Member Info for E_AL

In an exclusive studio interview from ADIPEC 2023, Julian Walker sat down with Tareq Kawash, Group Chief Executive of Petrofac, to hear more about the exciting news announced during ADIPEC of ADNOC Gas awarding an EPC contract for a CCUS project, one of the largest carbon capture projects in the Middle East and North Africa region. Tareq explained how this showed there was an appetite across the region for ambitious (CCUS) projects. He also touched on Petrofac’s own initiatives that will contribute to a lower carbon future. With Petrofac ramping up to deliver a range of exciting new projects the company is on a recruitment drive and is looking to attract the next generation of talent.

Video link: https://www.energyconnects.com/videos/video-interviews/2023/october/petrofac-set-for-growth/

Petrofac has posted this yesterday on LinkedIn:

“Our team is collaborating with #ADNOC to secure a lower carbon future, through its Sustainable Supply Chain Program. The Abu Dhabi kick-off event centred on four key pillars:

🤝 Collaboration between ADNOC and strategic suppliers

⚠️ Managing ESG risks across the value chain

📊 Embedding ESG performance visibility in procurement

✅ Promoting leading sustainability practice across the value chain

We aim to minimise our own environmental impact, while supporting ADNOC to achieve its ambition for Net Zero Emissions by 2045.

https://www.linkedin.com/feed/update/activity:7133741102284595200”

*Sultan Al Jaber is the chief executive of the Abu Dhabi National Oil Company (Adnoc) and president of the Cop28 summit, which begins on 30 November.

I couldn't resist another top up and this stupidly cheap level.... Thank you Shorters & Snapper10 ;)

Petrofac bonds have been showing some recovery too

https://www.boerse-frankfurt.de/bond/usg7052taf87-petrofac-ltd-9-75-21-26

It looks like they've plummeted Petrofac to load up on the cheap while they can before letting it go,....the rebound is now on :)

They are not, the Buy/Sell at the time 180/185 and all those chunky trades were @185

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'

Oh god, Snapper10 has just created a new profile to have a conversation with himself and to repeat his cra* on this board..............

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

It looks like one of the shorters closed their position yesterday:

22-Nov-23 18:00:00 39.00 4,000,000 Unknown* 34.88 35.00 £2m

It looks like one of the shorters has closed their position yesterday:

22-Nov-23 18:00:00 39.00 4,000,000 Unknown* 34.88 35.00 £2m

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.