Final Results

RNS Number : 5021O
Petrofac Limited
09 March 2009
 



CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2008











2008


2007


Notes


US$'000


US$'000



















Revenue

4a


3,329,536


2,440,251







Cost of sales

4b


(2,751,063)


(2,029,772)







Gross profit 



578,473


410,479







Selling, general and administration expenses

4e


(227,765)


(165,308)

Other income

4c


7,421


3,951

Other expenses

4d


(2,543)


(621)







Profit from operations before tax






  and finance income/(costs)



355,586


248,501







Finance costs

5


(13,906)


(8,527)

Finance income

5


16,688


18,259







Profit before tax



358,368


258,233

Income tax expense

6


(93,379)


(69,517)







Profit for the year attributable to Petrofac

    Limited shareholders




264,989



188,716











































Earnings per share (US cents)

7











- Basic



78.03


55.14

- Diluted



77.11


54.61








The attached notes 1 to 32 form part of these consolidated financial statements.


CONSOLIDATED BALANCE SHEET

At 31 December 2008







As restated




2008


2007


Notes


US$'000


US$'000

ASSETS






Non-current assets






Property, plant and equipment

9


413,064


256,237

Goodwill

11


97,534


71,743

Intangible assets

12


38,353


9,010

Available-for-sale financial assets

14


566


1,586

Derivative financial instruments

15


7,227


1,775

Other financial assets

15


1,899


23

Deferred income tax assets

6c


46,444


11,472




605,087


351,846







Current assets






Inventories

16


4,077


2,256

Work in progress

17


252,695


270,181

Trade and other receivables 

18


700,931


509,025

Due from related parties

30


2,907


3,147

Derivative financial instruments

15


5,631


27,298

Other financial assets

15


4,078


2,702

Cash and short-term deposits

19


694,415


581,552




1,664,734


1,396,161







TOTAL ASSETS



2,269,821


1,748,007













EQUITY AND LIABILITIES






Equity attributable to Petrofac Limited shareholders






Share capital

20


8,636


8,636

Share premium



68,203


68,203

Capital redemption reserve



10,881


10,881

Shares to be issued

10


1,988


-

Treasury shares

21


(69,333)


 (29,842)

Other reserves

23


(39,292)


87,433

Retained earnings



577,739


377,450




558,822


522,761

Minority interests



209


209







TOTAL EQUITY



559,031


522,970







Non-current liabilities






Interest-bearing loans and borrowings 

24


88,188


81,640

Provisions

25


29,663


19,046

Other financial liabilities

26


32,265


13,870

Deferred income tax liabilities

6c


38,196


34,137




188,312


148,693







Current liabilities






Trade and other payables

27


513,329


408,017

Due to related parties

30


559


744

Interest-bearing loans and borrowings

24


54,412


28,455

Other financial liabilities

26


6,362


864

Income tax payable



110,428


47,577

Billings in excess of cost and estimated earnings

17


285,527


208,105

Accrued contract expenses

28


551,861


382,582




1,522,478


1,076,344







TOTAL LIABILITIES



1,710,790


1,225,037







TOTAL EQUITY AND LIABILITIES



2,269,821


1,748,007







The financial statements on pages 73 to 126 were approved by the Board of Directors on 6 March 2009 and signed on its behalf by Keith Roberts - Chief Financial Officer.

The attached notes 1 to 32 form part of these consolidated financial statements.



CONSOLIDATED CASH FLOW STATEMENT 

For the year ended 31 December 2008












As restated




2008


2007


Notes


US$'000


US$'000













OPERATING ACTIVITIES






Profit before tax 



358,368


258,233

Adjustments for:






 Depreciation, amortisation, impairment and write off

4b, 4e


63,366


52,758

 Share-based payments

4f


9,448


5,412

 Difference between other long-term employment benefits paid and amounts recognised in the income statement



9,007


5,852

 Net finance (income)

5


(2,782)


(9,732)

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

4b,4c


41


(8,834)

 Gain on disposal of held for sale assets

4c


-


(243)

 Other non-cash items, net



11,303


1,756







Operating profit before working capital changes



448,751


305,202

 Trade and other receivables



(194,817)


(170,531)

 Work in progress



17,486


97,688

 Due from related parties



240


4,578

 Inventories



(1,821)


(313)

 Other current financial assets



(1,680)


(395)

 Trade and other payables



104,708


64,044

 Billings in excess of cost and estimated earnings



77,422


83,115

 Accrued contract expenses



117,505


(12,455)

 Due to related parties



(185)


562










567,609


371,495

Other non-current items, net



(1,927)


133







Cash generated from operations



565,682


371,628

Interest paid



(11,526)


(7,004)

Income taxes paid, net



(67,418)


(32,417)







Net cash flows from operating activities



486,738


332,207












INVESTING ACTIVITIES






Purchase of property, plant and equipment



(255,542)


(117,157)

Acquisition of subsidiaries, net of cash acquired

10


(40,774)


(4,902)

Payment of deferred consideration on acquisition

10


-


(64)

Purchase of intangible oil & gas assets

12


(37,036)


(48,604)

Purchase of available-for-sale financial assets



-


-

Proceeds from disposal of property, plant and equipment



1,031


12,166

Interest received



16,704


18,562







Net cash flows used in investing activities



(315,617)


(139,999)



The attached notes 1 to 32 form part of these consolidated financial statements.


CONSOLIDATED CASH FLOW STATEMENT (continued)

For the year ended 31 December 2008







As restated




2008


2007


Notes


US$'000


US$'000













FINANCING ACTIVITIES






Proceeds from interest-bearing loans and borrowings



25,000


-

Repayment of interest-bearing loans and borrowings



(6,213)


(2,767)

Shareholders loan note transactions, net



-


216

Treasury shares purchased

21


(42,500)


(21,698)

Equity dividends paid



(64,135)


(39,479)







Net cash flows used in financing activities



(87,848)


(63,728)













NET INCREASE IN CASH AND CASH EQUIVALENTS



83,273


128,480







Cash and cash equivalents at 1 January



565,886


437,406







CASH AND CASH EQUIVALENTS AT 31 DECEMBER

19


649,159


565,886








The attached notes 1 to 32 form part of these consolidated financial statements.



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2008 



    

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 21)

(note 23)
















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

  











Foreign currency translation

-

-

-

-

-

(84,232)

-

(84,232)

-

(84,232)












Net gains on maturity of cash flow











  hedges recycled in the year

-

-

-

-

-

(32,103)

-

(32,103)

-

(32,103)












Net changes in fair value of 











  derivatives and financial assets











    designated as cash flow hedges

-

-

-

-

-

(25,907)

-

(25,907)

-

(25,907)












Net changes in the fair value 











  of available-for-sale 











  financial assets

-

-

-

-

-

(879)

-

(879)

-

(879)












Impairment of available-for-sale











    financial asset

-

-

-

-

-

355

-

355

-

355












Total income and expenses 











  for the year recognised











  in equity

-

-

-

-

-

(142,766)

-

(142,766)

-

(142,766)












Net profit for the year

-

-

-

-

-

-

264,989

264,989

-

264,989












Total income and expenses 











  for the year

-

-

-

-

-

(142,766)

264,989

122,223

-

122,223












Shares to be issued on acquisition

-

-

-

1,988

-

-

-

1,988

-

1,988

 (note 10)






















Share-based payments charge (note 22)

-

-

-

-

-

9,448

-

9,448

-

9,448












Shares vested/forfeited  

    during the year (note 21)

-

-

-

-

3,009

(3,009)

-

-

-

-












Treasury shares purchased (note 21)

-

-

-

-

(42,500)

-

-

(42,500)

-

(42,500)












Transfer to reserve for share-based payments (note 22)


-


-


-


-


-


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 32 form part of these consolidated financial statements.


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

For the year ended 31 December 2008 



    

Issued


Capital








share

Share  

redemption

*Treasury

Other 

Retained


Minority

Total


capital

premium

reserve

shares

reserves

earnings

Total

interests

equity


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000





(note 21)

(note 23)















Balance at 1 January 2007 as previously reported

8,629

66,210

10,881

(8,144)

19,611

227,508

324,695

209

324,904

Restatement

-

-

-

-

19,213

-

19,213

-

19,213

Balance at 1 January 2007










    as restated 

8,629

66,210

10,881

(8,144)

38,824

227,508

343,908

209

344,117

  










Foreign currency translation

-

-

-

-

(72)

-

(72)

-

(72)











Net gain on maturity of cash flow










  hedges recycled in the year

-

-

-

-

(22,183)

-

(22,183)

-

(22,183)











Net changes in fair value of 










  derivatives and financial assets










    designated as cash flow hedges

-

-

-

-

59,487

-

59,487

-

59,487











Net changes in the fair value 










  of available-for-sale 










  financial assets

-

-

-

-

(140)

-

(140)

-

(140)











Total income and expenses 










  for the year recognised










  in equity

-

-

-

-

37,092

-

37,092

-

37,092











Net profit for the year

-

-

-

-

-

188,716

188,716

-

188,716











Total income and expenses 










  for the year

-

-

-

-

37,092

188,716

225,808

-

225,808











Share-based payments charge (note 22)

-

-

-

-

5,412

-

5,412

-

5,412











Shares issued on acquisition (note 20)

7

1,993

-

-

-

-

2,000

-

2,000











Treasury shares purchased (note 21)

-

-

-

(21,698)

-

-

(21,698)

-

(21,698)











Transfer to reserve for share-based payments (note 22)


-


-


-


-


6,105


-


6,105


-


6,105











Dividends (note 8)

-

-

-

-

-

(38,774)

(38,774)

-

(38,774)











Balance at 31 December 2007










    as restated 

8,636

68,203

10,881

(29,842)

87,433

377,450

522,761

209

522,970













* Shares held by Petrofac Employee Benefit Trust.


The attached notes 1 to 32 form part of these consolidated financial statements.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2008 



1    CORPORATE INFORMATION 


The consolidated financial statements of Petrofac Limited (the "Company") for the year ended 31 December 2008 were authorised for issue in accordance with a resolution of the directors on 6 March 2009


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 Company's 31 December 2008 financial statements are shown on pages 127 to 143.  The group's principal activity is the provision of facilities solutions to the oil & gas production and processing industry.


A full listing of all group companies, and joint venture companies, is contained in note 32 to these consolidated financial statements.


2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of preparation


The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and available-for-sale financial assets which have been measured at fair value.  The presentation currency of the consolidated financial statements is United States dollars and all values in the 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 and prior period earnings per shares numbers have been revised to be consistent with the current period presentation.


Statement of compliance


The consolidated financial statements of Petrofac Limited and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) and applicable requirements of Jersey law. 


Basis of consolidation


The consolidated financial statements comprise the financial statements of Petrofac Limited and its subsidiaries. The financial statements of its subsidiaries are prepared for the same reporting year as the Company and where necessary, adjustments are made to the financial statements of the group's subsidiaries to bring their accounting policies into line with those of the group.


Subsidiaries are consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which control is transferred out of the group. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group balances and transactions, including unrealised profits, have been eliminated on consolidation.  


Minority interests in subsidiaries consolidated by the group are disclosed separately from the group's equity and income statement. Losses attributable to minority interests in excess of the minority's interest in the net assets of the subsidiary are adjusted against the interest of the group unless there is a binding obligation on the part of the minority to contribute additional investment in the subsidiary.



New standards and interpretations


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 2008. The principal effects of the adoption of these new and amended standards and interpretations are discussed below:


IFRIC 11 'IFRS 2 Group and Treasury Share Transactions'

This interpretation clarifies that where any arrangement is made whereby an employee is granted rights to an entity's equity instruments; it is to be accounted for as an equity-settled scheme. This treatment would also hold true where the entity buys the instruments from an existing shareholder or any other party to provide the equity instruments to the employee. The adoption of this interpretation did not affect the group's operating results or financial position for the year ended 31 December 2008. 

IFRIC 14 'IAS19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'

This interpretation provides guidance on how to assess the limit on the amount of surplus in a defined benefit scheme that can be recognised as an asset under IAS 19 Employee Benefits. The adoption of this interpretation did not affect the group's operating results or financial position for the year ended 31 December 2008 as the group does not have any defined benefit schemes for its employees.


IAS 39 'Financial Instruments: Recognition and Measurement' and IFRS7 'Financial Instruments: Disclosures - Reclassification of Financial Assets (Amendments)'

These amendments in IAS 39 and IFRS7 permit reclassification of certain financial instruments held for trading and available for sale categories. These amendments did not affect the group's operating results or financial position for the year ended 31 December 2008.  

 

Certain new standards, amendments to and interpretations of existing standards have been issued and are effective for the group's accounting periods beginning on or after 1 January 2009 or later periods which the group has not early adopted. Those that are applicable to the group are as follows:


  • IAS 1 'Presentation of Financial Statements (Revised)' effective for annual periods beginning on or after 1 January 2009, has been revised to enhance the usefulness of information presented in the financial statements. Management is considering the approach to meeting this requirement. 

  • IFRS 2 'Amendments to IFRS 2 - Vesting Conditions and Cancellations' is required to be applied to periods beginning on or after 1 January 2009. This amendment clarifies the definition of non-vesting conditions and prescribes accounting treatment of an award that is cancelled because a non-vesting condition is not satisfied. This will have no significant impact on the group's financial statements.

  • IFRS 3 'Business Combinations (Revised)' and the amended version of IAS 27 'Consolidated and Separate Financial Statements', effective for annual periods beginning on or after 1 July 2009, have been enhanced to, amongst other matters, specify the accounting treatments for acquisition costs, contingent consideration, pre-existing relationships and reacquired rights. The revised standards include detailed guidance in respect of step acquisitions and partial disposals of subsidiaries and associates as well as in respect of allocation of income to non-controlling interests. Further, an option has been added to IFRS 3 to permit an entity to recognise 100 per cent of the goodwill of an acquired entity, not just the acquiring entity's portion of the goodwill. The impact of this standard on the group is not expected to be significant.

  • IFRS 8 'Operating Segments' introduces the management approach to segment reporting. IFRS 8, which becomes mandatory for the group's 2009 financial information, will require the disclosure of segment information based on the internal reports regularly reviewed by the group's Chief Operating Decision Maker in order to assess each segment's performance and allocate resources to them. The adoption of this standard does not have any impact on the financial position of the group. However, the segment information disclosed will change as a result of the recent internal restructuring of the group which is further discussed on page 6

  • Revisions to IAS 23 'Borrowing costs' have removed the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalise borrowing costs as part of the cost of such assets. The revised standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. This will have no significant impact on the group.

  • IAS 27 'Consolidated and Separate Financial Statements - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (Amendments)' effective for annual periods beginning on or after 1 January 2009has deleted the use of the 'cost method' of accounting for investments with respect to holding companies' separate financial statements. Also, in cases of reorganisations where a new parent is introduced above an existing one, the cost of the subsidiary is the previous carrying amount rather than its fair value. This will impact the separate financial statements of parent companies within the group, but does not have any impact on the consolidated financial statements of the group.

  • IAS 32 'Financial Instruments: Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (Amendments)' effective for annual periods beginning on or after 1 January 2009requires the classification of puttable financial instruments as equity if they have certain specified features. This will have no impact on the group.

  • IFRIC 16 'Hedges of a Net Investment in a Foreign Operation' this interpretation provides guidance in respect of hedges of foreign currency gains and losses on a net investment in a foreign operation. This interpretation is effective for periods beginning on or after 1 October 2008. The impact on the group is not considered to be significant.

  • IAS 39 'Financial Instruments: Recognition and Measurement - Eligible hedged item (Amendment)' is effective for periods beginning on or after 1 July 2009. This amendment addresses only the designation of a one-sided risk in a hedged item and the designation of inflation as a hedged risk or a portion in particular situations. This will have no impact on the group.

Other interpretations and amendments that have been issued but are not yet effective and are not considered applicable to the group are IFRIC 13 'Customer Loyalty Programmes', IFRIC 15 'Agreements for the Construction of Real Estate' and IFRS 1 'First-time Adoption of IFRS - Cost of an Investment in a Subsidiary, Jointly Controlled Entity of Associate (Amendments)'.



Significant accounting judgements and estimates


Judgements

In the process of applying the group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:


  • Revenue recognition on fixed-price engineering, procurement and construction contracts: the group recognises revenue on fixed-price engineering, procurement and construction contracts using the percentage-of-completion method, based on surveys of work performed. The group has determined this basis of revenue recognition is the best available measure of progress on such contracts.


Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:


  • Project cost to complete estimates: at each balance sheet date the group is required to estimate costs to complete on fixed price contracts. Estimating costs to complete on such contracts requires the group to make estimates of future costs to be incurred, based on work to be performed beyond the balance sheet date.


  • Onerous contract provisions: the group provides for future losses on long-term contracts where it is considered probable that the contract costs are likely to exceed revenues in future years. Estimating these future losses involves a number of assumptions about the achievement of contract performance targets and the likely levels of future cost escalation over time.


  • Impairment of goodwill: the group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the group to make an estimate of the expected future cash flows from each cash-generating unit and also to determine a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31 December 2008 was US$97,534,000 (2007: US$71,743,000).


  • Deferred tax assets: the group recognises deferred tax assets on unused tax losses where it is probable that future taxable profits will be available for utilisation. This requires management to make judgements and assumptions regarding the amount of deferred tax that can be recognised as well as the likelihood of future taxable profits. The carrying amount of recognised tax losses at 31 December 2008 was US$33,165,000 (2007: US$8,512,000).


  • Income tax: the Company and its subsidiaries are subject to routine tax audits and also a process whereby tax computations are discussed and agreed with the appropriate authorities. Whilst the ultimate outcome of such tax audits and discussions cannot be determined with certainty, management estimates the level of provisions required for both current and deferred tax on the basis of professional advice and the nature of current discussions with the tax authority concerned


  • Recoverable value of intangible oil & gas and other intangible assets: the group determines at each balance sheet date whether there is any evidence of impairment in the carrying value of its intangible oil & gas and other intangible assets. This requires management to estimate the recoverable value of its intangible assets for example by reference to quoted market values, similar arms length transactions involving these assets or value in use calculations.


  • Units of production depreciationestimated proven plus probable reserves are used in determining the depreciation of oil & gas assets such that the depreciation charge is proportional to the depletion of the remaining reserves over their life of production. These calculations require the use of estimates and assumptions including the amount of economically recoverable reserves and estimates of future oil & gas capital expenditure.


Interests in joint ventures 


The group has a number of contractual arrangements with other parties which represent joint ventures. These take the form of agreements to share control over other entities ('jointly controlled entities') and commercial collaborations ('jointly controlled operations'). The group's interests in jointly controlled entities are accounted for by proportionate consolidation, which involves recognising its proportionate share of the joint venture's assets, liabilities, income and expenses with similar items in the consolidated financial statements on a line-by-line basis. Where the group collaborates with other entities in jointly controlled operations, the expenses the group incurs and its share of the revenue earned is recognised in the income statement. Assets controlled by the group and liabilities incurred by it are recognised in the balance sheet. Where necessary, adjustments are made to the financial statements of the group's jointly controlled entities and operations to bring their accounting policies into line with those of the group.


Foreign currency translation


The Company's functional and presentational currency is United States dollars. In the accounts of individual subsidiaries, transactions in currencies other than a company's functional currency are recorded at the prevailing rate of exchange at the date of the transaction. At the year end, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates of exchange prevailing at the balance sheet date. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are translated using the rate of exchange as at the dates of the initial transactions. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated using the rate of exchange at the date the fair value was determined. All foreign exchange gains and losses are taken to the income statement with the exception of exchange differences arising on monetary assets and liabilities that form part of the group's net investment in subsidiaries. These are taken directly to equity until the disposal of the net investment at which time they are recognised in the income statement. 


The balance sheets of overseas subsidiaries and joint ventures are translated into US dollars using the closing rate method, whereby assets and liabilities are translated at the rates of exchange prevailing at the balance sheet date. The income statements of overseas subsidiaries and joint ventures are translated at average exchange rates for the year. Exchange differences arising on the retranslation of net assets are taken directly to a separate component of equity.


On the disposal of a foreign entity, accumulated exchange differences are recognised in the income statement as a component of the gain or loss on disposal.  


Property, plant and equipment 


Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Cost comprises the purchase price or construction cost and any costs directly attributable to making that asset capable of operating as intended. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Depreciation is provided on a straight-line basis other than on oil & gas assets at the following rates.


Oil & gas facilities                                               10% - 12.5%

Plant and equipment                                           4% - 33%

Buildings and leasehold improvements           5% - 33% (or shorter of the lease term)

Office furniture and equipment                         25% - 100%

Vehicles                                                                20% - 33%


Tangible oil & gas assets are depreciated, on a field-by-field basis, using the unit-of-production method based on entitlement to proven and probable reserves, taking account of estimated future development expenditure relating to those reserves. 


Each asset's estimated useful life, residual value and method of depreciation are reviewed and adjusted if appropriate at each financial year end.


No depreciation is charged on land or assets under construction. 


The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in profit or loss when the item is derecognised. Gains are not classified as revenue.


Non-current assets held for sale


Non-current assets or disposal groups are classified as held for sale when it is expected that the carrying amount of an asset will be recovered principally through sale rather than continuing use. Assets are not depreciated when classified as held for sale.


Borrowing costs


Borrowing costs directly attributable to the construction of qualifying assets, which are assets that necessarily take a substantial period of time to prepare for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognised as interest payable in the income statement in the period in which they are incurred.


Goodwill 


Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity at the date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that such carrying value may be impaired.

 

For the purpose of impairment testing, goodwill acquired is allocated to the cash-generating units that are expected to benefit from the synergies of the combination. Each unit or units to which goodwill is allocated represents the lowest level within the group at which the goodwill is monitored for internal management purposes and is not larger than a segment based on either the group's primary or the group's secondary reporting format determined in accordance with IAS14 'Segment Reporting'.


Impairment is determined by assessing the recoverable amount of the cash-generating units to which the goodwill relates. Where the recoverable amount of the cash-generating units is less than the carrying amount of the cash-generating units and related goodwill, an impairment loss is recognised.


Where goodwill has been allocated to cash-generating units and part of the operation within those units is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating units retained.


Deferred consideration payable on acquisition


When, as part of a business combination, the group defers a proportion of the total purchase consideration payable for an acquisition, the amount provided for is calculated based on the best estimate of the timing of additional payments discounted back to present value with the discount factor element recognised as a finance cost in the income statement.


Intangible assets - non oil & gas assets


Intangible assets acquired in a business combination are initially measured at cost being their fair values at the date of acquisition and are recognised separately from goodwill as the asset is separable or arises from a contractual or other legal right and its fair value can be measured reliably. After initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets with a finite life are amortised over their useful economic life using a straight line method unless a better method reflecting the pattern in which the asset's future economic benefits are expected to be consumed can be determined. The amortisation charge in respect of intangible assets is included in the selling, general and administration expenses line of the income statement. The expected useful lives of assets are reviewed on an annual basis. Any change in the useful life or pattern of consumption of the intangible asset is treated as a change in accounting estimate and is accounted for prospectively by changing the amortisation period or method. Intangible assets are tested for impairment whenever there is an indication that the asset may be impaired.


Oil & gas assets


Capitalised costs

The group's activities in relation to oil & gas assets are limited to assets in the evaluation, development and production phases.


Oil & gas evaluation and development expenditure is accounted for using the successful efforts method of accounting.


Evaluation expenditures

Expenditure directly associated with evaluation (or appraisal) activities is capitalised as an intangible asset. Such costs include the costs of acquiring an interest, appraisal well drilling costs, payments to contractors and an appropriate share of directly attributable overheads incurred during the evaluation phase. For such appraisal activity, which may require drilling of further wells, costs continue to be carried as an asset whilst related hydrocarbons are considered capable of commercial development. Such costs are subject to technical, commercial and management review to confirm the continued intent to develop, or otherwise extract value. When this is no longer the case, the costs are written-off in the income statement. When such assets are declared part of a commercial development, related costs are transferred to tangible oil & gas assets. All intangible oil & gas assets are assessed for any impairment prior to transfer and any impairment loss is recognised in the income statement.


Development expenditures

Expenditure relating to development of assets which include the construction, installation and completion of infrastructure facilities such as platforms, pipelines and development wells, is capitalised within propertyplant and equipment.


Changes in unit-of-production factors

Changes in factors which affect unit-of-production calculations are dealt with prospectively, not by immediate adjustment of prior years' amounts.


Decommissioning

Provision for future decommissioning costs is made in full when the group has an obligation to dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reasonable estimate of that liability can be made. The amount recognised is the present value of the estimated future expenditure. An amount equivalent to the discounted initial provision for decommissioning costs is capitalised and amortised over the life of the underlying asset on a unit-of-production basis over proven and probable reserves. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the oil & gas asset. 


The unwinding of the discount applied to future decommissioning provisions is included under finance costs in the income statement.


Available-for-sale financial assets


Investments classified as available-for-sale are initially stated at fair value, including acquisition charges associated with the investment.


After initial recognition, available-for-sale financial assets are measured at their fair value using quoted market rates. Gains and losses are recognised as a separate component of equity until the investment is sold or impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement.


Impairment of assets (excluding goodwill)


At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to assess whether there is an indication that those assets may be impaired. If any such indication exists, the group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows attributable to the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 


If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.


Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment is treated as a revaluation increase. 


Inventories


Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Cost comprises purchase price, cost of production, transportation and other directly allocable expenses. Costs of inventories, other than raw materials, are determined using the first-in-first-out method. Costs of raw materials are determined using the weighted average method.


Work in progress and billings in excess of cost and estimated earnings


Fixed price lump sum engineering, procurement and construction contracts are presented in the balance sheet as follows:


  • For each contract, the accumulated cost incurred, as well as the estimated earnings recognised at the contract's percentage of completion less provision for any anticipated losses, after deducting the progress payments received or receivable from the customers, are shown in current assets in the balance sheet under "Work in progress". 


  • Where the payments received or receivable for any contract exceed the cost and estimated earnings less provision for any anticipated losses, the excess is shown as "Billings in excess of cost and estimated earnings" within current liabilities.  


Trade and other receivables 


Trade receivables are recognised and carried at original invoice amount less an allowance for any amounts estimated to be uncollectable. An estimate for doubtful debts is made when there is objective evidence that the collection of the full amount is no longer probable under the terms of the original invoice. Impaired debts are derecognised when they are assessed as uncollectable.  


Cash and cash equivalents


Cash and cash equivalents consist of cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consists of cash and cash equivalents as defined above, net of outstanding bank overdrafts.


Interest-bearing loans and borrowings


All interest-bearing loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs directly attributable to the borrowing.


After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.


Provisions


Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised in the income statement as a finance cost.


Derecognition of financial assets and liabilities


Financial assets

A financial asset (or, where applicable a part of a financial asset) is derecognised where:

  • the rights to receive cash flows from the asset have expired;

  • the group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass-through' arrangement; or

  • the group has transferred its rights to receive cash flows from the asset and either a) has transferred substantially all the risks and rewards of the asset, or b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.


Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.


If an existing financial liability is replaced by another from the same lender, on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised in the income statement.


Pensions and other long-term employment benefits


The group has various defined contribution pension schemes in accordance with the local conditions and practices in the countries in which it operates. The amount charged to the income statement in respect of pension costs reflects the contributions payable in the year. Differences between contributions payable during the year and contributions actually paid are shown as either accrued liabilities or prepaid assets in the balance sheet.


The group's other long-term employment benefits are provided in accordance with the labour laws of the countries in which the group operates, further details of which are given in note 25.



Share-based payment transactions


Employees (including directors) of the group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions'). 


Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Petrofac Limited ('market conditions'), if applicable.


The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the relevant employees become fully entitled to the award (the 'vesting period'). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the group's best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.


No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. Equity awards cancelled are treated as vesting immediately on the date of cancellation, and any expense not recognised for the award at that date is recognised in the income statement.


Petrofac Employee Benefit Trust


The Petrofac Employee Benefit Trust was established on 7 March 2007 to warehouse ordinary shares purchased to satisfy various new share scheme awards made to the employees of the Company, which will be transferred to the members of the scheme on their respective vesting dates subject to satisfying the performance conditions of each scheme. The trust has been consolidated in the financial statements in accordance with SIC 12 'Special Purpose Entities'. The cost of shares temporarily held by Petrofac Employee Benefit Trust are reflected as treasury shares and deducted from equity.


Leases


The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys the right to use the asset.


The group has entered into various operating leases the payments for which are recognised as an expense in the income statement on a straight-line basis over the lease terms.


Revenue recognition


Revenue is recognised to the extent that it is probable economic benefits will flow to the group and the revenue can be reliably measured. The following specific recognition criteria also apply:


Engineering, procurement and construction services (Engineering & Construction)

Revenues from fixed-price lump-sum contracts are recognised on the percentage-of-completion method, based on surveys of work performed once the outcome of a contract can be estimated reliably. In the early stages of contract completion, when the outcome of a contract cannot be estimated reliably, contract revenues are recognised only to the extent of costs incurred that are expected to be recoverable. 


Revenues from cost-plus-fee contracts are recognised on the basis of costs incurred during the year plus the fee earned measured by the cost-to-cost method.


Revenues from reimbursable contracts are recognised in the period in which the services are provided based on the agreed contract schedule of rates.


Provision is made for all losses expected to arise on completion of contracts entered into at the balance sheet date, whether or not work has commenced on these contracts.


Incentive payments are included in revenue when the contract is sufficiently advanced that it is probable that the specified performance standards will be met or exceeded and the amount of the incentive payments can be measured reliably. Claims are only included in revenue when negotiations have reached an advanced stage such that it is probable the claim will be accepted and can be measured reliably.


Facilities management, engineering and training services (Operations Services)

Revenues from reimbursable contracts are recognised in the period in which the services are provided based on the agreed contract schedule of rates.  


Revenues from fixed-price contracts are recognised on the percentage-of-completion method, measured by milestones completed or earned value once the outcome of a contract can be estimated reliably. In the early stages of contract completion, when the outcome of a contract cannot be estimated reliably, contract revenues are recognised only to the extent of costs incurred that are expected to be recoverable.


Incentive payments are included in revenue when the contract is sufficiently advanced that it is probable that the specified performance standards will be met or exceeded and the amount of the incentive payments can be measured reliably. Claims are only included in revenue when negotiations have reached an advanced stage such that it is probable the claim will be accepted and can be measured reliably.


Oil & gas activities (Energy Developments)

Oil & gas revenues comprise the group's share of sales from the processing or sale of hydrocarbons on an entitlement basis, when the significant risks and rewards of ownership have been passed to the buyer.


Income taxes


Income tax expense represents the sum of current income tax and deferred tax. 


Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to the taxation authorities. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.


Deferred income tax is recognised on all temporary differences at the balance sheet date between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with the following exceptions:

  • where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

  • in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

  • deferred income tax assets are recognised only to the extent that it is probable that a taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.


The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.


Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the asset is realised or the liability is settled, based on tax rates and tax laws enacted or substantively enacted at the balance sheet date.


Current and deferred income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise, income tax is recognised in the income statement.



Derivative financial instruments and hedging 


The group uses derivative financial instruments such as forward currency contracts, interest rate collars and swaps and oil price collars and forward contracts to hedge its risks associated with foreign currency, interest rate and oil price fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.


Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the income statement.  


The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate cap, swap and oil price collar contracts is determined by reference to market values for similar instruments.


For the purposes of hedge accounting, hedges are classified as:


  • fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability; or


  • cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction.


The group formally designates and documents the relationship between the hedging instrument and the hedged item at the inception of the transaction, as well as its risk management objectives and strategy for undertaking various hedge transactions. The documentation also includes identification of the hedging instrument, the hedged item or transaction, the nature of risk being hedged and how the group will assess the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in the hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items.


The treatment of gains and losses arising from revaluing derivatives designated as hedging instruments depends on the nature of the hedging relationship, as follows:


Fair value hedges

For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged; the derivative is remeasured at fair value and gains and losses from both are taken to the income statement. For hedged items carried at amortised cost, the adjustment is amortised through the income statement such that it is fully amortised by maturity.


The group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the group revokes the designation.


Cash flow hedges

For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects the income statement.


If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as 

a hedge is revoked, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.


Embedded derivatives

Contracts are assessed for the existence of embedded derivatives at the date that the group first becomes party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. Embedded derivatives which are not clearly and closely related to the underlying asset, liability or transaction are separated and accounted for as stand alone derivatives.



3    SEGMENT INFORMATION 


The group's primary operations are organised on a worldwide basis into three business segments: Engineering & Construction, Operations Services and Energy Developments. The accounting policies of the segments are the same as those described in note 2 above. The group accounts for inter-segment sales as if the sales were to third parties, that is, at arms length prices. The group evaluates the performance of its segments and allocates resources to them based on this evaluation. 


The group's secondary segment reporting format is geographical. Geographical segments are based on the location of the group's assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.


Business segments


The following tables present revenue and profit information and certain asset and liability information relating to the group's business segments for the years ended 31 December 2008 and 2007. Included within the corporate, consolidation and eliminations columns are certain balances, which due to their nature, are not allocated to segments.


Year ended 31 December 2008


    

        

Engineering




Consolidation



&

Operations

Energy

Corporate

adjustments 



Construction

Services

Developments

& others

eliminations

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000








Revenue







External sales

2,212,704

963,475

153,357

-

-

3,329,536








Inter-segment sales

6,698

18,945

-

-

(25,643)

-








Total revenue

2,219,402

982,420

153,357

-

(25,643)

3,329,536














Segment results

265,853

46,737

51,713

(1,176)

(215)

362,912

Unallocated corporate 







  costs

-

-

-

(7,326)

-

(7,326)








Profit / (loss) before tax and







  finance income / (costs)

265,853

46,737

51,713

(8,502)

(215)

355,586








Finance costs

(380)

(4,190)

(8,247)

(7,547)

6,458

(13,906)








Finance income

19,522

903

224

8,075

(12,036)

16,688








Profit / (loss) before 







  income tax

284,995

43,450

43,690

(7,974)

(5,793)

358,368








Income tax (expense)/income

(60,919)

(11,641)

(21,810)

(571)

1,562

(93,379)








Profit / (loss) for the year

224,076

31,809

21,880

(8,545)

(4,231)

264,989









Year ended 31 December 2007


    

        

Engineering




Consolidation



&

Operations

Energy

Corporate

adjustments 



Construction

Services

Developments

& others

eliminations

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000








Revenue







External sales

1,409,817

897,602

132,832

-

-

2,440,251








Inter-segment sales

5,131

13,372

-

-

(18,503)

-








Total revenue

1,414,948

910,974

132,832

-

(18,503)

2,440,251








Segment  results

158,197

44,891

51,637

(236)

51

254,540








Unallocated corporate 







  costs

-

-

-

(6,039)

-

(6,039)








Profit / (loss) before tax and







  finance income / (costs)

158,197

44,891

51,637

(6,275)

51

248,501








Finance costs

(662)

(4,384)

(205)

(8,572)

5,296

(8,527)








Finance income

18,013

1,247

331

3,857

(5,189)

18,259








Profit / (loss) before 







  income tax

175,548

41,754

51,763

(10,990)

158

258,233








Income tax (expense)/income

(38,454)

(12,857)

(18,375)

169

-

(69,517)








Profit / (loss) for the year

137,094

28,897

33,388

(10,821)

158

188,716










Year ended 31 December 2008


    





Consolidation



Engineering &

Construction

Operations

Services

Energy Developments

Corporate & others

adjustments & eliminations 


Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000








Assets and liabilities







Segment assets

1,638,278

406,229

450,813

-

(305,049)

2,190,271

Inter-segment assets

(292,538)

(12,117)

(394)

-

305,049

-

Investments

-

-

566

-

-

566


1,345,740

394,112

450,985

-

-

2,190,837








Unallocated assets

-

-

-

32,540

-

32,540

Income tax assets

6,406

2,395

37,162

919

(438)

46,444








Total assets

1,352,146

396,507

488,147

33,459

(438)

2,269,821















Segment liabilities

1,136,732

271,371

407,711

-

(362,664)

1,453,150

Inter-segment liabilities

(3,846)

(35,726)

(323,092)

-

362,664

-


1,132,886

235,645

84,619

-

-

1,453,150








Unallocated liabilities

-

-

-

109,016

-

109,016

Income tax liabilities

90,679

11,270

46,231

882

(438)

148,624








Total liabilities

1,223,565

246,915

130,850

109,898

(438)

1,710,790















Other segment information







Capital expenditures:







Property, plant 







  and equipment

55,976

8,156

197,718

325

(6,633)

255,542

Intangible oil & gas assets

-

-

37,036

-

-

37,036

Other intangible assets

-

12,009

-

-

-

12,009

Goodwill

-

52,353

-

-

-

52,353








Charges:







Depreciation

19,253

4,264

22,254

425

(840)

45,356

Amortisation

-

2,829

-

-

-

2,829

Impairment

-

-

5,355

-

-

5,355

Write-off of intangible oil & gas assets

-

-

9,826

-

-

9,826

Other long-term employment benefits

7,870

2,240

60

53

-

10,223

Share-based payments

4,706

2,313

1,059

1,370

-

9,448









Year ended 31 December 2007


    





Consolidation



Engineering &

Construction

Operations

Services

Energy Developments

Corporate & others

adjustments & eliminations 


Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000








Assets and liabilities







Segment assets

1,222,444

339,682

244,500

-

(86,438)

1,720,188

Inter-segment assets

(82,050)

(4,388)

-

-

86,438

-

Investments

-

-

1,586

-

-

1,586


1,140,394

335,294

246,086

-

-

1,721,774








Unallocated assets

-

-

-

14,761

-

14,761

Income tax assets

2,895

1,000

13,650

618

(6,691)

11,472








Total assets

1,143,289

336,294

259,736

15,379

(6,691)

1,748,007















Segment liabilities

824,166

219,248

173,303

-

(178,559)

1,038,158

Inter-segment liabilities

(9,621)

(43,731)

(125,207)

-

178,559

-


814,545

175,517

48,096

-

-

1,038,158








Unallocated liabilities

-

-

-

105,165

-

105,165

Income tax liabilities

53,175

10,147

23,767

1,316

(6,691)

81,714








Total liabilities

867,720

185,664

71,863

106,481

(6,691)

1,225,037















Other segment information







Capital expenditures:







Property, plant 







  and equipment

44,683

6,447

66,484

130

(587)

117,157

Intangible oil & gas assets

-

-

49,700

-

-

49,700

Other intangible assets

-

2,369

-

-

-

2,369

Goodwill

-

14,233

-

-

-

14,233








Charges:







Depreciation

15,654

4,567

22,476

449

(845)

42,301

Amortisation

-

1,771

-

-

-

1,771

Impairment

-

-

8,686

-

-

8,686

Other long-term employment benefits

5,075

1,492

7

31

-

6,605

Share-based payments

2,667

1,382

589

774

-

5,412









Geographical segments


The following tables present revenue, assets and capital expenditure by geographical segments for the years ended 31 December 2008 and 2007.


Year ended 31 December 2008


Middle East 

CIS /





Africa

Asia Pacific

Europe

Americas

Consolidated


US$'000

US$'000

US$'000

US$'000

US$'000







Segment revenue

1,744,623

791,141

785,256

8,516

3,329,536







Carrying amount of segment assets

1,355,000

325,733

581,655

7,433

2,269,821







Capital expenditure:






Property, plant and equipment

72,508

13,802

169,022

210

255,542

Intangible oil & gas assets

-

27,210

9,826

-

37,036

Other intangible assets

-

-

12,009

-

12,009

Goodwill

-

-

52,353

-

52,353













Year ended 31 December 2007







Middle East 

CIS /





Africa

Asia Pacific

Europe

Americas

Consolidated


US$'000

US$'000

US$'000

US$'000

US$'000







Segment revenue

1,104,569

513,083

815,707

6,892

2,440,251







Carrying amount of segment assets

1,131,287

247,972

360,140

8,608

1,748,007







Capital expenditure:






Property, plant and equipment

85,169

17,640

14,261

87

117,157

Intangible oil & gas assets

-

15,927

33,773

-

49,700

Other intangible assets

2,369

-

-

-

2,369

Goodwill

14,233

-

-

-

14,233



4    REVENUES AND EXPENSES


a.    Revenue



2008


 2007


US$'000


US$'000





Rendering of services

3,214,782


2,346,431

Sale of crude oil & gas

102,036


85,592

Sale of processed hydrocarbons

12,718


8,228


3,329,536


2,440,251


Included in revenues from rendering of services are Operations Services revenues of a 'pass-through' nature with zero or low margins amounting to US$275,947,000 (2007: US$227,048,000).



b.    Cost of sales


Included in cost of sales for the year ended 31 December 2008 is US$88,000 (2007: US$8,590,000 gainloss on disposal of property, plant and equipment used to undertake various engineering and construction contracts. In addition depreciation charged on property, plant and equipment of US$39,143,000 during 2008 (2007: US$37,759,000) is included in cost of sales (note 9).


Also included in cost of sales are forward points and ineffective portions on derivatives designated as cash flow hedges of US$11,826,000 (2007: nil).


c.    Other income



2008


2007


US$'000


US$'000





Foreign exchange gains

6,134


3,003

Gain on sale of property, plant and equipment

47


244

Gain on sale of asset held for sale

-


243

Other income

1,240


461


7,421


3,951


d.    Other expenses



2008


 2007


US$'000


US$'000





Foreign exchange losses

1,932


441

Other expenses

611


180


2,543


621


e.    Selling, general and administration expenses 



2008


2007


US$'000


US$'000





 Staff costs

125,039


93,915

 Depreciation

6,213


4,542

 Amortisation (note 12)

2,829


1,771

 Impairment (note 12 and 14)

5,355


8,686

 Write-off of intangible oil & gas assets

9,826


-

 Other operating expenses

78,503


56,394


227,765


165,308


Other operating expenses consist mainly of office, travel, legal and professional and contracting staff costs.


f.    Staff costs 



2008


2007


US$'000


US$'000





Total staff costs:




 Wages and salaries

682,869


603,324

 Social security costs

28,892


29,544

 Defined contribution pension costs

11,948


11,927

 Other long-term employee benefit costs (note 25)

10,223


6,605

 Expense of share-based payments (note 22)

9,448


5,412


743,380


656,812




Of the US$743,380,000 of staff costs shown above, US$618,341,000 (2007: US$562,897,000) are included in cost of saleswith the remainder in selling, general and administration expenses.


The average number of persons employed by the group during the year wa10,383 (2007: 9,027).


g.    Auditors' remuneration 


The group paid the following amounts to its auditors in respect of the audit of the financial statements and for other services provided to the group:



2008


2007


US$'000


US$'000





Audit of the group financial statements

1,177


945

Other fee to auditors:




Auditing the accounts of subsidiaries

236


197

Other services relating to taxation

107


89

All other services

46


95


1,566


1,326



5    FINANCE (COSTS) / INCOME



2008


2007


US$'000


US$'000





Interest payable:




Long-term borrowings

(2,888)


(4,921)

Other interest, including short-term loans and overdrafts

(1,239)


(2,092)

Unwinding of discount on deferred consideration and decommissioning provisions

(1,910)


(1,514)

Ineffective foreign currency cash flow hedge 

(8,157)


-

Time value portion of derivatives designated as hedges (note 31)

288


-

Total finance cost

(13,906)


(8,527)





Interest receivable:




Bank interest receivable

15,989


18,255

Other interest receivable

699


4

Total finance income

16,688


18,259



6    INCOME TAX


a.    Tax on ordinary activities


The major components of income tax expense are as follows:


2008


2007


US$'000


US$'000





Current income tax




Current income tax charge

128,243


69,436

Adjustments in respect of current income tax of previous years

4,373


(228)





Deferred income tax




Relating to origination and reversal of temporary differences

(33,393)


688

Adjustments in respect of deferred income tax of previous years

(5,844)


(379)

Income tax expense reported in the income statement 

93,379


69,517



b.    Reconciliation of total tax charge


A reconciliation between the income tax expense and the product of accounting profit multiplied by the Company's domestic tax rate is as follows:



2008


2007


US$'000


US$'000





Accounting profit before tax

358,368


258,233





At Jersey's domestic income tax rate of 20% (2007: 20%)

71,674


51,647

Profits exempt from Jersey income tax  

(71,674)


(51,647)

Higher income tax rates of other countries, including withholding taxes

92,922


89,884

Overhead allowances - high rate jurisdiction

(4,484)


(14,456)

Expenditure not allowable for income tax purposes - high rate jurisdiction

6,192


3,256

Income not taxable - high rate jurisdiction

(415)


-

Adjustments in respect of previous periods 

(1,470)


(615)

Tax effect of utilisation of tax losses not previously recognised

(312)


(183)

Unrecognised tax losses

946


86

Losses recognised in the period

-


(8,455)

At the effective income tax rate of 26.1(2007: 26.9%)

93,379


69,517


For the year to 31 December 2008, the Company obtained Jersey exempt company status and was therefore exempt from Jersey income tax on non-Jersey source income and bank interest (by concession). From 1 January 2009, the Jersey exempt company status regime has been abolished and under the new regime the Company will be charged tax in Jersey at the rate of 0%. No material impact to the income tax expense is expected as a result of this change.


c.    Deferred income tax


Deferred income tax relates to the following:



Consolidated

Balance Sheet


Consolidated

Income Statement




2008


2007


2008


2007


US$'000


US$'000


US$'000


US$'000









Deferred income tax liabilities








Fair value adjustment on acquisitions

3,610


1,940


(800)


(453)

Accelerated depreciation

23,065


903


19,778


502

Other temporary differences

11,521


31,294


(18,094)


8,334

Gross deferred income tax liabilities

38,196


34,137













Deferred income tax assets








Losses available for offset

33,165


8,512


(28,747)


(6,661)

Decelerated depreciation for tax purposes

5,893


1,558


(3,932)


(655)

Share scheme

2,799


716


(3,024)


(716)

Other temporary differences

4,587


686


(4,418)


(42)

Gross deferred income tax assets

46,444


11,472













Deferred income tax charge 





(39,237)


309



d.    Unrecognised tax losses


Deferred income tax assets are recognised for tax loss carry-forwards and tax credits to the extent that the realisation of the related tax benefit through the future taxable profits is probable. The group did not recognise deferred income tax assets of US$20,732,000 (2007: US$19,672,000).



2008


2007


US$'000


US$'000





Expiration dates for tax losses




On completion of the contract

-


2,600

No earlier than 2022

11,906


11,972

No expiration date

6,534


5,100


18,440


19,672

Tax credits (no expiration date)

2,292


-


20,732


19,672



7    EARNINGS PER SHARE 


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


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 year.  


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



2008


2007


US$'000


US$'000





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

264,989


188,716



2008


2007


Number


Number


'000


'000





Weighted average number of ordinary shares for basic earnings per share

339,585


342,246

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

4,072


3,313

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

343,657


345,559




8    DIVIDENDS PAID AND PROPOSED



2008


2007


US$'000


US$'000

Declared and paid during the year




Equity dividends on ordinary shares:




Final dividend for 2006: 6.43 cents per share

-


22,018

Interim dividend 2007: 4.90 cents per share

-


16,756

Final dividend for 2007: 11.50 cents per share

39,164


-

Interim dividend 2008: 7.50 cents per share

25,536


-


64,700


38,774






2008


2007


US$'000


US$'000

Proposed for approval at AGM 




(not recognised as a liability as at 31 December)




Equity dividends on ordinary shares




Final dividend for 200817.90 cents per share (200711.50 cents per share) 

61,831


39,725



9    PROPERTY, PLANT AND EQUIPMENT






Land,









buildings



Office






and



furniture

Capital



Oil & gas

Oil & gas

 leasehold

Plant and


and

work in 



assets

facilities

improvements

equipment

Vehicles

equipment

progress

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000










Cost









 At 1 January 2007

28,780

124,740

21,462

20,986

6,684

34,445

9,075

246,172

 Additions

65,078

631

1,170

6,604

1,092

20,593

21,989

117,157

 Acquisition of subsidiaries

-

-

-

-

-

47

-

47

 Transfer from intangible 

    oil & gas assets (note 12)


41,657


-


-


-


-


-


-


41,657

 Disposals

-

-

(1,642)

(4,514)

(3,378)

(2,187)

-

(11,721)

 Exchange difference

-

-

257

(520)

45

522

-

304










 At 1 January 2008

135,515

125,371

21,247

22,556

4,443

53,420

31,064

393,616

 Additions

189,214

-

35,018

2,935

2,516

25,859

-

255,542

 Acquisition of subsidiaries

-

-

190

-

-

534

-

724

 Transfer from capital work in progress

-

-

31,064

-

-

-

(31,064)

-

 Disposals

-

-

(723)

(683)

(318)

(875)

-

(2,599)

 Exchange difference

(45,626)

-

(3,708)

(2,573)

(67)

(9,891)

-

(61,865)










 At 31 December 2008

279,103

125,371

83,088

22,235

6,574

69,047

-

585,418










Depreciation









 At 1 January 2007

(802)

(60,169)

(4,288)

(15,162)

(4,790)

(17,785)

-

(102,996)

 Charge for the year

(8,072)

(13,491)

(1,321)

(1,277)

(1,676)

(16,464)

-

(42,301)

 Disposals

-

-

1,568

1,637

3,030

2,154

-

8,389

 Exchange difference

-

-

(19)

(247)

(31)

(174)

-

(471)










 At 1 January 2008

(8,874)

(73,660)

(4,060)

(15,049)

(3,467)

(32,269)

-

(137,379)

 Charge for the year

(7,748)

(13,366)

(5,346)

(2,598)

(1,052)

(15,246)

-

(45,356)

 Disposals

-

-

544

20

237

726

-

1,527

 Exchange difference

435

-

879

1,115

47

6,378

-

8,854










 At 31 December 2008

(16,187)

(87,026)

(7,983)

(16,512)

(4,235)

(40,411)

-

(172,354)










 Net carrying amount:









 At 31 December 2008

262,916

38,345

75,105

5,723

2,339

28,636

-

413,064










 At 31 December 2007

126,641

51,711

17,187

7,507

976

21,151

31,064

256,237



No interest has been capitalised within oil & gas facilities during the year (2007: nil) and the accumulated capitalised interest, net of depreciation at 31 December 2008was US$1,430,000 (2007: US$1,929,000). 


Additions to oil & gas assets in the year mainly comprise development expenses capitalised on the group's interest in the Don area assets of US$167,265,000 (2007: US$33,773,000). Depreciation has not been charged on this asset as commercial production has not yet started.


Included in oil & gas assets are US$2,879,000 (2007US$1,315,000of capitalised decommissioning costs net of depreciation provided on the PM304 asset in Malaysia, Chergui asset in Tunisia and the Don area assets in the United Kingdom.


Of the total charge for depreciation in the income statement, US$39,143,000 (2007: US$37,759,000) is included in cost of sales and US$6,213,000 (2007: US$4,542,000) in selling, general and administration expenses.


Capital work in progress comprises of expenditures incurred on the construction of a new office building in SharjahUnited Arab Emirates. During 2008, this was transferred to land, buildings and leasehold improvements on commencing use of the building.



10    BUSINESS COMBINATIONS


Acquisitions in 2008


Eclipse Petroleum Technology Limited

On 25 July 2008, the group acquired 100% interest in the share capital of Eclipse Petroleum Technology Limited (Eclipse), a specialist production engineering company. The consideration for the acquisition inclusive of transaction costs of Sterling 195,000 (equivalent US$388,000), was Sterling 8,150,000 (equivalent US$16,200,000). The consideration of Sterling 7,955,000 (equivalent US$15,812,000), excluding transaction costscomprised of Sterling 6,000,000 (equivalent US$11,927,000) in cash, Sterling 1,000,000 (equivalent US$1,988,000) to be satisfied with 158,177 ordinary shares vesting in two years' time and the balance being the discounted value of deferred consideration amounting to Sterling 955,000 (equivalent US$1,897,000payable based on the estimated future profitability of EclipseThe deferred consideration in no event will exceed an additional amount of Sterling 9,000,000 (equivalent US$17,892,000). 


The provisional fair values of the identifiable assets and liabilities of Eclipse on completion of the acquisition are analysed below:



Recognised o


Carrying


acquisition


value


US$'000


US$'000





Property, plant and equipment

673


673

Intangible assets 

2,402


223

Trade and other receivables

3,407


3,407

Cash and short-term deposits

571


571

Total assets

7,053


4,874





Less:




Deferred tax liability

(610)


-

Trade and other payables

(2,483)


(2,483)

Total liabilities

(3,093)


(2,483)





Fair value of net assets acquired

3,960


2,391

Goodwill arising on acquisition 

12,240



Consideration at acquisition

16,200
















US$'000





Cash outflow on acquisition (translated at the payment date):




Cash acquired with subsidiary



571

Cash paid on acquisition



(12,002)

Legal and professional expenses paid on acquisition



(351)

Net cash outflow on the acquisition of subsidiary



(11,782)


Intangible assets recognised on acquisition comprise a proprietary software system which is being amortised over its remaining economic useful life of six years on a straight-line basis.


The residual goodwill above comprises the fair value of expected future synergies and business opportunities arising from the integration of the business in to the group.


From the date of acquisition, Eclipse has contributed net loss of US$436,000 to the net profit of the group after charging US$475,000 of post acquisition costs relating to amortisation of intangibles and finance costs in respect of deferred consideration payable. 


Caltec Limited

On 29 August 2008, the group acquired 100% interest in the share capital of Caltec Limited (Caltec), a specialist production technology company, for consideration of Sterling 26,776,000 (equivalent US$48,956,000), including transaction costs of Sterling 596,000 (equivalent US$1,093,000).  The consideration of Sterling 26,180,000 (equivalent US$47,863,000), excluding transaction costs, comprised of Sterling 15,699,000 (equivalent US$28,641,000) in cash as initial consideration and working capital adjustments and the balance being the discounted value of deferred consideration of Sterling 10,481,000 (equivalent US$19,222,000) payable based on the expected achievement of future performance targets set for the company. The deferred consideration in no event will exceed an additional amount of Sterling 15,000,000 (equivalent US$27,510,000).


The provisional fair values of the identifiable assets and liabilities of Caltec on completion of the acquisition are analysed below:



Recognised o


Carrying


acquisition


value


US$'000


US$'000





Property, plant and equipment

51


51

Intangible assets 

10,021


191

Trade and other receivables

2,105


2,105

Cash and short-term deposits

966


966

Total assets

13,143


3,313





Less:




Deferred tax liability

(2,753)


-

Trade and other payables

(1,547)


(1,547)

Total liabilities

(4,300)


(1,547)





Fair value of net assets acquired

8,843


1,766

Goodwill arising on acquisition 

40,113



Consideration at acquisition

48,956




 












US$'000





Cash outflow on acquisition (translated at the payment date):




Cash acquired with subsidiary



966

Cash paid on acquisition



(28,911)

Legal and professional expenses paid on acquisition



(1,047)

Net cash outflow on the acquisition of subsidiary



(28,992)


Intangible assets recognised on acquisition represent patented technology which is being amortised over its remaining economic useful life of ten years on a straight-line basis.


The residual goodwill above comprises the fair value of expected future synergies and business opportunities arising from the integration of the business in to the group.


From the date of acquisition, Caltec has contributed net loss of US$657,000 to the net profit of the group after charging US$821,000 of post acquisition costs relating to amortisation of intangibles and finance costs in respect of deferred consideration payable. 


If the above combinations had taken place at the beginning of the year, net profit of the group would have been US$262,738,000 and revenue would have been US$3,340,269,000.


Acquisitions in 2007


SPD Group Limited

On 16 January 2007, the group acquired a 51% interest in the share capital of SPD Group Limited (SPD), a specialist provider of well operations services. The consideration for the acquisition of the 51% interest inclusive of transaction costs of US$172,000, was US$7,872,000. Consideration of US$7,700,000 (excluding transaction costs) was settled by a cash payment of US$3,935,000, issuance of loan notes payable of US$1,765,000 and the balance of US$2,000,000 by issuance of 274,938 new ordinary shares of the Company at market value on 19 January 2007 to the vendor over three years in equal instalments on the anniversary of the transaction. On 27 December 2007, the outstanding loan notes of US$1,765,000 were repaid to the vendors.


The terms of the sale and purchase agreement for the remaining 49% interest in the share capital of SPD which convey call option rights on the acquirer and minority share holder put option rights over these shares and the respective rights to dividends and share of profits of the two parties are such that this transaction has been accounted for as a 100% acquisition of the business by the group. The discounted deferred consideration for the remaining 49% of the share capital of SPD was originally estimated at US$12,025,000 based on the discounted value of an agreed multiple of the future earnings of SPD and the total consideration for the 100% interest therefore, including transaction costs, amounted to US$19,897,000. The fair value of net assets acquired was US$5,664,000, which included intangible assets recognised on acquisition of US$2,369,000. These intangible assets recognised on acquisition comprise customer contracts which are being amortised over their remaining economic useful lives on a straight-line basis (note 12).


During the year, a charge of US$1,323,000 (2007: US$1,455,000) for the unwinding of interest has been reflected in the income statement as an interest expense (note 5).


The deferred consideration was reassessed at year end in light of latest financial projections for the business and the current carried amount was considered to be appropriate.  


The residual goodwill of US$14,233,000 (2007: US$14,233,000) comprises the fair value of expected future synergies and business opportunities arising from the integration of the business in to the group.



11    GOODWILL


A summary of the movements in goodwill is presented below:



2008


2007


US$'000


US$'000





At 1 January

71,743


56,732

Acquisitions during the year (note 10)

52,353


14,233

Exchange difference

(26,562)


778

At 31 December

97,534


71,743


Goodwill acquired through business combinations has been allocated to three groups of cash-generating units, which are reportable segments, for impairment testing as follows:


  • Facilities Management (comprising Petrofac Facilities Management Limited, Plant Asset Management Limited, SPD, Eclipse and Caltec)


  • Training (comprising Petrofac Training Limited and PPS Process Control & Instrumentation Limited)


  • Energy Developments (comprising Petrofac Energy Developments International Limited)


These represent the lowest level within the group at which the goodwill is monitored for internal management purposes.


Facilities Management and Training cash-generating units

The recoverable amounts for the Facilities Management and Training units have been determined based on value in use calculations, using discounted pre-tax cash flow projections. Management has adopted a ten year projection period to assess each unit's value in use as it is confident based on past experience of the accuracy of long-term cash flow forecasts that these projections are reliable. The cash flow projections are based on financial budgets approved by senior management covering a five year period, extrapolated thereafter at a growth rate of 5% per annum. Management considers this a conservative long-term growth rate relative to both the economic outlook for the units in their respective markets within the oil & gas industry and the growth rates experienced in the recent past by each unit. 


Energy Developments cash-generating unit

The recoverable amount of the Energy Developments unit is also determined on a value in use calculation using discounted pre-tax cash flow projections based on financial budgets and economic parameters for the unit approved by senior management and covering a five year period, as referred to in IAS 36.


Carrying amount of goodwill allocated to each group of cash-generating units


2008


2007


US$'000


US$'000





Facilities Management unit

77,086


44,769

Training unit

18,231


24,757

Energy Developments unit

2,217


2,217


97,534


71,743


Key assumptions used in value in use calculations


The calculation of value in use for both the Facilities Management and Training units is most sensitive to the following assumptions:


Market share: the assumption relating to market share for the Facilities Management unit is based on the unit re-securing those existing customer contracts in the UK which are due to expire during the projection period; for the Training unit, the key assumptions relate to management's assessment of maintaining the unit's market share in the UK and developing further the business in international markets.


Growth rate: estimates are based on management's assessment of market share having regard to macro-economic factors and the growth rates experienced in the recent past by each unit. A growth rate of 5% per annum has been applied for the remaining five years of the ten year projection period.


Net profit margins: estimates are based on management's assumption of achieving a level of performance at least in line with the recent past performance of each of the units.


Discount rate:  management has used a pre-tax discount rate of 16.1(2007: 9.8%) per annum for Facilities Management cash-generating unit and 15.1% (2007: 9.8%) per annum for Training cash-generating unit which are derived from the estimated weighted average cost of capital of the group. This discount rate has been calculated using an estimated risk free rate of return adjusted for the group's estimated equity market risk premium and the group's cost of debt.  


The calculation of value in use for the Energy Developments unit is most sensitive to the following assumptions:


Discount rate: management has used an estimate of the pre-tax weighted average cost of capital of the group plus a risk premium to reflect the particular risk characteristics of each individual investment. The discount rate used for 2008 was 11.4% for each asset (200710.0%).


Oil & gas prices: management has used an oil price assumption of US$55 (2007: US$55per barrel and a gas price of US$6.40 (2007: n/aper mcf for the impairment testing of its individual oil & gas investments.


Reserve volumes and production profiles: management has used its internally developed economic models of reserves and production as a basis of calculating value in use.


Sensitivity to changes in assumptions


With regard to the assessment of value in use of the cash generating units, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the relevant unit to exceed its recoverable amount, after giving due consideration to the macro-economic outlook for the oil & gas industry and the commercial arrangements with customers underpinning the cash flow forecasts for each of the units.



12    INTANGIBLE ASSETS



2008


2007


US$'000


US$'000

Intangible oil & gas assets




Cost:




  At 1 January

15,927


16,788

  Additions

37,036


49,700

  Disposals

-


(8,793)

Asset written off

(9,826)


-

Transferred to tangible oil & gas assets (note 9)

-


(41,657)

  Exchange difference

-


(111)

  At 31 December

43,137


15,927





Accumulated impairment:




  At 1 January

(8,686)


-

  Impairment

(5,000)


(8,686)

  At 31 December

(13,686)


(8,686)





Net book value of intangible oil & gas assets at 31 December

29,451


7,241





Other intangible assets




Cost:




  At 1 January

3,930


1,561

  Additions on acquisition (note 10)

12,009


2,369

  Acquired intangible assets (note 10)

414


-

  Exchange difference

(2,461)


-

  At 31 December

13,892


3,930





Accumulated amortisation:




  At 1 January

(2,161)


(390)

  Amortisation

(2,829)


(1,771)

  At 31 December

(4,990)


(2,161)





Net book value of other intangible assets at 31 December

8,902


1,769





Total intangible assets

38,353


9,010


Intangible oil & gas assets


Oil & gas asset additions above mainly comprise of US$24,658,000 of capitalised expenditure on near field appraisal wells in the group's 30% interest in Block PM304, offshore Malaysia.


Prior year additions to oil & gas assets included US$32,673,000 in respect of the Don area development and US$15,927,000 of well appraisal costs on Permit NT/P68.


During the year, US$9,826,000 of capitalised development costs were written-off in respect of a dry exploration well.


During the year an impairment provision of US$5,000,000 was made against the group's interest in Permit NT/P68 in Australia due to the continuing uncertainties surrounding the commercial outcome of the project.


There were investing cash outflows relating to capitalised intangible oil & gas assets of US$37,036,000 (2007: US$48,604,000) in the current period arising from pre-development activities. As at 31 December 2008 there were cash and deposits of US$495,000 (2007: US$3,582,000), trade and other receivables of nil (2007: US$3,106,000) and trade and other payables of US$508,000 (2007: US$4,840,000) arising from pre-development activities in the current period.


Other intangible assets comprise the fair values of customer contracts, proprietary software and patent technology (note 10) arising on acquisition. These intangible assets are being amortised over their remaining estimated economic useful life of three, six and ten years respectively on a straight-line basis and the related amortisation charges included in selling, general and administrative expenses (note 4e)


 

13    INTEREST IN JOINT VENTURES

 

In the normal course of business, the group establishes jointly controlled entities and operations for the execution of certain of its operations and contracts. A list of these joint ventures is disclosed in note 32The group's share of assets, liabilities, revenues and expenses relating to jointly controlled entities and operations are as follows:



2008


2007


US$'000


US$'000





Revenue

28,878


37,140

Cost of sales

(21,481)


(10,990)

Gross profit 

7,397


26,150

Selling, general and administration expenses

(1,200)


(1,246)

Finance income, net

87


42

Profit before income tax

6,284


24,946

Income tax

(523)


(819)

Net profit 

5,761


24,127





Current assets

38,295


46,991

Non-current assets

3,644


3,883

Total assets

41,939


50,874





Current liabilities

2,446


12,667

Non-current liabilities

-


323

Total liabilities

2,446


12,990

Net assets

39,493


37,884



14    AVAILABLE-FOR-SALE FINANCIAL ASSETS

    


2008


2007


US$'000


US$'000





Shares - listed

133


1,022

Units in a mutual fund

433


564


566


1,586


Available-for-sale financial assets consist of investments in the ordinary shares of quoted companies and units in a mutual fund and therefore have no fixed maturity date or coupon rate.


During the year, a provision for impairment of US$355,000 (2007: nil) was made against the above listed shares held as an available-for-sale financial asset on the basis that the recent fall in the market value of these shares was considered to be significant.



15    DERIVATIVE FINANCIAL INSTRUMENTS AND OTHER FINANCIAL ASSETS



2008


2007


US$'000


US$'000

Non-current




Fair value of derivative instruments (note 31)

7,227


1,775

Other financial assets




Restricted cash

1,899


-

Other

-


23


1,899


23





Current




Fair value of derivative instruments (note 31)

5,631


27,298

Other financial assets




Interest receivable

1,047


1,351

Restricted cash 

2,736


1,351

Other

295


-


4,078


2,702


Restricted cash comprises deposits with financial institutions securing various guarantees and performance bonds associated with the group's trading activities and cash in escrow against reimbursed long-term employee benefits charged to a customerThis cash will be released on the maturity of these guarantees and performance bonds and on the transfer/cessation of employment of the relevant employee for which the long-term benefit is held in escrow.



16    INVENTORIES



2008


2007


US$'000


US$'000





Crude oil

1,669


1,173

Processed hydrocarbons

805


18

Stores and spares

744


732

Raw materials

859


333


4,077


2,256


Included in the income statement are costs of inventories expensed of US$22,404,000 (2007: US$23,528,000).



17    WORK IN PROGRESS AND BILLINGS IN EXCESS OF COST AND ESTIMATED EARNINGS



2008


2007


US$'000


US$'000





Cost and estimated earnings

3,782,100


2,194,088

Less: billings

(3,529,405)


(1,923,907)

Work in progress

252,695


270,181





Billings

1,509,548


1,114,500

Less: cost and estimated earnings

(1,224,021)


(906,395)

Billings in excess of cost and estimated earnings

285,527


208,105





Total cost and estimated earnings 

5,006,121


3,100,483





Total billings

5,038,953


3,038,407



18    TRADE AND OTHER RECEIVABLES



2008


2007


US$'000


US$'000





Trade receivables

608,023


453,256

Retentions receivable

2,241


3,450

Advances

31,977


19,154

Prepayments and deposits

24,849


19,450

Other receivables

33,841


13,715


700,931


509,025


Trade receivables are non-interest bearing and are generally on 30 to 60 days' terms. Trade receivables are reported net of provision for impairment. The movements in the provision for impairment against trade receivables totalling US$608,023,000 (2007: US$453,256,000are as follows:



2008


2007


Specific

General



Specific

General



impairment

impairment

Total


impairment

impairment

Total


US$'000

US$'000

US$'000


US$'000

US$'000

US$'000









At 1 January

4,086

1,216

5,302


5,073

364

5,437

Charge for the year

1,361

482

1,843


2,948

849

3,797

Amounts written off

-

(333)

(333)


(3,555)

-

(3,555)

Unused amounts reversed

(1,530)

(15)

(1,545)


(382)

-

(382)

Exchange difference

(219)

(54)

(273)


2

3

5

At 31 December

3,698

1,296

4,994


4,086

1,216

5,302


At 31 December, the analysis of trade receivables is as follows:



Neither past 

Number of days past due


due nor









impaired 

< 30

31-60

61-90

91-120

121-360

> 360




days

days

days

days

days

days

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000










Unimpaired

325,844

197,790

45,106

11,012

10,460

12,714

1,319

604,245

Impaired

-

734

86

618

666

3,032

3,636

8,772


325,844

198,524

45,192

11,630

11,126

15,746

4,955

613,017

Less: impairment provision

-

(190)

(85)

(194)

(249)

(1,640)

(2,636)

(4,994)

Net trade receivables 2008

325,844

198,334

45,107

11,436

10,877

14,106

2,319

608,023










Unimpaired

206,327

176,426

41,030

16,170

1,937

4,580

876

447,346

Impaired

-

162

745

1,865

1,772

4,653

2,015

11,212


206,327

176,588

41,775

18,035

3,709

9,233

2,891

458,558

Less: impairment provision

-

(162)

(745)

(222)

(947)

(2,040)

(1,186)

(5,302)

Net trade receivables 2007

206,327

176,426

41,030

17,813

2,762

7,193

1,705

453,256


The credit quality of trade receivables that are neither past due nor impaired is assessed by management with reference to externally prepared customer credit reports and the historic payment track records of the counterparties.


Advances represent payments made to certain of the group's sub-contractors for projects in progress, on which the related work had not been performed at the balance sheet date.


All trade and other receivables are expected to be settled in cash.


Certain trade and other receivables will be settled in cash using currencies other than the reporting currency of the group, and will be largely paid in Sterling and Kuwaiti Dinars.



19    CASH AND SHORT-TERM DEPOSITS



2008


2007


US$'000


US$'000





Cash at bank and in hand

107,461


106,454

Short-term deposits

586,954


475,098

Total cash and bank balances

694,415


581,552


Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the group, and earn interest at respective short-term deposit rates. The fair value of cash and bank balances is US$694,415,000 (2007: US$581,552,000).


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



2008


2007


US$'000


US$'000





Cash at bank and in hand

107,461


106,454

Short-term deposits

586,954


475,098

Bank overdrafts (note 24)

(45,256)


(15,666)


649,159


565,886



20    SHARE CAPITAL


The share capital of the Company as at 31 December was as follows:


2008


2007


US$'000


US$'000

Authorised




750,000,000 ordinary shares of US$0.025 each




  (2007: 750,000,000 ordinary shares of US$0.025 each)

18,750


18,750





Issued and fully paid




345,434,858 ordinary shares of US$0.025 each




  (2007: 345,434,858 ordinary shares of US$0.025 each)

8,636


8,636


The movement in the number of issued and fully paid ordinary shares is as follows:



Number

Ordinary shares:


Ordinary shares of US$0.025 each at 1 January 2007

345,159,920

Issued during the year on acquisition of a subsidiary (note 10)

274,938



Ordinary shares of US$0.025 each at 1 January 2008

345,434,858

Movement during the year

-



Ordinary shares of US$0.025 each at 31 December 2008

345,434,858



The share capital comprises only one class of ordinary shares. The ordinary shares carry a voting right and the right to a dividend.



21    TREASURY SHARES


For the purpose of making awards under its employee share schemes, the Company acquires its own shares which are held by the Petrofac Employee Benefit Trust. All these shares have been classified in the balance sheet as treasury shares within equity.


The movements in total treasury shares are shown below:



2008


2007


Number

US$'000


Number

US$'000







At 1 January

4,052,024

29,842


1,500,135

8,144

Acquired during the year

5,854,194

42,500


2,551,889

21,698

Vested/forfeited during the year

(365,912)

(3,009)


-

-

At 31 December

9,540,306

69,333


4,052,024

29,842


As at 31 December 2008 5,504,819 of the above shares were held by Lehman Brothers in a client custody account which is now being managed by their appointed administrator. The Company is currently in discussion with the administrator to procure the release of these shares.


Included in the above treasury shares are 274,938 shares held in relation to the acquisition of SPD Group Limited in 2007 (note 10).



22    SHARE-BASED PAYMENT PLANS


Performance Share Plan (PSP)

Under the Performance Share Plan of the Company, share awards are granted to executive Directors and a restricted number of other senior executives of the group. The shares cliff vest at the end of three years subject to continued employment and the achievement of certain pre-defined non-market and market based performance conditions. The non-market based condition governing the vesting of 50% of the total award, is subject to achieving between 15% and 25% earning per share (EPS) growth targets over a three year period. The fair values of the equity-settled award relating to the EPS part of the scheme are estimated based on the quoted closing market price per Company share at the date of grant with an assumed vesting rate per annum built into the calculation (subsequently trued up at year end based on the actual leaver rate during the period from award date to year end) over the three year vesting period of the plan. The fair value and assumed vesting rates of the EPS part of the scheme are shown below: 



Fair value per share

Trued up vesting rate




2008 awards

522p

98.9%

200awards

415p

97.1%

2006 awards

353p

95.3%


The remaining 50% market performance based part of these awards is dependent on the total shareholder return (TSR) of the group compared to an index composed of selected relevant companies. The fair value of the shares vesting under this portion of the award is determined by an independent valuer 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:



2008 awards

2007 awards

2006 awards

Expected share price volatility 

(based on median of comparator group's three year volatilities)


32.0%


29.0%


28.0%

Share price correlation with comparator group

22.0%

17.0%

10.0%

Risk-free interest rate

3.79%

5.20%

4.60%

Expected life of share award

3 years

3 years

3 years

Fair value of TSR portion

287p

245p

234p



The following shows the movement in the number of shares held under the PSP scheme outstanding but not exercisable:



2008


2007


Number


Number





Outstanding at 1 January

864,181


431,194

Granted during the period

456,240


449,537

Forfeited during the period

(21,612)


(16,550)

Outstanding at 31 December

1,298,809


864,181


The number of awards still outstanding but not exercisable at 31 December 2008 is made up of 451,178 in respect of 2008 awards (2007: nil), 436,603 in respect of 2007 awards (2007: 443,070) and 411,028 for 2006 awards (2007: 421,111).


The charge recognised in the current year amounted to US$2,258,000 (2007: US$1,497,000).


Deferred Bonus Share Plan (DBSP)

Executive Directors and selected employees were originally eligible to participate in this scheme although the Remuneration Committee decided during 2007 that executive Directors should no longer continue to participate. Participants may be invited to elect or in some cases, be required, to receive a proportion of any bonus in ordinary shares of the Company ("Invested Awards")Following such an award, the Company will generally grant the participant an additional award of a number of shares bearing a specified ratio to the number of his or her invested shares ("Matching Shares"). The 2006 awards vest on the third anniversary of the grant date provided that the participant did not leave the group's employment, subject to a limited number of exceptions. However, a change in the rules of the DBSP scheme was approved by shareholders at the Annual General Meeting of the Company on 11 May 2007 such that for the March 2007 share awards and for any awards made thereafter, the invested and matching shares would, unless the Remuneration Committee of the Board of Directors determined otherwisevest 33.33% on the first anniversary of the date of grant, a further 33.33% on the second anniversary of the date of grant and the final 33.34% of the award on the third anniversary of the date of grant


At the year end the values of the bonuses settled by shares cannot be determined until all employees have confirmed the voluntary portion of their bonus they wish to be settled by shares rather than cash and until the Remuneration Committee has approved the mandatory portion of the employee bonuses to be settled in shares. Once the voluntary and mandatory portions of the bonus to be settled in shares are determined, the final bonus liability to be settled in shares is transferred to the reserve for share-based payments. The costs relating to the matching shares are recognised over the relevant vesting period and the fair values of the equity-settled matching shares granted to employees are based on the quoted closing market price at the date of grant adjusted for the trued up percentage vesting rate of the plan. The details of the fair values and assumed vesting rates of the DBSP scheme are below:



Weighted average fair value per share



Trued up vesting rate




2008 awards

522p

95.8%

2007 awards

415p

91.2%

2006 awards

353p

87.0%


The following shows the movement in the number of shares held under the DBSP scheme outstanding but not exercisable:



2008


2007


Number*


Number*





Outstanding at 1 January

2,558,711


1,104,503

Granted during the period

1,777,080


1,582,166

Vested during the period

(385,700)


(3,204)

Forfeited during the period

(194,708)


(124,754)

Outstanding at 31 December

3,755,383


2,558,711


* Includes invested and matching shares.


The number of awards still outstanding but not exercisable at 31 December 2008 is made up of 1,688,558 in respect of 2008 awards (2007: nil), 1,084,602 in respect of 2007 awards (2007: 1,500,298) and 982,223 for 2006 awards (2007: 1,058,413).


The charge recognised in the 2008 income statement in relation to matching share awards amounted to US$5,665,000 (2007US$3,411,000).


Share Incentive Plan (SIP)

All UK employees, including UK resident Directors, are eligible to participate in the scheme. Employees may invest up to Sterling 1,500 per tax year of gross salary (or, if lower, 10% of salary) to purchase ordinary shares in the Company. There is no holding period for these shares.


Restricted Share Plan (RSP)

Under the Restricted Share Plan scheme, employees are granted shares in the Company over a discretionary vesting period which may or may not be, at the direction of the Remuneration Committee of the Board of Directors, subject to the satisfaction of performance conditions.  At present there are no performance conditions applying to this scheme nor is there currently any intention to introduce them in the future.  The fair values of the awards granted under the plan at various grant dates during the year are based on the quoted market price at the date of grant adjusted for an assumed vesting rate over the relevant vesting period. For details of the fair values and assumed vesting rate of the RSP scheme, see below:



Weighted average fair value per share



Trued up vesting rate




2008 awards

478p

98.1%

2007 awards

456p

100.0%

2006 awards

278p

96.3%


The following shows the movement in the number of shares held under the RSP scheme outstanding but not exercisable:



2008


2007


Number


Number





Outstanding at 1 January

394,216


161,101

Granted during the period

811,399


239,567

Vested during the period

 (5,180)


-

Forfeited during the period

(15,724)


(6,452)

Outstanding at 31 December

1,184,711


394,216


The number of awards still outstanding but not exercisable at 31 December 2008 is made up of 795,675 in respect of 2008 awards (2007: nil), 234,387 in respect of 2007 awards (2007: 239,567), and 154,649 for 2006 awards (2007: 154,649).


During the year the Company recognised a charge of US$1,525,000 (2007: US$504,000) in relation to the above.


The group has recognised total charge of US$9,448,000 (2007US$5,412,000) in the income statement during the year relating to the above employee share-based schemes (see note 4f) which has been transferred to the reserve for share-based payments along with US$9,602,000 of the bonus liability accrued for the year ended 31 December 2007 which has been voluntarily elected or obliged to be settled in shares granted during the year (2007: US$6,105,000).


For further details on the above employee share-based payment schemes refer pages 62 to 64 of the Directors' Remuneration Report.


 

23    OTHER RESERVES



Net unrealised 






gains/(losses) on

Net unrealised





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 2007 as previously reported

738

9,340

4,889

4,644

19,611

Restatement*

-

19,213

-

-

19,213

Balance at 1 January 2007 as restated *

738

28,553

4,889

4,644

38,824







Foreign currency translation

-

-

(72)

-

(72)







Net gains on maturity of cash flow






  hedges recycled in the year

-

(22,183)

-

-

(22,183)







Net changes in fair value of derivatives and financial assets






    designated as cash flow hedges

-

59,487

-

-

59,487







Changes in fair value of available-for-sale






  financial assets

(140)

-

-

-

(140)







Share-based payments charge (note 22)

-

-

-

5,412

5,412







Transfer during the year (note 22)

-

-

-

6,105

6,105







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 22)

-

-

-

9,448

9,448







Transfer during the year (note 22)

-

-

-

9,602

9,602







Shares vested during the year (note 22)

-

-

-

(3,009)

(3,009)







Balance at 31 December 2008

74

7,847

(79,415)

32,202

(39,292)


*During 2008, the Company has identified that in prior periods certain gains and losses on cash flow hedges have 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$19,213,000 has been reclassified from contract costs to other reserves at 1 January 2007 and the amount transferred in 2007 adjusted by US$17,753,000. The impact on the income statement was immaterial so no adjustment has been made.


Nature and purpose of other reserves


Net unrealised gains / (losses) on available-for-sale financial assets

This reserve records fair value changes on available-for-sale financial assets held by the group net of deferred tax effects. Realised gains and losses on the sale of available-for-sale financial assets are recognised as other income or expenses in the income statement.


Net unrealised gains / (losses) on derivatives

The portion of gains or losses on cash flow hedging instruments that are determined to be effective hedges are included within this reserve net of related deferred tax effects. When the hedged transaction occurs or is no longer forecast to occur the gain or loss is transferred out of equity to the income statement. Realised net gains amounting to US$31,713,000 (2007: US$21,475,000) relating to foreign currency forward contracts and financial assets designated as cash flow hedges have been recognised in cost of sales, realised net gains of US$63,000 (2007: US$708,000) relating to interest rate derivatives have been classified as a net interest expense and realised net gain of US$327,000 (2007: nil) was added to revenues in respect of oil derivatives. 


The forward currency points element of derivative financial instruments relating to forward currency contracts amounting to net loss of US$11,826,000 (2007: nil) have been recognised in the cost of sales. The time value portion gain on interest rate derivatives of US$433,000 (2007: nil) and loss on oil derivatives of US$145,000 (2007: nil) were netted off/ and added to interest payable.


Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements in foreign subsidiaries. It is also used to record exchange differences arising on monetary items that form part of the group's net investment in subsidiaries.


Reserve for share-based payments

The reserve for share-based payments is used to record the value of equity settled share-based payments awarded to employees and transfers out of this reserve are made upon vesting of the original share awards.


The transfer during the year reflects the transfer from accrued expenses within trade and other payables of the bonus liability relating to the year ended 2007 of US$9,602,000 (2006 bonus of US$6,105,000which has been voluntarily elected or mandatorily obliged to be settled in shares during the year (note 22). 



24    INTEREST-BEARING LOANS AND BORROWINGS


The group had the following interest-bearing loans and borrowings outstanding:




31 December 2008

31 December 2007

Effective






Actual interest rate%

Actual interest rate%

interest rate%

Maturity

2008

2007







US$'000

US$'000

Current








Revolving credit facility

(i)

-

US LIBOR + 0.875%

US LIBOR + 0.875%

-

-

6,500

Short term loan

(ii)

-

KD Discount Rate + 1.50%

KD Discount Rate + 1.50%

-

-

3,627

Bank overdrafts

(iii)

UK LIBOR + 0.875%US LIBOR + 0.875%, KD Discount Rate + 2.00%

UK LIBOR + 0.875%US LIBOR +0.875%, KD Discount Rate + 1.50%

UK LIBOR + 0.875%US LIBOR + 0.875%, KD Discount Rate + 2.00%



on demand



45,256



15,666

Other loans:








Current portion of term loan

(iv)

US/UK LIBOR + 0.875%

US/UK LIBOR + 0.875%

4.18% to 4.88% (2007: 4.95% to 5.84%)



9,156


2,662







54,412

28,455

Non-current








Revolving credit facility

(v)

US/UK LIBOR + 0.875%

US/UK LIBOR + 0.875%

3.74% to 5.02% (2007: 4.97% to 5.62%)

2013

18,720

8,953

Revolving credit facility

(i)

US LIBOR + 0.875%

US LIBOR + 0.875%

3.11%

2010

20,000

-

Term loan 

(iv)

US/UK LIBOR + 0.875%

US/UK LIBOR + 0.875%

4.18% to 4.88% (2007: 4.95% to 5.84%)

2009-2013

54,847

75,019







93,567

83,972

Less:








  Debt acquisition costs net of accumulated amortisation and effective rate adjustments







(5,379)


(2,332)







88,188

81,640

Details of the group's interest-bearing loans and borrowings are as follows:


(i) Revolving credit facilities

This facility, provided by The Royal Bank of Scotland / Halifax Bank of Scotland (RBS/HBOS), is repayable on 31 December 2010.


(ii) Short-term loan

The short-term loan is denominated in Kuwaiti Dinars (KD) and relates to funding provided for a project in Kuwait. The loan was settled during 2008. 


(iii) Bank overdrafts

Bank overdrafts are drawn down in US dollars, Kuwaiti Dinars and Sterling denominations to meet the group's working capital requirements. These are repayable on demand.


(iv) Term loan

The term loan with RBS/HBOS at 31 December 2008 comprised drawings of US$33,998,000 (2007: US$35,310,000) denominated in US$ and US$30,005,000 (2007: US$42,371,000) denominated in Sterling. Both elements of the loan are repayable over a period of five years commencing 31 December 2008 to 30 September 2013.


(v) Revolving credit facility

The drawings against this facility, which is also provided by RBS/HBOS, will be converted to a term loan on 30 September 2010 to be repaid over a period of three years ending 30 September 2013. The drawings at 31 December 2008 comprised US$13,900,000 (2007: US$2,400,000) denominated in US$ and US$4,820,000 (2007: US$6,553,000) denominated in Sterling


The group's credit facilities and debt agreements contain covenants relating to cash flow cover, cost of borrowings cover, dividends and various other financial ratios. With the exception of Petrofac International Ltd, which under its existing bank covenants, is restricted from making upstream cash payments in excess of 70 per cent of its net income in any one year, none of the Company's subsidiaries is subject to any material restrictions on their ability to transfer funds in the form of cash dividends, loans or advances to the Company. 



25    PROVISIONS



Other long- term






employment 


Provision for 




benefits provision


decommissioning


Total


US$'000


US$'000


US$'000







At 1 January 2008

17,218


1,828


19,046

Additions during the year

10,223


1,546


11,769

Unused amounts reversed/paid in the year

(1,216)


-


(1,216)

Unwinding of discount

-


64


64

At 31 December 2008

26,225


3,438


29,663


Other long- term employment benefits provision

Labour laws in certain countries in which the group operates require employers to provide for other long- term employment benefits. These benefits are payable to employees at the end of their period of employment. The provision for these long- term benefits is calculated based on the employees' last drawn salary at the balance sheet date and length of service, subject to the completion of a minimum service period in accordance with the local labour laws of the jurisdictions in which the group operates. The amount is payable to the employees on being transferred to another jurisdiction or on cessation of employment.


Provision for decommissioning

The decommissioning provision primarily relates to the Company's obligation for the removal of facilities and restoration of the site at the PM304 field in Malaysia, at Chergui in Tunisia and on the Don assets in the United Kingdom. The liability is discounted at the rate of 3.50% on PM304 (2007: 3.50%), 5.25% on Chergui and 3.40% (2007: nil) on Don. The unwinding of the discount is classified as a finance cost (note 5). The Company estimates that the cash outflows against these provisions will arise in 2014 on PM304, in 2018 on Chergui and in 2013 on Don assuming no further development of the asset.



26    OTHER FINANCIAL LIABILITIES



2008


2007


US$'000


US$'000

Other financial liabilities - non-current




Deferred consideration 

32,147


13,622

Fair value of derivative instruments (note 31)

-


130

Other 

118


118


32,265


13,870

Other financial liabilities - current




Interest payable

118


812

Fair value of derivative instruments (note 31)

6,244


52


6,362


864



27    TRADE AND OTHER PAYABLES



2008


2007


US$'000


US$'000





Trade payables

275,058


187,417

Advances received from customers

76,845


61,744

Accrued expenses

149,684


136,514

Other taxes payable

6,876


16,885

Other payables

4,866


5,457


513,329


408,017


Trade payables are non-interest bearing and are normally settled on terms of between 30 and 60 days.


Advances from customers represent payments received for contracts on which the related work had not been performed at the balance sheet date.


Included in other payables are retentions held against subcontractors of US$911,000 (2007: US$4,292,000).


Certain trade and other payables will be settled in currencies other than the reporting currency of the group, mainly in Sterling, Euros and Kuwaiti Dinars.



28    ACCRUED CONTRACT EXPENSES





As restated


2008


2007


US$'000


US$'000





Accrued contract expenses

543,191


379,356

Reserve for contract losses

8,670


3,226


551,861


382,582


The reserve for contract losses is to cover costs in excess of revenues on certain contracts.



29    COMMITMENTS AND CONTINGENCIES


Commitments


In the normal course of business the group will obtain surety bonds, letters of credit and guarantees, which are contractually required to secure performance, advance payment or in lieu of retentions being withheld. Some of these facilities are secured by issue of corporate guarantees by the Company in favour of the issuing banks. 


At 31 December 2008, the group had letters of credit of US$24,096,000 (2007: US$8,184,000) and outstanding letters of guarantee, including performance and bid bonds, of US$865,120,000 (2007: US$663,292,000) against which the group had pledged or restricted cash balances of, in aggregate, US$1,506,000 (2007: US$1,351,000). 


At 31 December 2008, the group had outstanding forward exchange contracts amounting to US$166,412,000 (2007: US$326,442,000). These commitments consist of future obligations to either acquire or sell designated amounts of foreign currency at agreed rates and value dates (note 31). 


Leases


The group has financial commitments in respect of non-cancellable operating leases for office space and equipment. These non-cancellable leases have remaining non-cancellable lease terms of between one and seventeen years and, for certain property leases, are subject to renegotiation at various intervals as specified in the lease agreements. The future minimum rental commitments under these non-cancellable leases are as follows:



2008


2007


US$'000


US$'000





Within one year

59,292


70,870

After one year but not more than five years

72,729


76,493

More than five years

54,787


52,827


186,808


200,190


Included in the above are commitments relating to the lease of an office building extension in Aberdeen, United Kingdom of US$44,573,000 (2007: US$54,933,000) and the lease of a drilling rig for the Don Southwest project of US$35,744,000 (2007: US$43,200,000).


Minimum lease payments recognised as an operating lease expense during the year amounted to US$26,557,000 (2007: US$21,359,000). 



Capital commitments


At 31 December 2008, the group had capital commitments of US$44,035,000 (2007US$29,630,000) excluding the above lease commitments.  


Included in the above are commitments for the development of the Don assets amounting to US$8,610,000 (2007nil) and commitments relating to the further appraisal and development of wells as part of the Cendor project in Malaysia amounting to US$26,468,000 (2007US$11,389,000).



30    RELATED PARTY TRANSACTIONS 


The consolidated financial statements include the financial statements of Petrofac Limited and the subsidiaries listed in note 32. Petrofac Limited is the ultimate parent entity of the group.


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




Sales to related

Purchases from

Amounts owed

Amounts owed



parties

related parties

by related parties

to related parties



US$'000

US$'000

US$'000

US$'000







Joint ventures 

2008

9,081

1,858

2,907

367


2007

180

507

3,147

625







Other Directors' 

2008

-

1,277

-

192

interests

2007

-

614

-

119


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 will be settled in cash.


Purchases in respect of other Directors' interests of US$1,277,000 (2007: US$614,000reflect 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 


The following details remuneration of key management personnel of the group comprising of executive and non-executive Directors of the Company and other senior personnel. Further information relating to the individual Directors is provided in the Directors' Remuneration report on pages 56 to 69.



2008


2007


US$'000


US$'000





Short-term employee benefits

5,542


5,063

Other long-term employment benefits 

59


43

Share-based payments

1,311


906

Fees paid to non-executive directors

554


546


7,466


6,558



31    RISK MANAGEMENT AND FINANCIAL INSTRUMENTS


Risk management objectives and policies


The group's principal financial assets and liabilities, other than derivatives, comprise trade and other receivables, cash and short-term deposits, interest-bearing loans and borrowings, trade and other payables and deferred consideration.


The group's activities expose it to various financial risks particularly associated with interest rate risk on its variable rate loans and borrowings and foreign currency risk on both conducting business in currencies other than reporting currency as well as translation of the assets and liabilities of foreign operations to the reporting currency. These risks are being addressed by using a combination of various derivative instruments, principally interest rate swaps, caps and forward currency contracts in line with the group's hedging policy. The group has a policy not to enter into speculative trading of financial derivatives.


The Board of Directors of the Company has established an Audit Committee and Risk Committee to help identify, evaluate and manage the significant financial risks faced by the group and their activities are discussed in detail on pages 45 to 55


The other main risks besides interest rate and foreign currency risk arising from the group's financial instruments are credit risk, liquidity risk and commodity price risk and the policies relating to these risks are discussed in detail below:


Interest rate risk 


Interest rate risk arises from the possibility that changes in interest rates will affect the value of the group's interest-bearing financial liabilities and assets.  


The group's exposure to market risk arising from changes in interest rates relates primarily to the group's long-term variable rate debt obligations and its cash and bank balances. The group's policy is to manage its interest cost using a mix of fixed and variable rate debt and specifically to keep between 60% and 80% of its term borrowings at fixed or capped rates of interest.  At 31 December 2008, after taking into account the effect of interest rate swaps and collars, approximately 65.1% (200769.1%) of the group's term borrowings are at a fixed or capped rate of interest.


Interest rate sensitivity analysis


The impact on the group's pre-tax profit and equity due to a reasonably possible change in interest rates is demonstrated in the table below. The analysis assumes that all other variables remain constant.



Pre-tax profit


Equity


100 basis 

100 basis 


100 basis

100 basis


point increase

point decrease


point increase

point decrease


US$'000

US$'000


US$'000

US$'000







31 December 2008

(882)

882


(705)

(1,615)

31 December 2007

(1,058)

1,058


272

(670)


The following table reflects the maturity profile of these financial liabilities and assets



Year ended 31 December 2008


Within

1-2

2-3

3-4

4-5

More than



1 year

years

years

years

years

5 years

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Financial liabilities








Floating rates








Revolving credit facilities (note 24)

-

20,936

4,212

6,552

7,020

-

38,720

Bank overdrafts (note 24)

45,256

-

-

-

-

-

45,256

Term loan (note 24)

9,156

11,250

15,625

18,750

9,222

-

64,003

Interest rate collars (note 31)

1,137

-

-

-

-

-

1,137

Interest rate swap (note 31)

37

-

-

-

-

-

37


55,586

32,186

19,837

25,302

16,242

-

149,153









Financial assets








Floating rates








Cash and short-term deposits (note 19)

694,415

-

-

-

-

-

694,415

Restricted cash balances (note 15)

2,736

207

-

-

-

1,692

4,635


697,151

207

-

-

-

1,692

699,050


Year ended 31 December 2007


Within

1-2

2-3

3-4

4-5

More than



1 year

years

years

years

years

5 years

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Financial liabilities








Floating rates








Revolving credit facilities (note 24)

6,500

-

448

2,015

3,134

3,356

15,453

Short-term loan (note 24)

3,627

-

-

-

-

-

3,627

Bank overdrafts (note 24)

15,666

-

-

-

-

-

15,666

Term loan (note 24)

2,662

10,000

11,250

15,625

18,750

19,394

77,681

Interest rate collars (note 31)

-

130

-

-

-

-

130


28,455

10,130

11,698

17,640

21,884

22,750

112,557









Financial assets








Floating rates








Cash and short-term deposits (note 19)

581,552

-

-

-

-

-

581,552

Restricted cash balances (note 15)

1,351

-

-

-

-

-

1,351

Interest rate swap (note 31)

-

28

-

-

-

-

28


582,903

28

-

-

-

-

582,931


Financial liabilities in the above table are disclosed gross of debt acquisition costs and effective rate adjustments of US$5,379,000 (2007: US$2,332,000).


Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. The other financial instruments of the group that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk.  


Derivative instruments designated as cash flow hedges 


At 31 December 2008, the group held the following derivative instruments, designated as cash flow hedges in relation to floating rate interest-bearing loans and borrowings:






Fair value of asset/(liability)


Nominal amount


Date

2008

2007

Instrument

(US$ equivalent)

Period to maturity

commenced

US$'000

US$'000







UK LIBOR interest rate swap

US$2,629,000

9 months

31 December 2004

(37)

28

UK LIBOR interest rate collar

US$30,131,000

1 year

31 December 2007

(705)

(74)

US LIBOR interest rate collar

US$34,138,000

1 year

31 December 2007

(432)

(56)


During 2008, changes in fair value of a loss of US$1,607,000 (2007: US$102,000) relating to these derivative instruments were taken to equity and a gain of US$63,000 (2007: US$708,000) were recycled from equity into interest expense in the income statement. The time value portion of these derivatives of a gain of US$433,000 (2007: nil) was netted-off against interest expense.


Foreign currency risk


The group is exposed to foreign currency risk on sales, purchases, and translation of assets and liabilities that are in a currency other than the functional currency of its operating units. The group is also exposed to the translation of the functional currencies of its units to the US dollar reporting currency of the group. The following table summarises the percentage of foreign currency denominated revenues, costs, financial assets and financial liabilities, expressed in US dollar terms, of the group totals



2008


2007


% of foreign currency denominated items 


% of foreign currency denominated items 





Revenues

43.8%


48.6%

Costs

61.6%


68.7%

Current financial assets

57.9%


67.9%

Non-current financial assets

0.0%


0.6%

Current financial liabilities

64.8%


45.8%

Non-current financial liabilities

25.6%


44.0%


The group uses forward currency contracts to manage the currency exposure on transactions significant to its operations. It is the group's policy not to enter into forward contracts until a highly probable forecast transaction is in place and to negotiate the terms of the derivative instruments used for hedging to match the terms of the hedged item to maximise hedge effectiveness. 

 

Foreign currency sensitivity analysis


The income statements of foreign operations are translated into the reporting currency using a weighted average rate of conversion. Foreign currency monetary items are translated using the closing rate at the date of the balance sheet. Revenues and costs in currencies other than the functional currency of an operating unit are recorded at the prevailing rate at the date of the transaction. The following significant exchange rates applied during the year in relation to US dollars:



2008


2007


Average rate

Closing rate


Average rate

Closing rate







Sterling

1.85

1.46


2.01

1.99

Kuwaiti Dinars

3.72

3.62


3.51

3.66

Euros

1.48

1.39


1.38

1.46


The following table summarises the impact on the group's pre-tax profit and equity (due to change in the fair value of monetary assets, liabilities and derivative instruments) of a reasonably possible change in US dollar exchange rates with respect to different currencies:



Pre-tax profit


Equity


+10% US dollar rate increase 

-5% US dollar rate decrease 


+10% US dollar rate increase 

-5% US dollar rate decrease 


US$'000

US$'000


US$'000

US$'000







31 December 2008

(16,355)

8,177


10,597

(6,135)

31 December 2007

(27,285)

13,642


(35,065)

17,532



Derivative instruments designated as cash flow hedges 


At 31 December 2008, the group had foreign exchange forward contracts designated as cash flow hedges with a fair value gain of US$10,165,000 (2007: US$28,657,000in equity as follows: 







Net unrealised


Contract value


Fair value


gain/(loss) 


2008

2007


2008

2007


2008

2007


US$'000

US$'000


US$'000

US$'000


US$'000

US$'000










Euro currency (sales) purchases 

(41,655)

321,264


(31,783)

349,964


9,488

28,700

Sterling currency purchases

26,747

4,500


19,621

4,448


(2,956)

(52)

Yen currency purchases

7,465

678


8,716

687


-

9

Kuwaiti Dinars sales 

(90,545)

-


(86,912)

-


3,633

-








10,165

28,657


The above foreign exchange contracts mature and will affect income between January 2009 and April 2010 (2007: between January 2008 and February 2009).


At 31 December 2008, the group had cash and short-term deposits designated as cash flow hedges with a fair value loss of US$2,205,000 (2007:gain US$36,966,000) as follows: 







Net unrealised




Fair value


gain/(loss) 





2008

2007


2008

2007





US$'000

US$'000


US$'000

US$'000










Euro currency cash and short-term deposits 




269,409

235,479


2,653

35,143

Sterling currency cash and short-term deposits




15,667

16,697


(4,858)

1,823








(2,205)

36,966


During 2008, changes in fair value of US$(25,950,000) (2007: US$59,253,000) relating to these derivative instruments and financial assets were taken to equity and US$31,713,000 (2007: US$21,475,000) were recycled from equity into cost of sales in the income statement. The forward points and ineffective portion of the above foreign exchange forward contracts of a loss of US$11,826,000 (2007: nil) was recognised in the income statement (note 4b and 4d).


Commodity price risk - oil prices


The group is exposed to the impact of changes in oil gas prices on its revenues and profits generated from sales of crude oil gas. The group did not hedge this risk related to the sale of gas production from its Chergui investment which started production from August 2008 as, in accordance with the group policy, hedging of production should only take place after obtaining sufficiently reliable and regular long-term forecasted production data


During the year, the group used a zero premium oil price collar to hedge its exposure to fluctuations in oil prices which matured on a monthly basis from 31 January 2008 to 31 December 2008. The collar hedged 240,000 barrels of oil production and during the year a gain of US$327,000 was recognised in the income statement on the maturity of the contract.


On 30 September 2008, the group entered into an oil price collar, with a premium payable of US$87,000 maturing on a monthly basis from 1 January 2009 to 30 June 2009, which hedges 60,000 barrels of oil. The fair value of this oil price collar at 31 December 2008 was US$1,349,000 with a gain recognised in equity of US$1,494,000 being its intrinsic value and an interest expense recognised in the year of US$145,000 on its time value portion.


The following table summarises the impact on the group's pre-tax profit and equity (due to a change in the fair value of oil derivative instruments and the underlifting asset/overlifting liability) of reasonably possible change in the oil price:



Pre-tax profit


Equity


+10 US$/bbl increase 

-10 US$/bbl decrease 


+10 US$/bbl increase 

-10 US$/bbl decrease 


US$'000

US$'000


US$'000

US$'000







31 December 2008

-

-


251

(250)

31 December 2007

(446)

446


(1,739)

741


Credit risk


The group trades only with recognised, creditworthy third parties. Divisional Risk Review Committees (DRRC) have been set up by the Board of Directors to evaluate the creditworthiness of each individual third party at the time of entering into new contracts. Limits have been placed on the approval authority of the DRRC above which the approval of the Board of Directors of the Company is required. Receivable balances are monitored on an ongoing basis with appropriate follow-up action taken where necessary.  At 31 December 2008, the group's five largest customers accounted for 50.7% of outstanding trade receivables and work in progress (200758.0%).


With respect to credit risk arising from the other financial assets of the group, which comprise cash and cash equivalents, available-for-sale financial assets and certain derivative instruments, the group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.


Liquidity risk


The group's objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, revolving credit facilities, project finance and term loans to reduce its exposure to liquidity risk. The maturity profiles of the group's financial liabilities at 31 December 2008 are as follows: 


Year ended 31 December 2008







Contractual



6 months

6-12

1-2

2-5

More than

undiscounted

Carrying


or less

months

years

years

5 years

cash flows

amount


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Financial liabilities








Interest-bearing loans and borrowings

49,835

4,577

31,235

62,332

-

147,979

142,600

Trade and other payables (excluding advances from customers)

380,145

56,339

-

-

-

436,484

436,484

Due to related parties

469

90

-

-

-

559

559

Deferred consideration

-

-

29,454

8,894

-

38,348

32,147

Derivative instruments

5,436

808

-

-

-

6,244

6,244

Interest payable

118

-

-

-

-

118

118

Interest payments

1,817

1,817

2,799

4,236

-

10,669

-


437,820

63,631

63,488

75,462

-

640,401

618,152


Year ended 31 December 2007







Contractual



6 months

6-12

1-2

2-5

More than

undiscounted

Carrying


or less

months

years

years

5 years

cash flows

amount


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Financial liabilities








Interest-bearing loans and borrowings

19,293

9,162

10,000

51,222

22,750

112,427

110,095

Trade and other payables (excluding advances from customers)


345,833


440


-


-


-


346,273


346,273

Due to related parties

744

-

-

-

-

744

744

Deferred consideration

1,964

2,088

9,570

-

-

13,622

13,622

Derivative instruments

52

-

130

-

-

182

182

Interest payable

812

-

-

-

-

812

812

Interest payments

2,481

2,480

3,900

10,163

1,492

20,516

-


371,179

14,170

23,600

61,385

24,242

494,576

471,728


The group uses various funded facilities provided by banks and its own financial assets to fund the above mentioned financial liabilities.


Capital management


The group's policy is to maintain a healthy capital base to sustain future growth and maximise shareholder value. 


The group seeks to optimise shareholder returns by maintaining a balance between debt and capital and monitors the efficiency of its capital structure on a regular basis. The gearing ratio and return on shareholders' equity is as follows:





As restated


2008


2007


US$'000


US$'000





Cash and short-term deposits 

694,415


581,552

Interest-bearing loans and borrowings (A)

(142,600)


(110,095)

Net cash (B)

551,815


471,457





Equity attributable to Petrofac Limited shareholders (C)

558,822


522,761





Profit for the year attributable to Petrofac Limited shareholders (D)

264,989


188,716





Gross gearing ratio (A/C)

25.5%


21.1%

Net gearing ratio (B/C)

Net cash position


Net cash position

Shareholders' return on investment (D/C)

47.4%


36.1%


Fair values of financial assets and liabilities


The fair value of the group's financial instruments and their carrying amounts included within the group's balance sheet are set out below: 



Carrying amount


Fair value


2008

2007


2008

2007


US$'000

US$'000


US$'000

US$'000

Financial assets






Cash and short-term deposits

694,415

581,552


694,415

581,552

Restricted cash

4,635

1,351


4,635

1,351

Available-for-sale financial assets

566

1,586


566

1,586

Oil derivative

1,349

336


1,349

336

Interest rate swap

-

28


-

28

Forward currency contracts

11,509

28,709


11,509

28,709







Financial liabilities






Interest-bearing loans and borrowings

142,600

110,095


142,600

110,095

Deferred consideration

32,147

13,622


32,147

13,622

Interest rate collars

1,137

130


1,137

130

Interest rate swap

37

-


37

-

Forward currency contracts-designated as cash flow hedge

900

52


900

52

Forward currency contracts-undesignated

4,170

-


4,170

-


Market values have been used to determine the fair values of available-for-sale financial assets and forward currency contracts. The fair values of interest rate swaps and collars have been calculated by discounting the expected future cash flows at prevailing interest rates. The fair values of long-term interest-bearing loans and borrowings are their amortised costs determined as the present value of discounted future cash flows using the effective interest rate. The Company considers that the carrying amounts of trade and other receivables, trade and other payables, other current and non-current financial assets and liabilities approximate their fair values and are therefore excluded from the above table.



32    SUBSIDIARIES AND JOINT VENTURES


At 31 December 2008, the group had investments in the following subsidiaries and incorporated joint ventures:




Proportion of nominal



value of issued shares

Name of company

Country of incorporation

controlled by the group





Trading subsidiaries


2008

2007





Petrofac Inc.

USA

*100

*100

Petrofac International Ltd

Jersey

*100

*100

Petrofac Energy Developments Limited

England

*100

*100

Petrofac Energy Developments International Limited 

Jersey

*100

*100

Petrofac UK Holdings Limited

England

*100

*100

Petrofac Facilities Management International Limited

Jersey

*100

*100

Petrofac Services Limited

England

*100

*100

Petrofac Services Inc.

USA

*100

*100

Petrofac Training International Limited

Jersey

*100

*100

Petroleum Facilities E & C Limited

Jersey

*100

*100

Petrofac Employee Benefit Trust

Jersey

*100

*100

Atlantic Resourcing Limited

Scotland

100

100

Petrofac Algeria EURL

Algeria

100

100

Petrofac Engineering India Private Limited

India

100

100

Petrofac Engineering Services India Private Limited

India

100

100

Petrofac Engineering Limited

England

100

100

Petrofac Offshore Management Limited

Jersey

100

100

Petrofac FZE

United Arab Emirates

100

100

Petrofac Facilities Management Group Limited

Scotland

100

100

Petrofac Facilities Management Limited

Scotland

100

100

Petrofac International Nigeria Ltd

Nigeria

100

100

Petrofac Pars (PJSC) 

Iran

100

100

Petrofac Iran (PJSC) 

Iran

100

100

Plant Asset Management Limited

Scotland

100

100

Petrofac Nuigini Limited

Papua New Guinea

100

100

PFMAP Sendirian Berhad

Malaysia

100

100

Petrofac Caspian Limited

Azerbaijan

100

100

Petrofac (Malaysia-PM304) Limited

England

100

100

Petrofac Training Group Limited

Scotland

100

100

Petrofac Training Holdings Limited

Scotland

100

100

Petrofac Training Limited

Scotland

100

100

Petrofac Training Inc.

USA

100

100

Petrofac Training (Trinidad) Limited

Trinidad

100

100

Monsoon Shipmanagement Limited

Jersey

100

100

Petrofac E&C International Limited

United Arab Emirates

100

100

Petrofac Saudi Arabia Limited

Saudi Arabia

100

100

Petrofac Energy Developments (Ohanet) Jersey Limited

Jersey

100

100

Petrofac Energy Developments (Ohanet) LLC

USA

100

100

PEDL Limited

England

100

100

Petrofac (Cyprus) Limited

Cyprus

100

100

PKT Technical Services Ltd

Russia

**50

**50

PKT Training Services Ltd

Russia

100

100

Pt PCI Indonesia

Indonesia

80

80

Process Control and Instrumentation Services Pte Ltd

Singapore

100

100

Process Control and Instrumentation Sendirian Berhad

Malaysia

100

100

Sakhalin Technical Training Centre

Russia

80

80

Petrofac Norge AS

Norway

100

100

SPD Group Limited

British Virgin Islands

51

51

SPD UK Limited

Scotland 

51

51

SPD FZCO

United Arab Emirates

51

51

SPD LLC

United Arab Emirates

**25

**25

Petrofac Energy Developments Oceania Limited

Cayman Islands

100

100

PT. Petrofac IKPT International

Indonesia

51

n/a

Petrofac Kazakhstan Limited

England

100

n/a

Petrofac International (UAE) LLC

United Arab Emirates

100

n/a

Petrofac E&C Oman LLC

Oman

100

n/a

Petrofac International South Africa (Pty) Limited

South Africa

100

n/a

Eclipse Petroleum Technology Limited

England

100

n/a

Caltec Limited

England

100

n/a

i Perform Limited

Scotland

100

n/a





Joint Ventures








Costain Petrofac Limited

England

50

50

Kyrgyz Petroleum Company

Kyrgyz Republic

50

50

MJVI Sendirian Berhad

Brunei

50

50

Spie Capag - Petrofac International Limited

Jersey

50

50

TTE Petrofac Limited

Jersey

50

50

Petrofac Emirates LLC

United Arab Emirates

**49

n/a





Dormant subsidiaries








ASJV Venezuela SA

Venezuela

100

100

Joint Venture International Limited

Scotland

100

100

Montrose Park Hotels Limited

Scotland

100

100

RGIT Ethos Health & Safety Limited

Scotland

100

100

Scota Limited

Scotland

100

100

Petrofac Russia Limited

England

100

100

Monsoon Shipmanagement Limited 

Cyprus

100

100

Rubicon Response Limited

Scotland

100

100


* Directly held by Petrofac Limited 

**Companies consolidated as subsidiaries on the basis of control.



OTHER FINANCIAL INFORMATION 

At 31 December 2008



OIL AND GAS RESERVES (UNAUDITED)


 
Europe
 
   Africa
 
South East Asia
 
 
Total
 
 
Oil & NGLs
Gas
 
Oil & NGLs
Gas
 
Oil & NGLs
Gas
 
Oil & NGLs
Gas
Oil equivalent
 
mmbbl
bcf
 
mmbbl
bcf
 
mmbbl
bcf
 
mmbbl
bcf
mmboe
 
 
 
 
 
 
 
 
 
 
 
 
 
Proven reserves
 
 
 
 
 
 
 
 
 
 
 
 
At 1 January 2008
 
 
 
 
 
 
 
 
 
 
 
 
Developed
-
-
 
2.6
24.1
 
3.2
-
 
5.8
24.1
9.9
Undeveloped
12.2
-
 
-
2.0
 
0.2
-
 
12.4
2.0
12.8
Proven
12.2
-
 
2.6
26.1
 
3.4
-
 
18.2
26.1
22.7
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes during the year:
 
 
 
 
 
 
 
 
 
 
 
 
Revisions
-
-
 
0.2
(6.2)
 
0.8
-
 
1.0
(6.2)
(0.1)
Additions
-
-
 
-
-
 
-
-
 
-
-
-
Acquisitions
-
-
 
-
-
 
-
-
 
-
-
-
Production
-
-
 
(0.4)
(1.1)
 
(0.7)
-
 
(1.1)
(1.1)
(1.3)
 
 
 
 
 
 
 
 
 
 
 
 
 
At 31 December 2008
 
 
 
 
 
 
 
 
 
 
 
 
Developed
-
-
 
2.4
18.7
 
3.5
-
 
5.9
18.7
9.1
Undeveloped
12.2
-
 
-
0.1
 
-
-
 
12.2
0.1
12.2
Proven
12.2
-
 
2.4
18.8
 
3.5
-
 
18.1
18.8
21.3
 
 
 
 
 
 
 
 
 
 
 
 
 
Probable reserves
 
 
 
 
 
 
 
 
 
 
 
 
At 1 January 2008
11.4
-
 
-
6.4
 
1.5
-
 
12.9
6.4
14.0
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes during the year:
 
 
 
 
 
 
 
 
 
 
 
 
Revisions
(1.4)
-
 
-
(1.4)
 
0.2
-
 
(1.2)
(1.4)
(1.4)
Additions
-
-
 
-
-
 
-
-
 
-
-
-
Acquisitions
-
-
 
-
-
 
-
-
 
-
-
-
Production
-
-
 
-
-
 
-
-
 
-
-
-
At 31 December 2008
10.0
-
 
-
5.0
 
1.7
-
 
11.7
5.0
12.6
 
 
 
 
 
 
 
 
 
 
 
 
 
Total proven & probable reserves
 
 
 
 
 
 
 
 
 
 
 
 
At 1 January 2008
23.6
-
 
2.6
32.5
 
4.9
-
 
31.1
32.5
36.7
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes during the year:
 
 
 
 
 
 
 
 
 
 
 
 
Revisions
(1.4)
-
 
0.2
(7.6)
 
1.0
-
 
(0.2)
(7.6)
(1.5)
Additions
-
-
 
-
-
 
-
-
 
-
-
-
Acquisitions
-
-
 
-
-
 
-
-
 
-
-
-
Production
-
-
 
(0.4)
(1.1)
 
(0.7)
-
 
(1.1)
(1.1)
(1.3)
 
 
 
 
 
 
 
 
 
 
 
 
 
At 31 December 2008
22.2
-
 
2.4
23.8
 
5.2
-
 
29.8
23.8
33.9


Notes


  • These estimates of reserves were prepared by the group's engineers and audited by a competent, independent third party based on the guidelines of the Petroleum Resources Management System (sponsored by the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers).

  • The reserves presented are the net entitlement volumes attributable to the company, under the terms of relevant production sharing contracts and assuming future oil prices equivalent to $55 per barrel (Brent). 

  • For the purpose of calculating oil equivalent total reserves, volumes of natural gas have been converted to oil equivalent volumes at the rate of 5,800 standard cubic feet of gas per barrel of oil.



SHAREHOLDER INFORMATION

At 31 December 2008


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


Registrar



Capita Registrars (Jersey) Limited


12 Castle Street


St Helier


Jersey JE23RT




UK Transfer Agent


Company Secretary and registered office

Capita Registrars

Ogier Corporate Services (Jersey) Limited

The Registry

Whiteley Chambers

34 Beckenham Road

Don Street

Beckenham

St Helier

Kent BR3 4TU

Jersey JE4 9WG



Legal Advisers to the Company



As to English Law

As to Jersey Law


Norton Rose LLP

Ogier

3 More London Place

Whiteley Chambers

London SE1 2AF 

Don Street


St Helier


Jersey JE4 9WG



Joint Brokers



Credit Suisse

Nomura

1 Cabot Square

25 Bank Street

London E14 4QJ

London E14 5LE



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




15 May 2009

Annual General Meeting

22 May 2009

Final dividend payment

26 August 2009

Interim results announcement

November 2009

Interim dividend payment


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
 
END
 
 
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