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(Alliance News) - Petrofac Ltd on Tuesday reported lower revenue for 2019 and warned of a further fall in the year ahead due to reduced new order intake.
The oil and gas industry service provider posted revenue of USD5.53 billion for 2019, a 5.1% decline from USD5.83 billion in 2018, which Petrofac said reflected "project phasing and mix" in its Engineering & Construction division and "prior year asset sales" in Integrated Energy Services.
Pretax profit in 2019 was higher, however, at USD192 million from USD107 million as exceptional items and re-measurements of only USD189 million were incurred for 2019, compared to 2018's far higher figure of USD356 million.
In 2020, the firm expects revenue will drop further, "reflecting low new order intake in recent years". Thus far for 2020, Petrofac has USD4.5 billion of secured 2020 revenue.
Net profit margins for its Engineering & Construction division are expected to fall to a range of between 5.00% and 5.75% in 2020, having already fallen 1.0 percentage point to 6.2% in 2019. This is due to a "higher contribution from contract awards in lower margin markets" as well as Petrofac's planned investment of approximately USD30 million "in maintaining bench strength and technical capability".
Engineering & Production Services, however, is likely to see an improved net profit margin in 2020. Having posted a 1.4 point drop to 3.6% for 2019, its 2020 forecast is for a margin of between 3.5% and 4.5%. This puts only the very lowest end of its forecast below 2019.
Petrofac said capital expenditure is set to rise in 2020 to USD150 million from USD92 million due to digital investment and "developing new reserves" in block PM304 in Malaysia.
Petrofac is divesting its upstream portfolio in Mexico, and is set to complete this "in mid-2020". The agreement to sell the company's remaining 51% stake in its Mexico operations resulted in a post-tax non-cash impairment charge of USD49 million in 2019.
Petrofac declared a final dividend of 25.3 US cents per share, keeping the total dividend for 2019 flat at 38.0 cents per share.
Chief Executive Ayman Asfari said: "Looking forward, we expect 2020 to be a year of transition. We are encouraged by the improving market outlook, recent new awards and USD37 billion of bid opportunities scheduled for award by the end of 2020.
"Consequently, we are investing in maintaining our bench strength to preserve our market-leading execution capability. This investment - together with project mix and the low new order intake of recent years - will impact financial performance in 2020, but best positions us for a return to growth as we rebuild our order book."
The company said its order backlog stood at USD7.4 billion on December 31, down from USD9.6 billion a year before.
Shares in Petrofac were up 1.0% at 362.10 pence in London on Tuesday morning.
By Anna Farley; annafarley@alliancenews.com
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