Interim Results
Petrofac Limited
06 September 2007
PETROFAC LIMITED
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Petrofac Limited (Petrofac, the group or the Company), a leading international
provider of facilities solutions to the oil & gas production and processing
industry, today announces its interim results for the six months ended 30 June
2007.
FINANCIAL HIGHLIGHTS*
• Revenue up 14% to US$1,057 million (2006: US$927 million)
• EBITDA(1) up 55% to US$137.3 million (2006: US$88.8 million)
• Net profit(2) up 47% to US$77.2 million (2006: US$52.6 million)
• First half order intake(3) of US$0.6 billion (2006: US$1.0 billion) with
backlog(4) of US$3.9 billion at 30 June 2007 (31 December 2006: US$4.2
billion)
• Earnings per share (diluted) up 47% to 22.36 cents (2006: 15.23 cents)
• Interim dividend up 104% to 4.90 cents (2.44 pence(5)) per share (2006:
2.40 cents)
* continuing operations
Commenting on the results, Ayman Asfari, Petrofac's Group Chief Executive, said:
"I am delighted to be able to report that Petrofac has continued to perform well
in the first half of 2007. Continued excellent project execution allowed our
Engineering & Construction division to deliver another period of strong net
margins and profit. Prospects for new contracts remain strong and we are
confident of awards before the end of the year that will underpin sustained
revenue growth in future years. We also achieved strong growth in revenue and
profit in the Operations Services division, in part, due to the commencement of
our facilities and well management contract with Dubai Petroleum, and in the
Energy Developments division, with a strong contribution from the Cendor field.
With strong demand for our services, we are confident that the group is well
positioned to deliver 2007 results ahead of expectations and excellent growth in
2008 and beyond."
Notes
(1) EBITDA means earnings before interest, tax, depreciation and amortisation
and is calculated as profit from continuing operations before tax and net
finance costs adjusted to add back charges for depreciation, amortisation and
impairment.
(2) Net profit for the period attributable to Petrofac Limited shareholders.
(3) Order intake comprises new contracts awarded, growth in scope of existing
contracts and the rolling increment attributable to contracts which extend
beyond five years. Order intake is not an audited measure.
(4) Backlog consists of the estimated revenue attributable to the uncompleted
portion of lump-sum engineering, procurement and construction contracts and
variation orders plus, with regard to engineering services and facilities
management contracts, the estimated revenue attributable to the lesser of the
remaining term of the contract and, in the case of life-of-field facilities
management contracts, five years. The group uses this key performance indicator
as a measure of the visibility of future earnings. Backlog is not an audited
measure.
(5) The group reports its financial results in US dollars and, accordingly, will
declare any dividends in US dollars together with a Sterling equivalent. Unless
shareholders have made valid elections to the contrary, they will receive any
dividends payable in Sterling. Conversion of the 2007 interim dividend from US
dollars into Sterling is based upon an exchange rate of US$2.0107:£1, being the
Bank of England Sterling spot rate as at midday on 5 September 2007.
Ends
For further information, please contact:
Petrofac Limited +44 (0) 20 7811 4900
Ayman Asfari, Group Chief Executive
Keith Roberts, Chief Financial Officer
Jonathan Low, Head of Investor Relations
Bell Pottinger Corporate & Financial +44 (0) 20 7861 3232
Ann-marie Wilkinson
Olly Scott
Notes to Editors
Petrofac
Petrofac is a leading international provider of facilities solutions to the oil
& gas production and processing industry, with a diverse customer portfolio
including many of the world's leading integrated, independent and national oil &
gas companies. Petrofac is quoted on the London Stock Exchange (symbol: PFC) and
is a constituent of the FTSE 250 Index.
Through its three divisions, Engineering & Construction, Operations Services and
Energy Developments, Petrofac designs and builds oil & gas facilities; operates,
maintains or manages facilities and trains personnel; and, where return criteria
are met and service revenue synergies identified, co-invests with clients and
partners. Petrofac's range of services allows it to help meet its customers'
needs across the life cycle of oil & gas assets.
With more than 9,500 employees, Petrofac operates out of four strategically
located international centres, in Aberdeen, Sharjah, Woking and Mumbai and a
further 16 offices worldwide. The predominant focus of Petrofac's business is on
the UK Continental Shelf (UKCS), Africa, the Middle East, the Commonwealth of
Independent States (CIS) and the Asia Pacific region.
For additional information, please refer to the Petrofac website at
www.petrofac.com.
The attached is an extract from the group's interim condensed consolidated
financial statements for the six months ended 30 June 2007.
BUSINESS REVIEW
Results
We are pleased to report that the group performed strongly during the first half
of 2007 with continued growth in revenue and profit. In the six months ended 30
June 2007, revenue increased by 14% to US$1,057.1 million compared to the
corresponding prior period (2006: US$926.9 million) and net profit increased by
47% to US$77.2 million (2006: US$52.6 million). EBITDA increased by 55% to
US$137.3 million (2006: US$88.8 million).
Net interest receivable for the period was US$2.8 million compared to net
interest payable of US$0.7 million for the corresponding period in 2006 due
principally to higher average cash balances and higher rates of interest earned
on these balances.
The tax charge for the six months ended 30 June 2007 of US$40.0 million (2006:
US$21.9 million), based on the anticipated divisional effective tax rates for
the year ending 31 December 2007, results in an effective tax rate for the
period of 34.1% (2006: 29.4%). The principal reason for the increase is that a
higher proportion of group profits were generated by the Energy Developments
(formerly Resources) division, which has the highest divisional effective tax
rate, and which had a higher effective tax rate than in the previous period due
to profits generated by the Cendor field which commenced production in the
second half of 2006.
Net cash(1) generated from operations in the period was US$126.4 million (2006:
US$186.6 million), representing 92.1% of EBITDA (2006: 210.1%). The group's net
cash increased to US$391.0 million at 30 June 2007 (31 December 2006: US$340.7
million) as a result of profits generated and some improvement in working
capital utilisation, partly offset by increased cash outflows from investing
activities, including the financial completion of the group's acquisition of an
operating interest in the Chergui field in Tunisia, and increased cash outflows
from financing activities, in particular, equity dividend payments and the
purchase of company shares for the purpose of making employee share scheme
awards. The group's working capital balances are subject to significant
movements due to the timing of award and stage of completion of lump-sum
engineering, procurement and construction (EPC) contracts. The group's very
strong cash generation during the corresponding prior year period reflected a
significant decrease in working capital utilisation in that period.
Interest-bearing loans and borrowings increased marginally during the current
period to US$127.2 million (31 December 2006: US$117.2 million).
(1) Net cash represents cash and short-term deposits less interest-bearing loans
and borrowings.
Diluted earnings per share attributable to continuing operations for the six
months ended 30 June 2007 increased to 22.36 cents per share (2006: 15.23 cents
per share) reflecting the group's improved profitability.
At 30 June 2007, the group's combined backlog for the Engineering & Construction
and Operations Services divisions was US$3.9 billion (31 December 2006: US$4.2
billion), representing 2.0 times revenues for the trailing 12 months. During the
first six months of 2007, order intake across the group amounted to, in
aggregate, US$0.6 billion (2006: US$1.0 billion).
We have been successful in addressing the resource challenges faced by the group
and the industry in general. We now have over 9,500 employees, compared to
around 7,700 at 30 June 2006. While a large number of employees have been
recruited in conjunction with the assumption of operational responsibility for
existing infrastructure, for example, on the Dubai Petroleum contract, we have
also been successful in growing our engineering and construction capacity. The
Engineering & Construction division now has 3,600 employees (30 June 2006:
2,600), with strong growth arising in our Woking and Sharjah offices and through
the opening of the new Chennai office.
Dividend
The Board has declared an interim dividend of 4.90 cents per share (2006: 2.40
cents), an increase of 104%, which will be paid on 26 October 2007 to eligible
shareholders on the register at 28 September 2007. Shareholders who have not
elected to receive dividends in US dollars will receive a Sterling equivalent of
2.44 pence per share. The Board will set the total of dividends payable for the
year in the light of full year earnings to 31 December 2007, however, given the
continued strong cash generation of the business, the Board anticipates
increasing the percentage of earnings it distributes by way of dividend to
approximately 30% of full year post tax profits.
Segmental review
We present below an update on each of the group's three operating divisions:
US$'000 Revenue Operating Net profit EBITDA
profit
For the 6 months 2007 2006 2007 2006 2007 2006 2007 2006
ended 30 June
Engineering &
Construction 569,637 578,958 67,584 55,694 54,704 44,320 74,878 60,671
Operations Services 427,662 325,337 16,782 12,296 11,046 7,203 19,715 14,007
Energy Developments 68,904 23,113 31,821 7,550 15,760 3,898 44,586 14,745
Corporate,
consolidation and
elimination (9,094) (469) (1,724) (373) (4,292) (2,859) (1,924) (579)
-------------------------------------------------------------------
Group 1,057,109 926,939 114,463 75,167 77,218 52,562 137,255 88,844
===================================================================
Growth / margin Revenue growth Operating Net margin EBITDA margin
analysis margin
For the 6 months 2007 2006 2007 2006 2007 2006 2007 2006
ended 30 June
Engineering &
Construction (1.6%) 45.1% 11.9% 9.6% 9.6% 7.7% 13.1% 10.5%
Operations Services 31.5% 16.3% 3.9% 3.8% 2.6% 2.2% 4.6% 4.3%
Energy Developments 198.1% 2.4% 46.2% 32.7% 22.9% 16.9% 64.7% 63.8%
Group 14.0% 33.9% 10.8% 8.1% 7.3% 5.7% 13.0% 9.6%
Engineering & Construction
The division's lump-sum EPC activities continue to be focused on the Middle
East, North Africa and the Caspian regions. Whilst the division's customers
include both national oil companies (NOCs) and integrated and independent oil
companies, during the period, the majority of the division's Middle East and
North Africa lump-sum EPC work was undertaken in conjunction with NOCs.
Approximately two-thirds of the division's lump-sum EPC revenues in the period
were directly associated with NOCs,
In the Middle East, the division has made good progress on the Harweel project
in Oman which has entered the construction phase. The Kauther gas plant, also in
Oman, is substantially complete with commissioning expected to commence during
the second half of the year. The facilities upgrade project for Kuwait Oil
Company is on schedule, with substantial progress achieved on the construction
phase during the period.
The focus in North Africa has been on the mobilisation of contracts awarded in
late 2006: the Salam gas plant project in Egypt and the Hasdrubal gas plant
project in Tunisia. Significant progress has already been made with the
engineering and procurement services on the Salam gas plant project reflecting
the relatively short completion schedule. The Hasdrubal project is in its
relatively early stages with work proceeding according to plan.
In Kazakhstan, good progress has been made on the Kashagan construction
management contract and the engineering, procurement and construction management
contract for the Karachaganak 4th stabilisation and sweetening train, awarded in
January 2007.
The group's reimbursable engineering services delivered strong growth during the
period. The group's growing role in the multi-billion dollar, multi-phase,
Karachaganak development was further extended in June 2007 with the award of the
group's largest ever front-end engineering and design (FEED) study for Phase III
of the development. The contract with Karachaganak Petroleum Operating BV (a BG
Group and ENI led consortium) is scheduled to run to mid-2008 and is expected to
involve up to 400 engineering and other professional staff, principally in the
division's Woking office.
The division also provided reimbursable engineering services on the Kovykta
contracts with RUSIA Petroleum and the East Siberian Gas Company. Following
TNK-BP's agreement to sell their interest in these projects, it is likely that
the group will undertake a staged demobilisation during the second half of the
year.
The division's revenue was marginally lower than the corresponding period in
2006 at US$569.6 million (2006: US$579.0 million), principally reflecting the
level of activity on, and stage of completion of, lump-sum EPC contracts.
Reported revenue demonstrated sequential six-monthly period growth of 13.4% and
is expected to grow more strongly in the second half of 2007. Net profit
increased by 23.4% to US$54.7 million (2006: US$44.3 million), representing a
net margin of 9.6% (2006: 7.7%), which is expected to be broadly maintained for
the remainder of 2007. The increase in margin is due to continued strong
execution, a low proportion of early-stage work (no profit is recognised in the
early stages of projects) and the recognition of profit arising from contracts
in their later-stages. The division's backlog was marginally lower at US$2.1
billion (31 December 2006: US$2.2 billion) reflecting the anticipated timing of
new project awards expected during the second half of the current year.
Operations Services
Working closely with Dubai Petroleum, an entity wholly owned by the Government
of Dubai, the Operations Services division achieved a smooth and safe transition
to assume full operational responsibility for facilities and well management of
Dubai's offshore oil & gas assets on 2 April 2007. The contract, which is open
ended, represents the division's largest international contract to date and its
first international turnkey contract comparable to its UK duty holder service
offering.
Petrofac Brownfield and the division's Training businesses experienced good
growth over the period with a number of new international contract awards. This
was achieved, in part, through leveraging existing Operations Services and
Engineering & Construction division customer relationships and strong demand for
their services.
The UK Continental Shelf (UKCS) market remains buoyant, with continued strong
operational performance across the division.
In January 2007, the division acquired a majority interest in SPD Group Limited
(SPD), a specialist provider of well operations services, in particular well
project management, well engineering optimisation, well engineering studies and
consultancy services. SPD's core operations are in Africa and Europe and for
national and international oil companies in the Middle East, including Dubai
Petroleum. SPD has been successfully integrated into the division and the market
for its services is particularly strong.
Reported revenue for the period increased by 31.5% to US$427.7 million (2006:
US$325.3 million). Revenue excluding 'pass-through' revenue(1) (net revenue)
increased by 54.8%. The significant increase in net revenue is principally
attributable to the commencement of the Dubai Petroleum contract, the
acquisition of SPD and growth in the Brownfield engineering and Training
businesses, but is also positively impacted by the strong Sterling to US dollar
exchange rate as the majority of the division's revenues are denominated in
Sterling.
(1) Pass-through revenue refers to the revenue recognised from low or
zero-margin third-party procurement services provided to customers.
The division's net profit increased by 53.4% to US$11.0 million (2006: US$7.2
million), representing a net margin on revenue excluding pass-through revenue of
3.3% (2006: 3.3%). Net margins are expected to be higher in the second half of
2007 when the Dubai Petroleum contract will make a full period contribution. The
underlying net margin, adjusted to eliminate amortisation and interest charges
relating to acquisition intangibles and deferred consideration, increased to
3.8% (2006: 3.3%) due principally to the impact of the Dubai Petroleum contract
and the acquisition of SPD.
The division's backlog ended the period marginally lower at US$1.8 billion (31
December 2006: US$1.9 billion).
Energy Developments
Energy Developments' operational assets (Cendor, Ohanet and the KPC refinery)
performed well during the period and in line with expectations.
The Cendor field, offshore Peninsular Malaysia, produced an average of 14,300
barrels per day (bpd) during the period and had produced over 3.7 million
barrels of oil by 30 June 2007. Full cost recovery was achieved in March. A
drilling programme is scheduled for the second half of the year, after which
further development phases will be assessed.
In the UKCS, a draft field development plan (FDP) for the Don Southwest field
was submitted to the Department of Trade and Industry (DTI) and possible
development solutions for the West Don field were progressed. Subject to
consultation with the DTI and the approval of an Environmental Statement, formal
FDP approval for Don Southwest is anticipated early next year with production
expected to commence in 2009.
The acquisition of the division's 45% operating interest in the Chergui field in
Tunisia was completed in February and, with construction work on both the
offshore pipelines and onshore production processing facilities well in-hand,
production is expected to commence around the turn of the year.
In May 2007, the division farmed into a 10% operated interest in permit NT/P68
in northern Australian waters. The terms of the farm-in require the division to
fund 25% of the cost of two appraisal wells, up to a capped level of
expenditure, to be drilled during the second half of 2007(2). Petrofac will
become operator for any follow-on delineation, development and production
activities.
(2) See note 12 to the financial statements for further terms of the farm-in.
The division's revenues increased significantly to US$68.9 million (2006:
US$23.1 million) reflecting the commencement of production from the Cendor field
in September 2006. Net profit increased to US$15.8 million (2006: US$3.9
million) due to the significant contribution from Cendor, particularly during
the cost recovery period to the end of March.
Outlook
Demand for our services remains strong, underpinned by a number of long term
drivers. Specifically, expenditure on capital programmes and the associated
operating expenditures are expected to remain strong as the oil & gas industry
responds to increased global energy demand and the depletion of existing
production. Furthermore, limited capacity within the oil service sector,
particularly in relation to non-capital intensive services, coupled with the
strong demand for services, should ensure that favourable market conditions are
sustained for the foreseeable future.
While the industry has seen the postponement of some projects due to escalating
costs, we believe this is a necessary response to some capacity constraints
within the industry. Indeed, we consider this to have the positive effect of
extending the longevity and sustainability of capital programmes. Nonetheless,
we have been successful in growing our own capacity during the period and remain
confident that our longstanding relationships with local subcontractors and
suppliers in our core regions will assist us to continue to deliver strong
project execution.
The Board considers the group well positioned to benefit from expenditure in
regions where the development of hydrocarbon reserves is controlled by NOCs,
such as in the Middle East and North Africa, where we see a growing appetite for
NOCs to contract directly with the service sector. In addition, we will continue
to build upon our longstanding customer relationships with integrated and
independent oil companies, particularly in regions where we can position
ourselves for long-term participation, such as the multi-billion dollar
multi-phase developments in Kazakhstan.
Overall, we are confident that the group is well positioned to deliver 2007
results ahead of expectations and excellent growth in 2008 and beyond.
Rodney Chase Ayman Asfari
Chairman Group Chief Executive
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2007
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
Unaudited Unaudited Audited
Notes US$'000 US$'000 US$'000
Continuing operations
Revenue 4 1,057,109 926,939 1,863,873
Cost of sales 5 (868,464) (809,660) (1,593,462)
------------------------------------------
Gross profit 188,645 117,279 270,411
Selling, general and administration (74,794) (42,438) (103,029)
expenses
Other income 1,249 829 4,870
Other expenses (637) (503) (1,133)
------------------------------------------
Profit from continuing operations
before tax
and finance income/(costs) 114,463 75,167 171,119
Finance costs (4,948) (3,552) (7,168)
Finance income 7,738 2,870 9,296
------------------------------------------
Profit before tax 117,253 74,485 173,247
Income tax expense - UK (6,115) (4,329) (13,886)
- Overseas (33,920) (17,546) (37,454)
------------------------------------------
6 (40,035) (21,875) (51,340)
Profit for the period from
continuing operations 77,218 52,610 121,907
Discontinued operations
Profit/(loss) for the period from
discontinued operations 12 (49) (1,575)
------------------------------------------
Profit for the period 77,230 52,561 120,332
==========================================
Attributable to:
Petrofac Limited shareholders 77,230 52,513 120,332
Minority interests - 48 -
------------------------------------------
77,230 52,561 120,332
==========================================
Earnings per share (US cents) 7
From continuing and discontinued
operations:
- Basic 22.53 15.25 34.98
- Diluted 22.36 15.21 34.87
From continuing operations:
- Basic 22.53 15.26 35.44
- Diluted 22.36 15.23 35.32
The attached notes 1 to 21 form part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
At 30 June 2007
30 June 30 June 31
December
2007 2006 2006
Unaudited Unaudited Audited
Notes US$'000 US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 10 176,288 125,294 143,176
Goodwill 11 72,397 53,361 56,732
Intangible assets 12 21,582 12,532 17,959
Available-for-sale financial assets 1,619 4,379 1,726
Other financial assets 13 461 906 1,947
Deferred income tax assets 1,747 5,885 2,902
--------------------------------------
274,094 202,357 224,442
--------------------------------------
Current assets
Inventories 2,035 1,109 1,943
Work in progress 321,240 354,389 367,869
Trade and other receivables 442,813 278,802 330,515
Due from related parties 20 3,422 20,177 7,725
Other financial assets 13 12,887 14,497 10,133
Cash and short-term deposits 15 518,261 379,338 457,848
--------------------------------------
1,300,658 1,048,312 1,176,033
--------------------------------------
Assets of discontinued operations
classified as held for sale - 1,667 1,372
--------------------------------------
TOTAL ASSETS 1,574,752 1,252,336 1,401,847
======================================
EQUITY AND LIABILITIES
Equity attributable to Petrofac Limited
shareholders
Share capital 16 8,636 8,629 8,629
Share premium 16 68,203 66,210 66,210
Capital redemption reserve 10,881 10,881 10,881
Treasury shares 17 (19,715) (8,144) (8,144)
Other reserves 18 30,832 19,839 19,611
Retained earnings 282,720 167,938 227,508
---------------------------------------
381,557 265,353 324,695
Minority interests 209 257 209
---------------------------------------
TOTAL EQUITY 381,766 265,610 324,904
---------------------------------------
Non-current liabilities
Interest-bearing loans and borrowings 92,074 74,212 90,705
Provisions 15,837 9,723 12,498
Other financial liabilities 14 20,438 7,214 7,373
Deferred income tax liabilities 2,403 2,659 2,794
--------------------------------------
130,752 93,808 113,370
--------------------------------------
Current liabilities
Trade and other payables 426,963 226,082 346,706
Due to related parties 20 50 110 182
Interest-bearing loans and borrowings 35,148 43,739 26,475
Other financial liabilities 14 1,884 5,494 172
Income tax payable 56,001 19,724 33,045
Billings in excess of cost and estimated
earnings 186,152 130,370 124,990
Accrued contract expenses 356,036 467,399 432,003
---------------------------------------
1,062,234 892,918 963,573
---------------------------------------
TOTAL LIABILITIES 1,192,986 986,726 1,076,943
---------------------------------------
TOTAL EQUITY AND LIABILITIES 1,574,752 1,252,336 1,401,847
=======================================
The attached notes 1 to 21 form part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2007
6 months 6 months Year
ended ended ended
30 June 30 June 31
December
2007 2006 2006
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
OPERATING ACTIVITIES
Net profit/(loss) before income taxes
and minority interest:
Continuing operations 117,253 74,485 173,247
Discontinued operations 12 (49) (1,575)
---------------------------------------
117,265 74,436 171,672
Adjustments for:
Depreciation, amortisation and
impairment 22,792 13,677 28,807
Share-based payments 1,820 315 1,281
Difference between other long-term
employment benefits
paid and amounts recognised in the
income statement 3,025 1,439 3,082
Finance (income)/ costs (2,790) 682 (2,128)
Gain on disposal of investments - - (1,671)
Gain on disposal of property, plant and
equipment (8,541) (6,605) (11,681)
Other non-cash items, net 619 816 1,203
--------------------------------------
Operating profit before working capital
changes 134,190 84,760 190,565
Trade and other receivables (106,800) 48,349 (2,355)
Work in progress 46,629 (119,342) (132,822)
Due from related parties 4,303 8,225 20,677
Inventories (92) 47 (787)
Current financial assets (427) 348 983
Trade and other payables 83,152 9,355 129,896
Billings in excess of cost and estimated
earnings 61,162 60,594 55,214
Accrued contract expenses (75,967) 103,929 68,533
Due to related parties (132) (1,225) (1,153)
Current financial liabilities - (193) -
--------------------------------------
146,018 194,847 328,751
Other non-current items, net 87 69 (139)
--------------------------------------
Cash generated from operations 146,105 194,916 328,612
Interest paid (3,629) (3,331) (7,848)
Income taxes paid, net (16,538) (5,542) (19,087)
--------------------------------------
Net cash flows from operating activities 125,938 186,043 301,677
--------------------------------------
Of which discontinued operations (496) (537) (416)
The attached notes 1 to 21 form part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2007 (continued)
6 months 6 months Year
ended ended Ended
30 June 30 June 31
December
2007 2006 2006
Unaudited Unaudited Audited
Notes US$'000 US$'000 US$'000
INVESTING ACTIVITIES
Purchase of property, plant and equipment (56,604) (27,566) (58,332)
Acquisition of subsidiaries, net of cash
acquired 9 (3,137) (568) (3,865)
Purchase of intangible oil & gas assets (1,776) (1,137) (6,187)
Purchase of available-for-sale financial
assets - (501) (501)
Proceeds from disposal of property, plant
and equipment 11,205 16,575 22,823
Proceeds from disposal of
available-for-sale financial assets - - 2,250
Net foreign exchange differences 2,023 2,480 1,366
Interest received 7,863 2,054 7,927
----------------------------------------
Net cash flows used in investing activities (40,426) (8,663) (34,519)
----------------------------------------
Of which discontinued operations - 2 2
FINANCING ACTIVITIES
Proceeds from interest-bearing loans and
borrowings - 767 766
Repayment of interest-bearing loans and
borrowings (1,157) (9,400) (10,361)
Shareholders' loan note transactions, net 173 148 198
Treasury shares purchased 17 (11,571) (8,127) (8,127)
Equity dividends paid (22,374) (6,820) (15,069)
---------------------------------------
Net cash flows used in financing activities (34,929) (23,432) (32,593)
---------------------------------------
Of which discontinued operations - - -
NET INCREASE IN CASH AND CASH
EQUIVALENTS 50,583 153,948 234,565
Cash and cash equivalents at 1 January 437,406 202,841 202,841
---------------------------------------
CASH AND CASH EQUIVALENTS AT PERIOD END 15 487,989 356,789 437,406
=======================================
The attached notes 1 to 21 form part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2007
Attributable to shareholders of Petrofac Limited
Issued Capital
share Share redemption Treasury Other Retained Minority Total
capital premium reserve shares reserves earnings Total interests equity
(note
18)
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$' 000 US$' 000 US$' 000
For the six months
ended 30 June 2007
Balance at 1
January 2007 8,629 66,210 10,881 (8,144) 19,611 227,508 324,695 209 324,904
--------------------------------------------------------------------------------
Foreign currency
translation - - - - 2,288 - 2,288 - 2,288
Net gain on
maturity of cash
flow hedges
recognised in
income statement - - - - (5,607) - (5,607) - (5,607)
Net changes in
fair value of
derivatives - - - - 6,736 - 6,736 - 6,736
Net changes in
fair value of
available-for-sale
financial assets - - - - (121) - (121) - (121)
Share-based
payments charge - - - - 1,820 - 1,820 - 1,820
-------------------------------------------------------------------------------
Total income and
expenses for the
period
recognised in
equity - - - - 5,116 - 5,116 - 5,116
Net profit for the
period - - - - - 77,230 77,230 - 77,230
-------------------------------------------------------------------------------
Total income and
expenses for the
period - - - - 5,116 77,230 82,346 - 82,346
Shares issued on
acquisition (note
16) 7 1,993 - - - - 2,000 - 2,000
Treasury shares
(note 17) - - - (11,571) - - (11,571) - (11,571)
Transfer to
reserve for
share-based
payments - - - - 6,105 - 6,105 - 6,105
Dividends (note 8) - - - - - (22,018) (22,018) - (22,018)
--------------------------------------------------------------------------------
Balance at 30 June
2007 (unaudited) 8,636 68,203 10,881 (19,715) 30,832 282,720 381,557 209 381,766
================================================================================
The attached notes 1 to 21 form part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2007 (continued)
Attributable to shareholders of Petrofac Limited
Issued Capital
share Share redemption Treasury Other Retained Minority Total
capital premium reserve shares reserves earnings Total interests equity
(note
18)
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
For the six months
ended 30 June 2006
Balance at 1
January 2006 8,629 66,210 10,881 (17) (12,426) 121,850 195,127 - 195,127
---------------------------------------------------------------------------------
Foreign currency
translation - - - - 3,736 - 3,736 - 3,736
Net loss on
maturity of cash
flow hedges
recognised in
income statement - - - - 5,064 - 5,064 - 5,064
Net changes in fair
value of
derivatives - - - - 18,322 - 18,322 - 18,322
Net changes in fair
value of
available-for-sale
financial assets - - - - 1,465 - 1,465 - 1,465
Share-based
payments charge - - - - 315 - 315 - 315
--------------------------------------------------------------------------------
Total income and
expenses for the
period
recognised in
equity - - - - 28,902 - 28,902 - 28,902
Net profit for the
period - - - - - 52,513 52,513 48 52,561
--------------------------------------------------------------------------------
Total income and
expenses for the
period - - - - 28,902 52,513 81,415 48 81,463
Treasury shares - - - (8,127) - - (8,127) - (8,127)
Transfer to reserve
for share-based
payments - - - - 3,363 - 3,363 - 3,363
Dividends (note 8) - - - - - (6,425) (6,425) - (6,425)
Minority interests
acquired - - - - - - - 209 209
---------------------------------------------------------------------------------
Balance at 30 June
2006 (unaudited) 8,629 66,210 10,881 (8,144) 19,839 167,938 265,353 257 265,610
=================================================================================
For the year ended
31 December 2006
Balance at 1
January 2006 8,629 66,210 10,881 (17) (12,426) 121,850 195,127 - 195,127
--------------------------------------------------------------------------------
Foreign currency
translation - - - - 7,449 - 7,449 - 7,449
Net gain on
maturity of cash
flow hedges
recognised in
income statement - - - - (2,378) - (2,378) - (2,378)
Net changes in fair
value of
derivatives - - - - 22,931 - 22,931 - 22,931
Realised gains on
the sale of
available-for- sale
financial assets
recognised in
income statement - - - - (1,671) - (1,671) - (1,671)
Net changes in fair
value of
available-for-sale
financial assets - - - - 1,062 - 1,062 - 1,062
Share-based
payments charge - - - - 1,281 - 1,281 - 1,281
-------------------------------------------------------------------------------
Total income and
expenses for the
year
recognised in
equity - - - - 28,674 - 28,674 - 28,674
Net profit for the
year - - - - - 120,332 120,332 - 120,332
-------------------------------------------------------------------------------
Total income and
expenses for the
year - - - - 28,674 120,332 149,006 - 149,006
Treasury shares - - - (8,127) - - (8,127) - (8,127)
Transfer to reserve
for share-based
payments - - - - 3,363 - 3,363 - 3,363
Dividends (note 8) - - - - - (14,674) (14,674) - (14,674)
Minority interests
acquired - - - - - - - 209 209
--------------------------------------------------------------------------------
Balance at 31
December 2006 8,629 66,210 10,881 (8,144) 19,611 227,508 324,695 209 324,904
================================================================================
The attached notes 1 to 21 form part of these interim condensed consolidated
financial statements.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2007
1 CORPORATE INFORMATION
Petrofac Limited is a limited liability company registered in Jersey under the
Companies (Jersey) Law 1991 and is the holding company for the international
group of Petrofac subsidiaries (together "the group"). The group's principal
activity is the provision of facilities solutions to the oil & gas production
and processing industry. The interim condensed consolidated financial statements
of the group for the six months ended 30 June 2007 were authorised for issue in
accordance with a resolution of the Board of Directors on 5 September 2007.
2 BASIS OF PREPARATION AND ACCOUNTING POLICIES
Basis of preparation
The interim condensed consolidated financial statements have been prepared on a
historical cost basis, except for derivative financial instruments and
available-for-sale financial assets that have been measured at fair value. The
presentation currency of the interim condensed consolidated financial statements
is United States dollars (US$), as a significant proportion of the group's
assets, liabilities, income and expenses are US$ denominated. All values are
rounded to the nearest thousand (US$'000) except where otherwise stated. Certain
comparative information has been reclassified to conform to current period
presentation.
Statement of compliance
The interim condensed consolidated financial statements of Petrofac Limited and
all its subsidiaries for the six months ended 30 June 2007 have been prepared in
accordance with IAS 34 'Interim Financial Statements' and applicable
requirements of Jersey law. They do not include all of the information and
disclosures required in the annual financial statements and should be read in
conjunction with the consolidated financial statements of the group as at and
for the year ended 31 December 2006.
Accounting policies
The accounting policies and methods of computation adopted in the preparation of
these interim condensed consolidated financial statements are consistent with
those followed in the preparation of the group's financial statements for the
year ended 31 December 2006, except as noted below.
The group has adopted new and revised Standards and Interpretations issued by
the International Accounting Standards Board (IASB) and the International
Financial Reporting Interpretations Committee (IFRIC) of the IASB that are
relevant to its operations and effective for accounting periods beginning on or
after 1 January 2007. The principal effects of the adoption of these new and
amended standards and interpretations are discussed below:
IAS 1 Amendments - Capital disclosures and IFRS 7 Financial instruments:
Disclosures
The group has adopted the above mentioned amendments and standard with effect
from 1 January 2007. IAS 1 amendments and IFRS 7 require additional information
relating to capital and financial instruments. These disclosures are not
required for the interim condensed financial statements and will be disclosed in
the year end financial statements.
The adoption of this amendment and interpretation did not affect the group's
operating results or financial position for the period ended 30 June 2007.
IFRIC 10 Interim Financial Reporting and Impairment
The group adopted IFRIC 10 'Interim Financial Reporting and Impairment' with
effect from 1 January 2007. The interpretation lays out guidelines for the
treatment of impairment losses during an interim period, namely that an entity
must not reverse an impairment loss recognised in a previous interim period in
respect of goodwill or an investment in either an equity instrument or a
financial asset carried at cost.
The adoption of this interpretation did not affect the group's operating results
or financial position for the period ended 30 June 2007 as the management
believes that there have been no indications of impairment during this period.
3 SEGMENT INFORMATION
The group's primary continuing operations are organised on a worldwide basis
into three business segments: Engineering & Construction, Operations Services
and Energy Developments. The following tables present revenue and profit
information relating to the group's primary business segments for the six months
ended 30 June 2007, six months ended 30 June 2006 and the year ended 31 December
2006. Included within the consolidation and eliminations columns are certain
balances, which due to their nature, are not allocated to segments.
Continuing operations
Engineering Consolidation
& Operations Energy adjustments & Discontinued Total
Construction Services Developments Corporate eliminations Total operations operations
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Six months
ended 30 June
2007
(unaudited)
Revenue
External
sales 567,030 421,175 68,904 - - 1,057,109 - 1,057,109
Inter-segment
sales 2,607 6,487 - - (9,094) - - -
------------------------------------------------------------------------------------------
Total revenue 569,637 427,662 68,904 - (9,094) 1,057,109 - 1,057,109
==========================================================================================
Segment
operating
results 67,584 16,782 31,821 - (70) 116,117 12 116,129
Unallocated
corporate
costs - - - (1,654) - (1,654) - (1,654)
------------------------------------------------------------------------------------------
Profit/(loss)
before tax
and finance
income/(costs) 67,584 16,782 31,821 (1,654) (70) 114,463 12 114,475
Finance costs (442) (2,205) (367) (4,549) 2,615 (4,948) - (4,948)
Finance income 7,750 608 121 1,934 (2,675) 7,738 - 7,738
------------------------------------------------------------------------------------------
Profit/(loss)
before
income tax 74,892 15,185 31,575 (4,269) (130) 117,253 12 117,265
Income tax
(expense)/income (20,188) (4,139) (15,815) 105 2 (40,035) - (40,035)
------------------------------------------------------------------------------------------
Profit/(loss)
for the period 54,704 11,046 15,760 (4,164) (128) 77,218 12 77,230
==========================================================================================
Other segment
information
Depreciation 7,294 1,966 12,765 125 (325) 21,825 - 21,825
Amortisation - 967 - - - 967 - 967
Other long-term
employment
benefits 2,685 626 44 16 - 3,371 - 3,371
Share-based
payments 885 441 195 299 - 1,820 - 1,820
------------------------------------------------------------------------------------------
3 SEGMENT INFORMATION (continued)
Continuing operations
Engineering Consolidation
& Operations Energy adjustments & Discontinued Total
Construction Services Developments Corporate eliminations Total operations operations
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Six months
ended 30 June
2006
(unaudited)
Revenue
External sales 578,832 324,994 23,113 - - 926,939 33 926,972
Inter-segment
sales 126 343 - - (469) - - -
------------------------------------------------------------------------------------------
Total revenue 578,958 325,337 23,113 - (469) 926,939 33 926,972
==========================================================================================
Segment
operating
results 55,694 12,296 7,550 - 342 75,882 (51) 75,831
Unallocated
corporate costs - - - (715) - (715) - (715)
-------------------------------------------------------------------------------------------
Profit/(loss)
before tax and
finance income/
(costs) 55,694 12,296 7,550 (715) 342 75,167 (51) 75,116
Finance costs (147) (1,312) (128) (3,966) 2,001 (3,552) - (3,552)
Finance income 3,313 83 56 1,419 (2,001) 2,870 2 2,872
------------------------------------------------------------------------------------------
Profit/(loss)
before
income tax 58,860 11,067 7,478 (3,262) 342 74,485 (49) 74,436
Income tax
(expense)/income (14,540) (3,816) (3,580) 40 21 (21,875) - (21,875)
Minority interests - (48) - - - (48) - (48)
-----------------------------------------------------------------------------------------
Profit/(loss)
for the period 44,320 7,203 3,898 (3,222) 363 52,562 (49) 52,513
=========================================================================================
Other segment
information
Depreciation 4,977 1,613 7,195 216 (422) 13,579 - 13,579
Amortisation - 98 - - - 98 - 98
Other long-term
employment
benefits 1,884 173 32 22 - 2,111 - 2,111
Share-based
payments 98 65 24 128 - 315 - 315
----------------------------------------------------------------------------------------
Year ended 31 December 2006
(audited)
Revenue
External sales 1,079,236 722,850 62,125 - (338) 1,863,873 33 1,863,906
Inter-segment sales 2,043 6,390 - - (8,433) - - -
---------------------------------------------------------------------------------------
Total revenue 1,081,279 729,240 62,125 - (8,771) 1,863,873 33 1,863,906
=======================================================================================
Segment operating
results 117,209 29,100 25,065 - 707 172,081 (1,577) 170,504
Unallocated corporate
costs - - - (962) - (962) - (962)
--------------------------------------------------------------------------------------
Profit/(loss) before
tax and finance income/
(costs) 117,209 29,100 25,065 (962) 707 171,119 (1,577) 169,542
Finance costs (347) (2,754) (470) (8,042) 4,445 (7,168) - (7,168)
Finance income 10,040 438 236 3,027 (4,445) 9,296 2 9,298
--------------------------------------------------------------------------------------
Profit/(loss) before
income tax 126,902 26,784 24,831 (5,977) 707 173,247 (1,575) 171,672
Income tax (expense)/
income (31,522) (8,681) (10,466) (707) 36 (51,340) - (51,340)
---------------------------------------------------------------------------------------
Profit/(loss) for the
year 95,380 18,103 14,365 (6,684) 743 121,907 (1,575) 120,332
=======================================================================================
Other segment
information
Depreciation 10,049 3,433 15,042 402 (804) 28,122 - 28,122
Amortisation - 390 - - - 390 - 390
Impairment losses - - - - - - 295 295
Other long-term 3,814 430 67 (7) - 4,304 - 4,304
employment benefits
Share-based payments 358 287 65 571 - 1,281 - 1,281
-------------------------------------------------------------------------------------
4 REVENUES
6 months 6 months Year
ended ended Ended
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Rendering of services 1,007,030 922,966 1,840,519
Sale of crude oil 46,014 - 15,656
Sale of processed hydrocarbons 4,065 3,973 7,698
----------------------------------------
1,057,109 926,939 1,863,873
========================================
Included in revenues from rendering of services are Operations Services revenues
of a "pass-through" nature with zero or low margins amounting to US$94,836,000
(six months ended June 2006: US$110,290,000; for the year ended 31 December
2006: US$221,790,000).
5 COST OF SALES
Included in cost of sales for the six months ended 30 June 2007 is US$8,296,000
(June 2006: US$6,500,000) profit on disposal of property, plant and equipment
used to undertake an engineering and construction contract.
6 INCOME TAX
The taxation charge for the six months ended 30 June 2007 of US$40,035,000
represents 34.1% of the profit before tax (June 2006: 29.4%). The charge for the
six months ended 30 June 2007 has been arrived at by applying the anticipated
full year ending 31 December 2007 divisional effective tax rates (which equate
to a full year group composite rate of 33.1%) to the results for the six months
ended 30 June 2007.
The major components of the income tax expense are as follows:
6 months 6 months Year
ended ended ended
30 June 30 June 31
December
2007 2006 2006
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Current income tax
Current income tax charge 39,392 22,008 49,512
Adjustments in respect of current income tax
of previous years (466) 308 (364)
Deferred income tax
Relating to origination and reversal of
temporary differences 1,109 (459) 1,963
Adjustment in respect of deferred income tax - 18 229
-------------------------------------
of previous years
40,035 21,875 51,340
=====================================
7 EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing the net profit for
the period attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary shareholders, after adjusting for any dilutive effect,
by the weighted average number of ordinary shares outstanding during the period,
adjusted for the effects of ordinary shares granted under the employee share
award schemes which are held in trust.
The following reflects the income and share data used in calculating basic and
diluted earnings per share:
6 months 6 months Year
ended ended ended
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Continuing and discontinued operations
Net profit attributable to ordinary
shareholders for basic
and diluted earnings per share 77,230 52,513 120,332
Continuing operations
Less net (gain)/loss for the period from
discontinued operations (12) 49 1,575
----------------------------------------
Net profit attributable to ordinary
shareholders for basic and diluted earnings
per share 77,218 52,562 121,907
========================================
6 months 6 months Year
ended ended ended
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Audited
'000 '000 '000
Weighted average number of ordinary shares for
basic earnings per share 342,701 344,390 344,003
Weighted average number of ordinary shares
granted under share-based payment schemes held
as treasury shares 2,707 770 1,117
-------------------------------------
Adjusted weighted average number of ordinary
shares for diluted earnings per share 345,408 345,160 345,120
=====================================
8 DIVIDENDS PAID AND PROPOSED
6 months 6 months Year
ended ended ended
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Declared and paid during the period
Equity dividends on ordinary shares:
Final dividend for 2005: 1.87 cents per share - 6,425 6,425
Interim dividend 2006: 2.40 cents per share - - 8,249
Final dividend for 2006: 6.43 cents per share 22,018 - -
--------------------------------------
22,018 6,425 14,674
======================================
On 5 September 2007, the Board approved an interim dividend of 4.90 cents per
share to be paid on 26 October 2007.
9 BUSINESS COMBINATION
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 estimated
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 values at
the date of issue to the vendor over three years in equal instalments on the
anniversary of the transaction.
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 shareholder 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 has been estimated at US$12,025,000 and this will be reassessed
each year to fair value and any adjustment to the deferred consideration arising
will be reflected in goodwill except for the unwinding of interest which will be
reflected in the income statement as interest expense. The total consideration
for the 100% interest therefore, including transaction costs, amounts to
US$19,897,000.
The 100% fair values of the identifiable assets and liabilities of SPD Group
Limited on completion of the acquisition are analysed below:
Recognised Carrying
on
acquisition value
US$'000 US$'000
Property, plant and equipment 47 47
Intangible assets 2,369 -
Trade and other receivables 5,498 5,498
Cash and short-term deposits 970 970
------------------------
Total assets 8,884 6,515
------------------------
Less:
Trade and other payables (3,210) (3,210)
Income tax payable (10) (10)
------------------------
Total liabilities (3,220) (3,220)
------------------------
Fair value of net assets acquired 5,664 3,295
========
Goodwill arising on acquisition 14,233
---------
Consideration 19,897
=========
Cash outflow on acquisition:
Cash acquired with subsidiary 970
Cash paid on acquisition (3,935)
Legal and professional expenses paid on acquisition (172)
--------
Net cash outflow on the acquisition of subsidiary (3,137)
========
Intangible assets recognised on acquisition comprise customer contracts which
are being amortised over their remaining economic useful lives 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, SPD has contributed a loss of US$71,000 to the net
profit of the group.
10 PROPERTY, PLANT AND EQUIPMENT
During the period, the group incurred capital expenditure of US$6,979,000 (June
2006: US$4,726,000) on the construction of a new office building.
On 22 February 2007, the group completed the acquisition of a 45% interest in
the Chergui gas concession in Tunisia, for a final cash consideration of
US$27,323,000, which, after including advance capital expenditure paid on behalf
of the vendor of US$2,846,000, brought the total consideration for the
transaction to US$30,169,000, of which US$27,323,000 has been recognised during
the period as additions to property, plant and equipment. Further post
acquisition capital expenditure of US$7,570,000 was made during the period.
11 GOODWILL
The increase in the goodwill balance in the current period represents exchange
differences of US$1,432,000 and additional goodwill on the acquisition of SPD
Group Limited of US$14,233,000 (note 9).
12 INTANGIBLE ASSETS
6 months 6 months Year
ended ended ended
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Intangible oil & gas assets
At 1 January 16,788 2,982 2,982
Additions 1,776 7,876 12,926
Exchange difference 445 211 880
---------------------------------------
At period end 19,009 11,069 16,788
---------------------------------------
Other intangible assets
Cost:
At 1 January 1,561 - -
Additions (note 9) 2,369 1,561 1,561
---------------------------------------
At period end 3,930 1,561 1,561
---------------------------------------
Accumulated amortisation:
At 1 January (390) - -
Amortisation (967) (98) (390)
---------------------------------------
At period end (1,357) (98) (390)
---------------------------------------
Net book value of other intangible assets at
period end 2,573 1,463 1,171
---------------------------------------
Total intangible assets 21,582 12,532 17,959
======================================
On 29 May 2007, the group entered into a farm-in arrangement to acquire a 10%
interest in Permit NT/P68 300km north north-west of Darwin in Australian waters
and an option to acquire an interest in any LNG or methanol project in Tassie
Shoal that results from this investment. The terms of the farm-in require
funding a portion of two appraisal wells to be drilled in 2007 subject to an
option to terminate the agreement within sixty hours of the decision by the
parties to the farm-in arrangement to plug and abandon the primary well. As a
consideration for the interest the group will pay 25% of the costs of both a
primary and secondary appraisal well (capped at US$13,200,000 and US$12,500,000
respectively). Under the terms of the farm-in agreement, there is also an option
to acquire a further 5% interest in the licence by paying a further capital
contribution towards the cost of these two appraisal wells with the amount
payable dependent on the timing of the exercise of the option. These costs will
be capitalised as property, plant and equipment in the period in which they are
incurred. During the period, the group did not incur any capital expenditure
relating to this investment.
There were cash outflows relating to capitalised costs of US$1,776,000 in the
current period arising from pre-development activities pertaining to oil & gas
reserves. There are no assets other than intangible assets, liabilities, income
or expenses arising from pre-development activities in the current period.
Intangible oil & gas assets at 30 June 2007 relate to the group's interest in
three UK offshore oil & gas licences.
Other intangible assets comprise the fair values of customer contracts arising
on acquisition (note 9). Customer contracts are being amortised over their
remaining economic useful lives on a straight line basis and the related
amortisation charge is included in selling, general and administrative expenses.
13 OTHER FINANCIAL ASSETS
The movement in other non-current and current financial assets in the period is
primarily due to changes in the fair value of derivative financial instruments
that the group uses to hedge its risk against foreign currency exposure on
sales, purchases and borrowings that are entered into in a currency other than
US dollars.
14 OTHER FINANCIAL LIABILITIES
The increase in other non-current and current financial liabilities is primarily
due to deferred consideration of US$12,025,000 and a loan note payable of
US$1,765,000 respectively, being recognised on the acquisition of SPD (note 9).
15 CASH AND CASH EQUIVALENTS
For the purposes of the interim condensed consolidated cash flow statement, cash
and cash equivalents comprise the following:
6 months 6 months Year
ended ended ended
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Cash at bank and in hand 143,588 83,252 120,003
Short-term deposits 374,673 296,086 337,845
Bank overdrafts (30,272) (22,549) (20,442)
-----------------------------------------
487,989 356,789 437,406
=========================================
16 SHARE CAPITAL
On 19 January 2007, 274,938 shares with a fair value of US$2,000,000 were issued
as part of the consideration for the acquisition of SPD (note 9). This resulted
in an increase in the issued share capital of US$7,000 and a share premium of
US$1,993,000.
17 SHARE-BASED PAYMENTS
During the period, the Company acquired 1,500,000 of its own shares at a cost of
US$11,571,000 for the purpose of making awards under the group's Performance
Share Plan and Deferred Bonus Share Plan.
On 19 March 2007, 791,083 US$0.025 matching ordinary shares of the Company were
granted to members of the Deferred Bonus Share Plan.
At the Annual General Meeting of the Company on 11 May 2007, shareholders
approved a change in the rules of the Deferred Bonus Share Plan in respect of
the March 2007 awards, such that the invested and matching share awards may at
the discretion of the Remuneration Committee of the Board of Directors vest
either 100% after the expiry of three years from the grant date of the award or
33.333% after year one, a further 33.333% after year two and the final 33.333%
of the award after the end of year three.
The fair value of the equity-settled awards granted during the period ended 30
June 2007 in respect of the Deferred Bonus Share Plan were estimated based on
the quoted closing market price of 415p per Company share at the date of grant
with an assumed vesting rate of 94% per annum over the vesting period of the
plan.
On 19 March 2007, 449,537 US$0.025 matching ordinary shares of the Company were
granted to participants in the Performance Share Plan.
The fair value of the non-performance related equity-settled awards granted
during the period ended 30 June 2007 representing 50% of the total Performance
Share Plan award were estimated based on the quoted closing market price of 415p
per Company share at the date of grant with an assumed vesting rate of 100% per
annum over the three year vesting period of the plan. The remaining 50% of these
awards which are market performance based were fair valued by an independent
valuer at 245p per share using a Monte Carlo simulation model taking into
account the terms and conditions of the plan rules and using the following
assumptions at the date of grant:
Share price volatility 29.0%
Share price correlation with comparator
group 17.0%
Risk-free interest rate 5.2%
Expected life of share award 3 years
The group has recognised an expense in the income statement for the period to 30
June 2007 relating to employee share-based incentives of US$1,820,000 (30 June
2006: US$315,000) which has been transferred to the reserve for share-based
payments along with US$6,105,000 of the remaining bonus liability accrued for
the year ended 31 December 2006 which has been voluntarily elected or
mandatorily obliged to be settled in shares granted during the period. The
reserve for share based payments at 30 June 2006 has been restated to reflect
the transfer of the remaining bonus liability accrued for the year ended 31
December 2005 (see note 18).
18 OTHER RESERVES
Net unrealised
gains on- Net
unrealised
available-for- (losses)/ Foreign Reserve for
sale financial gains on currency share-based
assets derivatives translation payments Total
US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2007 738 9,340 4,889 4,644 19,611
Foreign currency translation - - 2,288 - 2,288
Net gain on maturity of cash
flow
hedges recognised in income
statement - (5,607) - - (5,607)
Net changes in fair value of
derivatives - 6,736 - - 6,736
Net changes in fair value of
available-for-sale
financial assets (121) - - - (121)
Share-based payments charge
(note 17) 1,820 1,820
Transfer during the period
(note 17) - - - 6,105 6,105
------------------------------------------------------
Balance at 30 June 2007
(unaudited) 617 10,469 7,177 12,569 30,832
======================================================
Balance at 1 January 2006 1,347 (11,213) (2,560) - (12,426)
Foreign currency translation - - 3,736 - 3,736
Net gain on maturity of cash
flow
hedges recognised in income
statement - 5,064 - - 5,064
Net changes in fair value of
derivatives - 18,322 - - 18,322
Net changes in fair value of
available-for-sale
financial assets 1,465 - - - 1,465
Share-based payments charge
(note 17) - - - 315 315
Transfer during the period
(note 17) - - - 3,363 3,363
------------------------------------------------------
Balance at 30 June 2006
(unaudited) 2,812 12,173 1,176 3,678 19,839
======================================================
Balance at 1 January 2006 1,347 (11,213) (2,560) - (12,426)
Foreign currency translation - - 7,449 - 7,449
Net gain on maturity of cash
flow
hedges recognised in income
statement - (2,378) - - (2,378)
Net changes in fair value of
derivatives - 22,931 - - 22,931
Realised gains on the sale of
available-for-sale
financial assets recognised in
income statement (1,671) - - - (1,671)
Changes in fair value of
available-for-sale
financial assets 1,062 - - - 1,062
Share-based payments charge - - - 1,281 1,281
Transfer during the year - - - 3,363 3,363
-----------------------------------------------------
Balance at 31 December 2006
(audited) 738 9,340 4,889 4,644 19,611
=====================================================
19 CAPITAL COMMITMENTS
At 30 June 2007 the group had capital commitments of US$33,323,000 (31 December
2006: US$21,819,000; 30 June 2006: US$33,628,000).
Included in the above are commitments for the construction of a new office
building in Sharjah, United Arab Emirates amounting to US$19,609,000 (31
December 2006: US$20,577,000; 30 June 2006: US$24,628,000). Also included in the
above commitments are the costs associated with a primary appraisal well capped
at US$13,200,000 arising from the company's farm-in arrangement for a 10%
interest in Permit NT/P68 Australia (note 12).
20 RELATED PARTY TRANSACTIONS
The following table provides the total amount of transactions which have been
entered into with related parties:
Sales Purchases Amounts Amounts
to from owed owed
related related by to
related related
parties parties parties parties
US$'000 US$'000 US$'000 US$'000
Joint ventures Six months ended 30 June 2007
(unaudited) 2,343 233 3,422 50
Six months ended 30 June 2006
(unaudited) 775 174 20,177 110
Year ended 31 December 2006
(audited) 4,520 3,282 7,725 133
Other Six months ended 30 June 2007
directors' (unaudited) - 254 - -
interests Six months ended 30 June 2006
(unaudited) - - - -
Year ended 31 December 2006
(audited) - 49 - 49
All sales to and purchases from joint ventures are made at normal market prices
and the pricing policies and terms of these transactions are approved by the
group's management.
All related party balances at 30 June 2007 will be settled in cash.
Purchases in respect of other directors' interests of US$254,000 comprise of
market rate based costs of chartering the services of an aeroplane used for the
transport of senior management and directors of the Company on company business,
which is owned by an offshore trust of which the Chief Executive of the Company
is one of the beneficiaries.
Compensation of key management personnel
6 months 6 months Year
ended ended ended
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Short-term employee benefits 1,233 1,098 4,412
Other long-term employment benefits 22 20 40
Share-based payments 395 68 288
Fees paid to non-executive directors 255 198 415
----------------------------------------
1,905 1,384 5,155
========================================
21 EVENTS AFTER THE BALANCE SHEET DATE
On 27 August 2007, the group entered into an exchange agreement whereby it
swapped its 29% interest in the Crawford field for a 3.12% interest in West Don
Block 211/18a (equating to a unit interest of 2%), for nil consideration.
Introduction
We have been instructed by the Company to review the Interim Condensed
Consolidated Financial Statements for the six months ended 30 June 2007 as set
out on pages 6 to 21 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data and based thereon, assessing whether the
accounting policies have been applied. A review excludes audit procedures such
as tests of controls and verification of assets, liabilities and transactions.
It is substantially less in scope than an audit performed in accordance with
International Standards on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Ernst & Young LLP
London
5 September 2007
SHAREHOLDER INFORMATION
Petrofac shares are traded on the London Stock Exchange using code 'PFC.L'.
Registrar 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 Place Riverside Whiteley Chambers
London SE1 2AQ Don Street
St Helier
Jersey JE4 9WG
Joint brokers
Credit Suisse Lehman Brothers
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
28 September 2007 Interim dividend record date
26 October 2007 Interim dividend payment
31 December 2007 2007 financial year end
10 March 2008 2007 full year results announcement
Dates correct at time of print, but subject to change
The group's investor relations website can be found through www.petrofac.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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