exchange gains of US$10,514,000 and reductions as a result of reassessment of deferred consideration payable on the acquisitions of SPD Group Limited of US$2,572,000, Caltec Limited of US$6,994,000 and Eclipse Petroleum Technology Limited of US$1,814,000.



11    INTANGIBLE ASSETS


Movements in intangible assets mainly comprise additions to intangible oil & gas assets of US$20,290,000 representing further appraisal drilling costs in respect of the group's interest in the Cendor field in Malaysia. 


12    DERIVATIVE FINANCIAL INSTRUMENTS 


The movement during the period is due to changes in the fair value of derivative financial instruments which the group uses to hedge its risk against foreign currency exposure on sales, purchases and borrowings that are entered into in a currency other than US dollars and exposure to oil price revenue fluctuations.


During the period the group entered into various crude oil swaps hedging oil production of 66,000 bbl with maturities ranging from 1 July 2009 to 31 December 2009. Two crude oil collars were also contracted hedging 60,000 bbl of oil production with maturities from 1 January 2010 to 30 June 2010. In addition, two fuel oil swaps were also entered into for hedging gas production of 13,500MT with maturities from 1 October 2009 to 30 June 2010.


During the period the group entered into the following foreign exchange forward contracts designated as cash flow hedges:


Currencies

Sales


Purchases


Foreign currency amount

'000


US$ equivalent

US$'000


Foreign currency amount

'000


US$ equivalent

US$'000

Euro

192,000

266,560


330,000

428,843

Sterling

-

-


40,560

55,185

Yen

527,800

5,859


-

-

Kuwaiti Dinars

16,000

55,691


-

-

UAE Dirhams

71,666

19,506


-

-



13    CASH AND CASH EQUIVALENTS


For the purposes of the interim condensed consolidated cash flow statement, cash and cash equivalents comprise the following:

30 June 2009


30 June 2008


31 December 2008


Unaudited


Unaudited


Audited


US$'000


US$'000


US$'000







Cash at bank and in hand

112,093


103,234


107,461

Short-term deposits

788,084


461,972


586,954

Cash and short term deposits

900,177


565,206


694,415

Bank overdrafts

(15,979)


(13,458)


(45,256)


884,198


551,748


649,159



14    TREASURY SHARES AND SHARE-BASED PAYMENTS


During the period, the Company acquired nil (30 June 2008: 1,554,194; 31 December 2008: 5,854,194) of its own shares at a cost of US$ nil (30 June 2008: US$16,969,000; 31 December 2008: US$42,500,000) for the purpose of making awards under the group's employee share schemes and these shares have been classified in the balance sheet as treasury shares within equity. In addition during the period 2,158,122 shares (including 67,971 accrued dividend shares) with a cost of $12,087,000 were transferred out of the Employee Benefit Trust on vesting of various employee share scheme awards as shown below.


Of the 7,382,184 shares held in the Petrofac Employee Benefit Trust at 30 June 2009, 5,504,819 are still being held in a Lehman Brothers client custody account pending release on the finalisation of their legal administration.


The following table shows the movements in the number of shares held under the three group employee share schemes:

Deferred Bonus Share Plan*

Performance Share Plan

Restricted Share Plan


Number

Number

Number





Outstanding at 1 January 2009

3,755,383

1,298,809

1,184,711

Granted during the period

2,774,600

576,780

76,008

Vested during the period

(1,673,943)

(411,028)

(5,180)

Forfeited during the period

(28,418)

(3,318)

(3,142)

Outstanding but not exercisable at 30 June 2009

4,827,622

1,461,243

1,252,397





Made up of following awards:




2006

-

-

154,649

2007

758,022

436,603

229,207

2008

1,297,164

447,860

792,533

2009

2,772,436

576,780

76,008


4,827,622

1,461,243

1,252,397

* Includes invested and matching shares.


The fair value of the equity-settled awards granted during the period ended 30 June 2009 in respect of the Deferred Bonus Share Plan were estimated based on the quoted closing market price of 545p per Company share at the date of grant with an assumed vesting rate of 99% per annum over the vesting period of the plan.

   

The fair value of the non-market based equity-settled awards granted during the period ended 30 June 2009 representing 50% of the total Performance Share Plan award were estimated based on the quoted closing market price of 545p per Company share at the date of grant with an assumed vesting rate of 100% per annum over the three year vesting period of the plan. The remaining 50% of these awards which are market performance based were fair valued by an independent valuer at 456p per share using a Monte Carlo simulation model taking into account the terms and conditions of the plan rules and using the following assumptions at the date of grant:



Expected share price volatility (based on median of comparator group's three year volatilities)

49.0%

Share price correlation with comparator group 

36.0%

Risk-free interest rate 

2.1%

Expected life of share award

3 years


The fair value of the equity-settled awards granted at various dates during the period ended 30 June 2009 in respect of the Restricted Share Plan were based on an average market price of 430p with an assumed vesting rate of 100% per annum over the vesting period of the plan.


The group has recognised an expense in the income statement for the period to 30 June 2009 relating to employee share-based incentives of US$6,111,000 (six months ended 30 June 2008: US$4,331,000; year ended 31 December 2008: US$9,448,000) which has been transferred to the reserve for share-based payments along with US$10,949,000 of the remaining bonus liability accrued for the year ended 31 December 2008 (30 June 2008: US$9,603,000; 31 December 2008: US$9,602,000) which has been voluntarily elected or mandatorily obliged to be settled in shares granted during the period.

  

15    OTHER RESERVES

Net unrealised 






gains/(losses) 

Net unrealised





on available-for-

(losses)/

Foreign

Reserve for



sale financial

gains on

currency

share-based 



assets

derivatives

translation

payments

Total


US$'000

US$'000

US$'000

US$'000

US$'000







Balance at 1 January 2009

74

7,847

(79,415)

32,202

(39,292)

Foreign currency translation

-

-

15,249

-

15,249

Net gains on maturity of cash flow hedges recycled in the period

-

(6,732)

-

-

(6,732)

Net changes in fair value of derivatives and financial assets

    designated as cash flow hedges


-


49,838


-


-


49,838

Share-based payments charge (note 14)

-

-

-

6,111

6,111

Transfer during the period (note 14)

-

-

-

10,949

10,949

Shares vested during the period (note 14)




(11,706)

(11,706)

Balance at 30 June 2009 (unaudited)

74

50,953

(64,166)

37,556

24,417







Balance at 1 January 2008 (as restated)*

598

65,857

4,817

16,161

87,433

Foreign currency translation

-

-

(512)

-

(512)

Net gains on maturity of cash flow hedges recycled in the period

-

(23,460)

-

-

(23,460)

Net changes in fair value of derivatives and financial assets designated as cash flow hedges


-


12,720


-


-


12,720

Changes in fair value of available-for-sale financial assets

(112)

-

-

-

(112)

Share-based payments charge (note 14)

-

-

-

4,331

4,331

Transfer during the period (note 14)

-

-

-

9,603

9,603

Shares vested during the period

-

-

-

(2,762)

(2,762)

Balance at 30 June 2008 (unaudited)*

486

55,117

4,305

27,333

87,241







Balance at 1 January 2008 (as restated)*

598

65,857

4,817

16,161

87,433

Foreign currency translation

-

-

(84,232)

-

(84,232)

Net gains on maturity of cash flow hedges recycled in the year

-

(32,103)

-

-

(32,103)

Net changes in fair value of derivatives and financial assets designated as cash flow hedges

-

(25,907)

-

-

(25,907)

Changes in fair value of available-for-sale financial assets

(879)

-

-

-

(879)

Impairment of available-for-sale financial assets

355

-

-

-

355

Share-based payments charge (note 14)

-

-

-

9,448

9,448

Transfer during the year

-

-

-

9,602

9,602

Shares vested during the year

-

-

-

(3,009)

(3,009)

Balance at 31 December 2008 (audited)

74

7,847

(79,415)

32,202

(39,292)


* During 2008, the Company identified that in prior periods certain gains and losses on cash flow hedges had been recycled to accrued contract expenses from other reserves (net unrealised (losses)/gains on derivatives) ahead of the contract costs to which they relate impacting the income statement. As a result US$36,966,000 was reclassified from accrued contract expenses to other reserves at 1 January 2008. The net changes in fair value of derivatives as at 30 June 2008 have also been restated by US$36,177,000.



16    CAPITAL COMMITMENTS


At 30 June 2009 the group had capital commitments of US$83,663,000 (31 December 2008: US$44,035,000; 30 June 2008: US$142,547,000).


Included in the above are commitments relating to the development of the Don area assets of US$59,418,000 (31 December 2008: US$8,610,000; 30 June 2008: US$119,797,000), additional appraisal and development well costs on the Cendor project in Malaysia of US$21,358,000 (31 December 2008: US$26,468,000; 30 June 2008: US$15,582,000) and on the Ohanet investment of US$2,545,000 (31 December 2008: US$ nil; 30 June 2008: US$ nil).


  

17    RELATED PARTY TRANSACTIONS


The following table provides the total amount of transactions which have been entered into with related parties:


Sales 

Purchases

Amounts

Amounts



to

from

owed

owed



related

related

by related

to related



parties

parties

parties

parties



US$'000

US$'000

US$'000

US$'000







Joint ventures 

Six months ended 30 June 2009 (unaudited)

349

13

2,805

436


Six months ended 30 June 2008 (unaudited)

2,768

104

3,408

410


Year ended 31 December 2008 (audited)

9,081

1,858

2,907

367







Other directors' 

Six months ended 30 June 2009 (unaudited)

-

588

-

23

  interests

Six months ended 30 June 2008 (unaudited)

-

522

-

168


Year ended 31 December 2008 (audited)

-

1,277

-

192


All sales to and purchases from joint ventures are made at normal market prices and the pricing policies and terms of these transactions are approved by the group's management.


All related party balances at 30 June 2009 will be settled in cash.


Purchases in respect of other directors' interests of US$588,000 (six months ended 30 June 2008: US$522,000; year ended 31 December 2008: US$1,277,000) reflect the market rate based costs of chartering the services of an aeroplane used for the transport of senior management and directors of the group on company business, which is owned by an offshore trust of which the Chief Executive of the Company is a beneficiary. 


Compensation of key management personnel 

6 months ended


6 months ended


Year

 ended


30 June 2009


30 June 2008


31 December 2008


Unaudited


Unaudited


Audited


US$'000


US$'000


US$'000







Short-term employee benefits

1,428


1,627


5,542

Other long-term employment benefits 

23


33


59

Share-based payments

780


690


1,311

Fees paid to non-executive directors

249


305


554


2,480


2,655


7,466




 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES 


The directors confirm that, to the best of their knowledge, the condensed set of financial statements on pages 9 to 25 has been prepared in accordance with IAS 34 'Interim Financial Reporting', and that the interim management report on pages 1 to 7 includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.


The directors of Petrofac Limited are listed in the Petrofac Annual Report and Accounts 2008.


By the order of the Board


Ayman Asfari                                 Keith Roberts

Chief Executive Officer                Chief Financial Officer

21 August 2009                            21 August 2009



INDEPENDENT REVIEW REPORT TO PETROFAC LIMITED


Introduction 


We have been engaged by the Company to review the Interim condensed consolidated financial statements for the six months ended 30 June 2009 in the interim report which comprises the Interim condensed consolidated income statement, the Interim condensed consolidated statement of comprehensive income, the Interim condensed consolidated balance sheet, the Interim condensed consolidated cash flow statement, the Interim condensed consolidated statement of changes in equity and the related explanatory notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 


This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.


Directors' Responsibilities 


The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 


As disclosed in note 2, the annual consolidated financial statements of Petrofac Limited are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board. The condensed consolidated financial statements included in this interim report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting". 


Our Responsibility 


Our responsibility is to express to the Company a conclusion on the interim condensed consolidated financial statements in the interim report based on our review. 


Scope of Review 


We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 


Conclusion 


Based on our review, nothing has come to our attention that causes us to believe that the Interim condensed consolidated financial statements in the interim report for the six months ended 30 June 2009 are not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.


Ernst & Young LLP

London

21 August 2009



Petrofac shares are traded on the London Stock Exchange using code 'PFC.L'.  


Registrar

Company Secretary and registered office

Capita Registrars (Jersey) Limited

Ogier Corporate Services (Jersey) Limited

12 Castle Street

Whiteley Chambers

St Helier

Don Street

Jersey JE2 3RT

St Helier


Jersey JE4 9WG


UK Transfer Agent


Capita Registrars


The Registry


34 Beckenham Road


Beckenham


Kent BR3 4TU




Legal Advisers to the Company


As to English Law

As to Jersey Law

Freshfields Bruckhaus Deringer LLP

Ogier

65 Fleet Street 

Whiteley Chambers

London EC4Y 1HS

Don Street


St Helier


Jersey JE4 9WG



Joint Brokers


Goldman Sachs

JP Morgan Cazenove

Peterborough Court 

20 Moorgate

113 Fleet Street

London EC2R 6DA

London EC4A 2BB




Auditors

Corporate and Financial PR

Ernst & Young LLP

Bell Pottinger Corporate & Financial

1 More London Place

6th Floor Holborn Gate

London SE1 2AF

330 High Holborn


London WC1V 7QD



Financial calendar


25 September 2009

Interim dividend record date

23 October 2009

Interim dividend payment

31 December 2009

2009 financial year end

8 March 2010

2009 full year results announcement


Dates correct at time of print, but subject to change.


The group's investor relations website can be found through www.petrofac.com.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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