ADNOC cancels $1.65bn Petrofac contracts

(Sharecast News) - UK oilfield services company Petrofac said the Abu Dhabi National Oil Company had cancelled two contracts for the Dalma Gas Development Project worth $1.65bn only two months after they were awarded.
The two contracts were awarded in February, and entailed the delivery by Petrofac of offshore platforms and gas processing facilities for the Dalma Gas Development Project.

"Petrofac is committed to working with ADNOC over the coming weeks to explore alternative options to deliver this project in a way that supports their strategic objectives within the current challenging environment," the company said on Thursday.

It added that it continued to work on its remaining backlog of around $7bn as planned and iwas still progressing with tendering for major contracts in Abu Dhabi.

However, it anticipates Thursday's development may have an impact on the timing of new contract awards.

The Dalma gas development project is a part of the Ghasha ultra-sour gas concession and part of plans for the United Arab Emirates to achieve gas self-sufficiency and become a net gas exporter.

The Ghasha project consists of three major gas and condensate development projects - Hail, Ghasha and Dalma - and could produce more than 120,000 barrels of oil per day once completed.

Petrofac last week pulled its final dividend and withdrew its guidance as it said it was cutting its personnel by 20% and furloughing staff due to the coronavirus pandemic.

The company said it had also cut and rebased salaries and allowances for its board, senior management and most of its employees by between 10-15%; cutting personnel by around 20% and furloughing staff; and reducing non-staff overhead costs by up to 25%.

The measures are expected to reduce overhead and project support costs by at least $100m this year and up to $200m in 2021.

Petrofac said that as at 2 April, it had liquidity of $1.1bn following the planned repayment of a $75m facility in February. A two-year extension of a $150m loan in March 2020 has reduced debt maturities in the next 12 months to $275m