The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
MASSIVE BUYS Just gone through
24-Nov-23 10:03:33 185.00 500,000 Unknown* 180.00 185.00 925.00k O
24-Nov-23 10:03:33 185.00 500,000 Buy* 180.00 185.00 £925.00k O
24-Nov-23 10:03:21 185.00 225,000 Unknown* 180.00 185.00 £416.25k O
24-Nov-23 10:03:21 185.00 225,000 Buy* 180.00 185.00 £416.25k O
24-Nov-23 10:03:04 181.05 10 Sell* 180.00 185.00 £18.11 O
24-Nov-23 10:03:03 185.00 5,000 Buy* 180.00 185.00 £9,250 O
24-Nov-23 10:03:01 185.00 600 Buy* 180.00 185.00 £1,110 O
24-Nov-23 10:03:00 185.00 225,000 Unknown* 180.00 185.00 £416.25k O
24-Nov-23 10:03:00 185.00 225,000 Buy* 180.00 185.00 £416.25k
24.11.23 Berenberg cuts Team17 price target to 490 (650) pence - 'buy'
The current low trading volume is influencing the share price, making it vulnerable for short sellers to drive down and load up on the cheap while they can. Once the volume picks up again, the share price is expected to rebound quickly.
# Trades 88
Vol. Sold 227,118
Sold Value £75.94k
Vol. Bought 245,626
Bought Value £82.78k
You can get detailed & factual information from Fitch's report: https://www.fitchratings.com/research/corporate-finance/fitch-revises-petrofac-outlook-to-stable-affirms-idr-at-b-27-09-2023
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
- EBITDA gross leverage below 3.5x on a sustained basis
- Neutral-to-positive FCF on a sustained basis
- Sustained recovery in the order book with no evidence of deterioration in the new orders' quality or margin dilution
- Improved project diversification
Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
- Lack of project wins and effective bidding management
- Weakening financial flexibility
- EBITDA gross leverage above 4.0x on a sustained basis
- Inability to generate working-capital inflows
- Negative FCF on a sustained basis
- EBITDA margins weakening as a result of project losses or poorer project quality
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity: At 30 June 2023, Petrofac's liquidity profile comprised USD152 million readily available cash (excluding around USD101 million deemed not readily available by Fitch, mainly for intra-year working-capital swings). The group has access to an USD162 million RCF, fully drawn at 30 June 2023. We project positive FCF in 2H23 and 2024.
Long-Dated Debt Structure: At 30 June 2023, Petrofac's debt maturity profile mainly comprised USD600 million senior secured notes due in 2026. The group also had around USD90 million term loans and a USD162 million RCF, both due in 4Q24. The long-dated debt maturity profile supports financial flexibility and limits refinancing risk.
https://www.fitchratings.com/research/corporate-finance/fitch-revises-petrofac-outlook-to-stable-affirms-idr-at-b-27-09-2023
Recovery Assumptions:
- The recovery analysis assumes that Petrofac would be reorganised as a going-concern (GC) in bankruptcy rather than liquidated. It mainly reflects Petrofac's strong market position, engineering capabilities, customer relationships and asset-light business model, following disposals in the integrated energy services division
- For the purpose of recovery analysis we assumed that the debt comprises USD600 million senior secured notes, its USD162 million revolving credit facility (RCF; assumed full drawdown), and USD90 million term loans. We assume that all debt instruments rank equally among themselves.
- The GC EBITDA estimate of USD145 million reflects Fitch's view of a sustainable, post-reorganisation EBITDA level on which we base the enterprise valuation (EV). In such a scenario, stress on EBITDA would most likely result from severe operational challenges in lump-sum projects
- Fitch applies a distressed EBITDA multiple of 4x to calculate a GC EV. The choice of multiple mainly reflects Petrofac's strong market position being offset by demand volatility in the oil and gas end-markets
- After deducting 10% for administrative claims, our waterfall analysis generates a ranked recovery for the senior secured debt in the Recovery Rating 'RR3' band, indicating a 'BB-' instrument rating for the group's USD600 million senior secured notes, and justifying the one-notch uplift from the IDR. The waterfall analysis output percentage on current metrics and assumptions is 61%.
DERIVATION SUMMARY
Petrofac has no close direct peers in the Fitch-rated universe. We view Petrofac's business profile as weaker than Saipem S.p.A.'s, mainly due to the latter's significantly stronger revenue visibility supported by its large backlog. We view Petrofac's business profile as broadly in line with John Wood Group Plc's. Both companies boast a solid position in their core markets, sound geographic diversification and moderate, but improving, revenue visibility.
Petrofac's financial profile is weaker than Fitch-rated infrastructure E&C contractor Webuild S.p.A.'s (BB/Stable), mainly due to expected weak operating profitability in 2023-2024 leading to high leverage metrics.
KEY ASSUMPTIONS
Key Assumptions Within Our Rating Case for the Issuer:
- Revenue of around USD2.7 billion in 2023, USD3.2 billion in 2024, and gradually increasing to USD4.7 billion in 2026
- Negative EBITDA of around USD70 million in 2023. EBITDA margin at about 2% in 2024 and 4%-5% in 2025-2026
- Capex at about USD20 million in 2023 and USD30 million-USD35 million a year in 2024-2026
- Working-capital inflows at around 6% of revenue annually in 2023-2024 and 5% in 2025. Working- capital outflow of 2% in 2026
- Dividends of about USD90 million in 2025 and USD100 million in 2026. No dividends in 2023-2024
- No acquisitions in the next four years
Improved Business Profile: Petrofac's business profile improved in 1H23 due to growing revenue visibility, which is now in line with expectations for a 'BB' category E&C company. Petrofac boasts a solid overall E&C market position, with a broad range of skills and services covering onshore and offshore works, and delivering projects in upstream and downstream oil and gas developments. Further, it has demonstrated its expertise in sustainable energy E&C activities, which firmly positions the group for the growth of this smaller but increasingly important sub-sector.
FCF to Improve: We expect neutral-to-positive FCF in 2023-2025 following high cash consumption in 2021-2022. We assume that Petrofac's cash flow will benefit from an improving order backlog in 2023-2025 and increasing operating profitability in 2024-2025. Nonetheless, this is subject to execution risk including successful completions of the remaining eight legacy contracts in addition to the prepayment-structure risk common to the E&C sector.
Sound Financial Flexibility: Petrofac's completed recapitalisation in 2021 has improved its liquidity and debt maturity profile, limiting short-term refinancing risk. This long-term debt structure enables the group to plan and bid for its typical large-scale, multi-year E&C projects. It also provides the group with financial and operating headroom to pursue bidding opportunities with long lead times.
KEY RATING DRIVERS
Improved E&C Revenue Visibility: Petrofac's improved revenue visibility is supported by an increased order backlog of about USD6.6 billion at end-June 2023, including USD3.4 billion new awards in its E&C segment, which until now had been limiting overall revenue visibility. We expect continued increase in the order backlog in 2H23 and 2024 on a solid prospects pipeline of around USD60 billion to end-2024.
Of the three major E&C awards in 1H23 one was the first contract in a multi-year six-platform agreement with TenneT to expand offshore wind capacity in the Dutch-German North Sea. The rapid backlog growth in the non-core new energies sector is balanced by two major awards being in its core markets, limiting execution risk. They are a petrochemical facility engineering, procurement, and construction (EPC) contract for STEP Polymers SPA in Algeria and gas compressor station for Abu Dhabi National Oil Company (ADNOC) in the UAE.
Weak Operating Profitability: Fitch expects continued profitability pressures in 2023-2024 due to the combination of still subdued, but increasing, revenue, the lingering impacts from legacy contracts and unfavourable commercial settlements with clients mainly related to the pandemic. We assume low single-digit EBITDA margins in 2024 and recovery to mid-single digits in 2025-2026, on increased activity combined with continued receding impact from its commercial settlement in its mature E&C portfolio. In 1H23, Petrofac made good progress in resolving its historical disputes, which will support cash collection in 2H23.
Execution Risk in Legacy Contracts: Execution risk is exacerbated by the pending completion of the remaining legacy contracts disrupted by the pandemic. The group expects to complete five of the remaining eight contracts during 2H23 or early 2024. The risk is partly mitigated by progress in construction of Thai Oil Clean Fuels contract in Thailand in 1H23, which was in line with the group's April's guidance.
High Near-Term Leverage: We expect EBITDA leverage to remain above our 4x negative sensitivity to 2024 due to subdued operating profitability, which limits rating headroom. We expect gross leverage to decrease to around 4x in 2025 and below 3x in 2026, on an increasing E&C order backlog and receding impact of remaining legacy projects.
Deleveraging prospect is supported by a prudent financial policy including reduced total debt quantum and suspended dividends. Petrofac has deleveraged its balance sheet since 2017, partly in response to a downturn in the oil industry and an SFO investigation.
Interesting report to read backed by factual information.
Fitch Ratings - London - 27 Sep 2023: Fitch Ratings has revised Petrofac Limited's Outlook to Stable from Negative, while affirming its Issuer Default Rating (IDR) at 'B+'. Fitch has also affirmed the group's USD600 million senior secured notes rating at 'BB-' with a Recovery Rating of 'RR3'. A full list of rating actions is detailed below.
The Stable Outlook mainly reflects improved revenue visibility in Petrofac's engineering & construction (E&C) segment, supported by strong new orders in 1H23 and a healthy pipeline of prospects. However, the rating remains constrained by weak operating profitability and high leverage metrics for 2023-2024. We expect significant backlog growth to help gradually improve the group's weak operating profitability, which has been affected by low activity and ongoing completion of the legacy projects disrupted by the pandemic.
Rating strengths are Petrofac's improved business profile, expected neutral-to-positive free cash flows (FCF), sufficient liquidity and a long-dated debt maturity profile limiting short-term refinancing risk.
Here you go, it’s showing on two platforms including this platform (LSE):
https://i.ibb.co/wYpXQW7/IMG-1910.jpg
Except for Israel, Lebanon, and Syria, the remainder of the Middle East seems to be doing well, particularly the oil-rich countries. As far as I can remember, Petrofac doesn't have any business activities in Israel, Lebanon, or Syria.
“ They are either 100% confident or risking more than necessary now. Most would happily close out and take a very decent profit based on shorting from 60p levels if not higher. Some got burnt on the TenneT deal so you'd think they would be more cautious. Instead... they are adding more and more shorts in mid 30's? Madness. ”
They are aiming to keep a cap on the share price to exhaust private investors and to load up on the cheap while the sentiment in down.
The share price just hit a support level on both daily & weekly technical charts so I am expecting some recovery from this point.
https://i.yourimageshare.com/o93dP3E7kq.webp
Jeremy Hunt announced a £4.5bn manufacturing package, including £2.5bn for electric cars and £960m for a green industries growth accelerator.
Jeremy Hunt has announced £960m in investment to the green energy sector to accelerate growth.
The chancellor announced the money, which will be used to fund offshore wind, nuclear, carbon capture, and hydrogen projects, during his Autumn Statement as part of a £4.5bn investment package for strategic manufacturing.
‘These targeted investments will make sure the UK remains competitive,’ he said.
https://citywire.com/wealth-manager/news/autumn-statement-960m-investment-into-green-energy/a2431040
Chancellor Jeremy Hunt will deliver the Autumn Statement in the House of Commons on Wednesday at 12:30pm.
On Friday the Chancellor announced a £4.5bn Government fund to support strategic manufacturing sectors including automotive, aerospace and energy. Over £2 billion of the fund has been earmarked for the automotive industry, with £975m for aerospace manufacturers and support for clean energy during a visit to the cutting-edge factory of green hydrogen experts ITM Power plant in Sheffield.
Energy services giant Petrofac (LON: PFC) has hired 3,000 people in the last 12 months amid a strong order book.
The London-listed firm said 1,000 of its new hires have been in the UK, where it has renewed more than 80% of its existing work.
Petrofac, like other companies of its type, made major cuts during the Covid pandemic – including dropping around 20% of its global workforce of around 12,000 in April 2020.
Today the company has 8,600 people worldwide.
In recent months the London-listed firm has racked up North Sea wins and extensions worth multiple hundreds of millions of dollars with firms including Repsol, CNR International, Saipem and NEO Energy.
Elsewhere it has made big wins, including a $1.5bn petrochemicals deal in Algeria.
Despite losses being expected in H2 as part of legacy E&C issues, the firm said at the end f June its order book stoof at $6.6bn, nearly double that at the start of 2023.
In September it made 251 hires, 80 of which were in the UK.
Group director of HR Des Thurlby said: “2023 has been Petrofac’s strongest period for new awards in many years. We have renewed more than 80% of our existing work in the UK and secured new projects in both the traditional and renewable energy sectors in Europe, the Middle East and Africa.
“As we ramp up our new projects, we have created exciting opportunities for our existing talent, and we are welcoming a large number of new team members at both an experienced and graduate level.”
https://www.energyvoice.com/oilandgas/540666/petrofac-headcount/