FT - Petrofac25 Jun 2019 17:26
Petrofac, the oilfield services company under investigation by the UK’s Serious Fraud Office, failed to win any new contracts in Saudi Arabia and Iraq at the start of the year after the key markets were cited as part of the corruption probe.
The London-listed group had been bidding for contracts worth $10bn in Saudi Arabia and Iraq earlier this year. But it ran up against concerns from clients such as Saudi Aramco after the SFO in February announced that Petrofac’s former global head of sales, David Lufkin, a British national, had pleaded guilty to 11 counts of bribery related to making “corrupt offers” to influence the award of contracts in the two countries.
The contracts cited by the SFO were collectively worth more than $4bn and included a $1.56bn award by Saudi Aramco in November 2015 to work on the engineering, procurement and construction of a sulphur recovery plant.In a trading update on Tuesday, Petrofac’s chief executive Ayman Asfari said new orders so far this year reflected “recent challenges in Saudi Arabia and Iraq”.
New orders have reached $1.7bn this year compared with $5bn for 2018 as a whole. Mr Asfari did not directly mention the SFO investigation in the update but the longstanding chief executive, who has been at the helm of Petrofac since 2002, had previously warned the company was having to soothe clients’ concerns following the SFO announcement. Petrofac’s chief financial officer, Alastair Cochran, told analysts in a call later on Tuesday that the company had not won any of the $10bn worth of work for which it had been bidding in Saudi Arabia and Iraq at the start of the year. It would normally have expected to win $2bn-$3bn worth of those contracts, a spokesman for the company said.
But Mr Cochran insisted Petrofac had not been barred from bidding for work in any country and continued to fulfil ongoing contracts in both Saudi Arabia and Iraq. Last year contracts in Saudi Arabia accounted for 13.5 per cent of Petrofac’s overall revenues, making the country its third-biggest market by geography, and its work in Iraq represented 3.5 per cent. Asfari added in Tuesday’s statement that Petrofac continued to “maintain excellent client relationships in all of our markets” and said the group “has a busy tendering pipeline in other markets with around $15bn of bid opportunities due for award in the second half of the year”.
Shares in Petrofac were down 5 per cent by early afternoon on Tuesday in London. Victoria McCulloch, analyst at RBC Capital Markets, noted that the company’s backlog, or estimated revenue that would be generated from remaining work on contracts, had declined, which she said reflected “ongoing challenges”. Petrofac valued its backlog at $8.9bn at the end of May, versus $9.6bn at the end of December. The SFO launched its investigation into Petrofac in May 2017 as part of a wider probe into Unaoil, a Monaco-based oil consultancy.
Sign In
Follow the stocks
