Trading update

RNS Number : 9242R

Petrofac Limited

15 December 2016

 

15 December 2016

PETROFAC LIMITED

TRADING UPDATE

Petrofac issues the following pre-close trading update ahead of the announcement of its final results for the year ending 31 December 2016 on 22 February 2017.

·      Net profit⁽¹⁾ is expected to be c.US$410 million in 2016 in line with previous guidance

o Group (excluding IES) is expected to deliver a better than expected net profit of c.US$465 million

o IES is expected to report a loss of c.US$55 million, predominantly reflecting low realised oil and gas prices and a change in depreciation policy⁽²⁾

·      Results will benefit from record revenues, improved operational efficiency and a c.25% reduction in headcount during the year

·      Group order intake of US$1.4 billion reflecting challenging market conditions.  Group backlog of US$14.5 billion at 30 November 2016 (30 June 2016: US$17.4bn)

·      Reducing capital intensity with c.US$300 million of proceeds from Berantai RSC exit

·      Net debt currently expected to be around US$0.9 billion at the year-end (30 June 2016: US$0.9bn)

Ayman Asfari, Petrofac's Group Chief Executive, commented:

"We are on track to deliver positive results in 2016 in line with guidance reflecting record revenues, solid operational performance across all of our businesses and the delivery of significant cost savings.  We also continue to make good progress on our strategy to refocus on our core strengths and reduce capital intensity.  During the year we exited the Berantai Risk Service Contract in Malaysia and Ticleni Production Enhancement Contract in Romania.

"2016 has been a challenging year for the industry.  The deferral and cancellation of project tenders has contributed to significantly reduced order intake in our lump-sum business year to date.  Order intake in our reimbursable business has been more resilient, which will partially offset the anticipated reduction in EPC revenues in 2017 from record levels this year.  Our existing backlog continues to provide excellent visibility for Group revenue next year and our bidding activity has increased during the last quarter of the year.  We remain very focused on maintaining our cost competitiveness and discipline in a competitive market, and are well-positioned for a recovery in our core markets."

Engineering & Construction

We have made good progress executing our portfolio of lump-sum engineering and construction projects, working approximately 200 million man hours on 18 projects across our portfolio.  As previously disclosed, the Laggan-Tormore project was handed over and completed in the first half of the year.  Market conditions have been weaker than expected, with many project tenders deferred or cancelled. Bidding activity has increased during the last quarter of the year, but remains competitive.

Engineering & Production Services

Our reimbursable business continues to perform in line with expectations and will contribute an increasing proportion of earnings in 2016 and 2017.  We have secured awards and extensions worth approximately US$1.1 billion year to date, predominantly in the UK North Sea and Iraq, and we are pursuing a good pipeline of opportunities in the UK and internationally.

Integrated Energy Services (IES)

Overall, IES is on track to deliver production expectations for the year across its portfolio of producing assets. Following sailaway of the FPF1 floating production facility in August 2016, first production from the Greater Stella Area development is now expected in January 2017.

During the year we exited the Berantai Risk Service Contract (RSC) and the Ticleni Production Enhancement Contract (PEC).  We continue to make progress in Mexico towards the migration of our PECs to Production Sharing Contracts (PSCs).

Financial position

Group backlog stood at US$14.5 billion at 30 November 2016, giving us excellent revenue visibility for 2017:

	30 November 2016	30 June 2016	31 December 2015
	US$ billion	US$ billion	US$ billion
Engineering & Construction	8.4	10.7	13.3
Engineering & Production Services	3.5	3.9	4.4
Integrated Energy Services	2.6	2.8	3.0
Group	14.5	17.4	20.7

Net debt is expected to be around US$0.9 billion at 31 December 2016 (30 June 2016: US$0.9bn) primarily reflecting lower than expected new order intake.  Lower operating cash flow from IES and higher activity-based work in progress in Engineering & Construction are expected to be largely offset by proceeds from the Berantai RSC exit and a reduction in capital expenditure.  Capital expenditure is expected to be around US$300 million, below previous guidance, reflecting the re-phasing of expenditure.

Notes

(1)           Underlying business performance profit for the year attributable to Petrofac Limited shareholders before the final charge on the Laggan-Tormore project of US$101 million (as previously announced) and exceptional items and certain re-measurements.

(2)           In accordance with IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation, the Group has revised its accounting policy in respect of its Production Enhancement Contracts (PECs) in Mexico. The net impact of the change is expected to be US$15 million for the full year.

Conference call

Alastair Cochran, Chief Financial Officer, will host a conference call for analysts and investors at 8am today. The participant details are as follows:

UK and international:                           [phone]

Passcode:                                           93198701#

Ends

Disclaimer:

This announcement contains forward-looking statements relating to the business, financial performance and results of Petrofac and the industry in which Petrofac operates. These statements may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast" and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither Petrofac nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.

For further information contact:

Petrofac Limited                                                                                  [phone]

Jonathan Low, Head of Investor Relations

Jonathan Edwards, Investor Relations Manager

Alison Flynn, Group Head of Communications                                  [phone]

Tulchan Communications Group LLP                                                [phone]

Martin Robinson

Stephen Malthouse

[e-mail]

Notes to Editors

Petrofac

Petrofac is a leading international service provider to the oil & gas production and processing industry, with a diverse client 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). 

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 clients' needs across the full life cycle of oil & gas assets.

With approximately 14,000 employees, Petrofac operates out of seven strategically located operational centres, in Aberdeen, Sharjah, Abu Dhabi, Woking, Chennai, Mumbai and Kuala Lumpur and has a further 24 offices worldwide.

 

END

 

 

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