Petrofac Regulatory News (PFC)

Press Release

7 MARCH 2011

PETROFAC LIMITED

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

FINANCIAL HIGHLIGHTS

·; Net profit(1) up 58% to US$557.8 million (2009: US$353.6 million); net profit up 26% on a like-for-like basis(2)

·; Earnings per share (diluted) up 57% to 162.46 cents (2009: 103.19 cents)

·; Revenue up 19% to US$4.4 billion (2009: US$3.7 billion)

·; Year-end backlog(3) up 45% at US$11.7 billion (2009: US$8.1 billion)

·; Final dividend 30.00 cents (18.42 pence(4)); full year dividend up 22% to 43.80 cents (2009: 35.80 cents)

·; As part of the EnQuest demerger in April 2010, distribution of one EnQuest share for every Petrofac share with a fair value of 160.08 cents per share

·; Gross cash balances at 31 December 2010 of US$1.1 billion (2009: US$1.4 billion), augmented by receipt of US$0.7 billion of cash advances in January 2011

·; Medium-term Engineering & Construction net margin guidance raised 100 bps

Commenting on the outlook, Ayman Asfari, Petrofac's group chief executive, said:

"I am delighted to present another excellent set of results. 2010 has been an exceptional year for us, with a record intake of new orders, which gives us outstanding revenue visibility and brings exciting opportunities for us to develop our capability and to deliver it into new markets.

"With this strong financial underpinning, our differentiated and competitive offering and our proven excellence in project execution, we are confident that we will continue to deliver superior value for our customers and sector-leading returns for our shareholders, with like-for-like net profit growth in 2011 of at least 15%."

2010 OPERATIONAL HIGHLIGHTS

Engineering & Construction

·; Excellent operational performance, including the substantial completion of 5 large EPC projects

·; Order intake of US$6.0 billion, including the US$3.4 billion EPC phase of the South Yoloten project in Turkmenistan and our first major project in Iraq

Offshore Engineering & Operations

·; Awarded our first predominantly lump-sum EPC project in the UKCS, the Laggan Tormore gas processing plant for Total on Shetland, worth in excess of £500 million

·; Expanded our international operations with the award of a 5 year duty holder contract for the Government of Sharjah in the United Arab Emirates

Engineering, Training Services and Production Solutions

·; Acquired TNEI, a specialist consultancy providing services in the areas of power transmission and distribution, planning and environmental consent and energy management

·; Established new training facilities in Syria and Algeria to help develop local workforces

·; Successfully transitioned to assume full operational responsibility for the Ticleni fields in Romania under a 15 year production enhancement contract

·; Acquired a 15% equity stake in Seven Energy, a Nigerian production and development company, and entered into a strategic alliance agreement to assist in developing its assets

Energy Developments

·; Completed EnQuest demerger with Don investment generating an IRR from inception to demerger of approximately 35%

·; Field Development Programme approved for the second phase of the Cendor field in Malaysia

·; Secured US$800 million Risk Services Contract (Petrofac share 50%) to develop the Berantai field, offshore Malaysia

·; Acquired CO2Deepstore, a developer of CO2 storage projects, and partnering with Shell on the Goldeneye CO2 storage prospect

PROSPECTS FOR 2011

The significant political changes across the Middle East and North Africa have, to date, had a minimal impact on our day to day operations. Of the countries substantially affected, Tunisia is the only one in which Petrofac has current operations and production at our Chergui facility has returned to normal after short periods of being shut-in. Managing country risk has always been an important part of operating in the region and we continue to monitor the evolving political situation closely to ensure that the interests of our employees, stakeholders and investors are safeguarded.

Engineering & Construction

We entered 2011 with a record backlog in Engineering & Construction of US$9.0 billion, which has been augmented by the award of the US$1.2 billion In Salah Gas project in Algeria in January, giving us outstanding revenue visibility for the coming year and beyond. As a result, our immediate focus is on ensuring that we continue our excellent operational performance across our portfolio of projects. Given the terms of our existing backlog, our confidence in our execution capability, and our competitive positioning in our core and developing markets, we are raising our medium-term net margin guidance from around 10% to around 11%.

Offshore Engineering & Operations

Our recent awards in Offshore Engineering & Operations should underpin strong revenue growth in 2011. We expect recent high levels of bidding activity, both in the UK and internationally, to continue, which should present us with further opportunities for growth. Notwithstanding the improvement in net margin achieved in 2010, we see opportunities to improve net margins further over the medium-term.

Engineering, Training Services and Production Solutions

As well as supporting the group's wider activities, we expect Engineering Services to see more opportunities with external customers in 2011. Delegate numbers in Training Services improved as 2010 progressed and we expect this trend to continue throughout the course of this year. We continue to review strategic opportunities for establishing new training facilities and developing local workforces. Following the award of the Ticleni production enhancement contract in July 2010, and an improvement in general market conditions for our consultancy and technology businesses, we expect to deliver strong revenue growth in Production Solutions in 2011. Given the change in scope of our services on Dubai's offshore oil & gas assets (now accounted for through Offshore Engineering & Operations), and given that we do not expect to recognise profit on the Ticleni contractuntil next year due to the long-term nature of the contract, we forecast a reduction in overall net profit for this reporting segment in 2011.

Energy Developments

With the award of the risk services contract for the development of the Berantai field and delivery of the FPSO, and commencement of the second phase of the Cendor field, we expect a significant increase in capital expenditure in 2011. Our current capital commitments are around US$500 million for 2011.

Ends

Analyst presentation:

A presentation for analysts will be held at 9.30am today, which will be webcast live via http://www.investorcalendar.com/IC/CEPage.asp?ID=163402.

For further information, please contact:

Petrofac Limited +44 (0) 20 7811 4900

Jonathan Low, Head of Investor Relations

Tulchan Communications Group Ltd +44 (0) 20 7353 4200

James Bradley

David Allchurch

Martin Robinson

petrofac@tulchangroup.com

Notes to Editors

Petrofac is a leading international provider of facilities solutions to the oil & gas production and processing industry, with a diverse customer portfolio including many of the world's leading integrated, independent and national oil & gas companies. Petrofac is quoted on the London Stock Exchange (symbol: PFC) and is a constituent of the FTSE 100 Index.

The group delivers services through seven business units: Engineering & Construction, Engineering & Construction Ventures, Engineering Services, Offshore Engineering & Operations, Training Services, Production Solutions and Energy Developments.

Through these businesses Petrofac designs and builds oil & gas facilities; operates, maintains and manages facilities and trains personnel; enhances production; and, where it can leverage its service capability, develops and co-invests in upstream and infrastructure projects. Petrofac's range of services meets its customers' needs across the full life cycle of oil & gas assets.

With around 14,000 employees, Petrofac operates out of six strategically located operational centres, in Aberdeen, Sharjah, Woking, Chennai, Mumbai and Abu Dhabi and a further 20 offices worldwide. The predominant focus of Petrofac's business is on the UK Continental Shelf (UKCS), the Middle East and Africa, the Commonwealth of Independent States (CIS) and the Asia Pacific region.

For additional information, please refer to the Petrofac website at www.petrofac.com.

(The attached is an extract from the group's Annual Report and Accounts for the year ended 31 December 2010.)

Review of operations

Our operations are organised into seven business units, which report under four segments:

We present below an update on each of the group's reporting segments:

1 Profit from operations before tax and finance costs.

2 Profit for the year attributable to Petrofac Limited shareholders.

Engineering & Construction

The Engineering & Construction reporting segment includes the group's Sharjah-based Engineering & Construction business unit and Engineering & Construction Ventures, which has been established to target new markets, such as Abu Dhabi, Saudi Arabia, and Turkmenistan. Engineering & Construction generally undertakes engineering, procurement and construction projects on a lump-sum basis, with a typical duration of between two to four years, and is focused on markets in the Middle East, Africa, Asia-Pacific and the Commonwealth of Independent States, particularly the Caspian region.

Order intake in 2010 exceeded US$6.0 billion. This includes our largest ever award, of US$3.4 billion, for the second phase of our contract with Turkmengas on the South Yoloten project in Turkmenistan, as well as contracts in Qatar, Kuwait and Malaysia.

We have delivered good progress on our current portfolio of contracts including the handover or substantial completion of the following:

·; in Syria, we completed and commissioned the Ebla gas plant for PetroCanada in April 2010, two months ahead of schedule, earning an early completion bonus. We have also completed and commissioned the Jihar gas plant for the Hayan Petroleum Company (a joint venture between the state-owned Syrian Petroleum Company and INA Industrija Nafte d.d.-Naftaplin of Croatia)

·; in Oman, we completed the Harweel cluster development project for Petroleum Development Oman (PDO), achieving the introduction of hydrocarbons in January 2011

·; in Kuwait, we substantially completed the Mina Al-Ahmadi refinery pipelines project for Kuwait Oil Company (KOC), which was awarded in November 2008

·; in Algeria, we made good progress on the In Salah gas compression project for Sonatrach, BP and Statoil. Two of the three fields are now in operation and the compression facility and power generation on the Krechbah field were substantially completed by the end of the year

We were awarded the following principal contracts during the year, on which initial progress has been in line with our expectations:

Gas sweetening facilities, Qatar

In March 2010, we were successful in securing an award for gas sweetening facilities in Qatar from Qatar Petroleum. The contract, for more than US$600 million, includes the engineering, procurement, installation and commissioning of gas sweetening facilities in Qatar's Messaieed and Dukhan industrial districts. The project includes a sulphur recovery upgrade in Messaieed and an acid gas recovery plant in Dukhan. Work on the projects is due for completion within 38 months.

Pipelines from Mina Al-Ahmadi to power stations, Kuwait

In July 2010, we were awarded a US$400 million contract by Kuwait Oil Company for EPC services for the installation of fuel gas and gas oil pipelines from Mina Al-Ahmadi to the Azzour and Shuaiba Power Stations in Kuwait. The project follows on from the pipelines contract referred to above and is expected to last approximately two years.

Water injection project, Kuwait

In August 2010, we were awarded a further EPC project by KOC for US$430 million for effluent water and sea water injection facilities. The project involves the installation of a new central injection pumping facility and modifications to three existing gathering centres and seawater treatment plant. When completed, both effluent water and sea water will be fed into a central injection pumping facility and injected into the wells with the objective of increasing oil recovery from the Raudhatain and Sabriyah fields. Completion is estimated within 36 months.

South Yoloten development, Turkmenistan

In December 2010, we commenced the second phase of the South Yoloten contract, worth US$3.4 billion, for Turkmengas, the state-owned national gas company of Turkmenistan. This followed the completion of the first phase of the project, which involved a front end engineering and design (FEED) study and early engineering work for the gas processing development. The second phase of the contract is scheduled to last 31.5 months, during which time we will provide engineering, procurement and commissioning work on a lump-sum basis for a 10 bcma gas processing plant along with the infrastructure and pipelines for the entire 20 bcma development. The structuring of this contract in two phases was important for risk mitigation and the work completed in phase one gives us a higher level of confidence that we can execute the project in accordance with our high standards.

SEPAT offshore early production system, Malaysia

In December 2010, we secured an award for the engineering, procurement, construction, installation and commissioning of an offshore early production system on the east coast of Peninsular Malaysia. The contract, worth approximately US$280 million, was awarded by Petronas Carigali Sdn Bhd. First oil is expected by the end of 2011 and the project is estimated to be completed by April 2012.

Results

High activity levels, due principally to projects won in 2009 and late 2008, resulted in Engineering & Construction growing revenues strongly by 29.7% to US$3,253.9 million (2009: US$2,509.0 million). The main contributors to revenue were: the El Merk central processing facility in Algeria; the Asab project in Abu Dhabi; the Kauther gas compression project in Oman; the Mina Al-Ahmadi refinery pipelines project in Kuwait, and the Karan utilities package in Saudi Arabia.

Net profit increased by 40.7% to US$373.0 million (2009: US$265.1 million), representing a net margin of 11.5% (2009: 10.6%). The increase in net margin is due to continued strong operational performance, including the delivery of a number of projects during the year, and first time profit recognition on a number of projects. A variation order on a project agreed in the first half of 2010 was not reflected in the interim results, leading to an understatement of revenue by US$35 million and net profit by US$32 million. These amounts have been recognised in the second half of 2010 and therefore there is no overall financial impact on the reported results for the year ended 31 December 2010.

Over the year, Engineering & Construction grew its headcount from 4,200 to 5,400, in response to the record intake in 2009 and in anticipation of our largest ever award, in Turkmenistan. In addition, headcount in our engineering offices in Mumbai and Chennai, which principally support our Engineering & Construction activities - although they are reported within our Engineering, Training Services and Production Solutions segment - also grew strongly. At 31 December 2010, we had approximately 1,600 employees in our Indian offices (2009: 1,300).

At 31 December, the Engineering & Construction backlog stood at a record US$9.0 billion (2009: US$6.2 billion), reflecting the high level of order intake during the year.

Offshore Engineering & Operations

Offshore Engineering & Operations provides engineering and construction services at all stages of greenfield and brownfield offshore projects. In addition, through the provision of operations management services, we deliver production and maintenance support and extend field life. Offshore Engineering & Operations' activities are primarily in the UKCS and are predominantly provided on a reimbursable basis, but often with incentive income linked to the successful delivery of performance targets. Many of our operations contracts are long-term (typically three to five years) and in the case of the provision of Duty Holder services(5) are often open-ended.

Activity levels in Offshore Engineering & Operations improved in 2010 due to the commencement of work on major contracts awarded in 2009, good bidding success and a general improvement in market conditions. Our strong record of operational performance, company-wide capability and established presence in core markets helped us achieve an order intake of US1.6 billion, taking backlog to record levels of US$2.4 billion. The key awards secured were:

Sharjah Government Duty Holder contract, UAE

In October 2010, we secured a Duty Holder contract to provide a full range of facilities management services to the Government of Sharjah on the Sajaa Gas Plant and related assets. This contract, which furthers our aim to grow the Offshore Engineering & Operations business internationally, will run for five years and is worth more than US$250 million.

Laggan Tormore EPC contract, UK

In October 2010, we won an engineering, procurement, supply, construction, commissioning and start-up contract with Total for the development of a gas processing plant on the Shetland Islands. Offshore Engineering & Operations will develop this facility, supported by Engineering & Construction. This is the first time that we have secured a predominantly lump-sum EPC contract in the UK. The contract is worth more than £500 million, with first gas expected in Q2 2014.

Maersk Oil engineering services contract, UK

In November 2010, we were awarded a contract worth £40 million over three years for the provision of engineering services to the UKCS assets of Maersk Oil. The contract includes three one-year options for extension, and broadens Petrofac's scope of services for these assets, building upon the offshore operations and support services we have been providing since 2000.

In addition to securing these new awards, we have been successful in extending a number of our operations and maintenance contracts with both oil majors and independents. These include a five-year agreement with BHP Billiton to provide operations and maintenance personnel support for the Liverpool Bay Development in the Irish Sea and a five-year extension to our operations and maintenance support contract with CNR International in the North Sea.

From October 2010, the technical services agreement with the Government of Dubai was reported through the Offshore Engineering & Operations reporting segment (having previously been reported through Engineering, Training Services and Production Solutions). The transition from having operational control over these assets to the new technical services agreement was effected smoothly.

Acquisitions

We successfully completed two small acquisitions in 2010 which broaden our capability: Scotvalve Services Limited, which provides servicing and repair for oilfield pressure control equipment, and Stephen Gillespie Consultants Limited, which designs and manufactures metering systems (see note 10 to the financial statements).

Results

Reported revenue for the year increased by 15.2% to US$721.9 million (2009: US$626.7 million) and revenue excluding 'pass-through' revenue(6) increased by 20.6% to US$526.4 million (2009: US$436.4 million), reflecting the commencement of major contracts secured in the second half of 2009 and a general improvement in the operating environment. Approximately 90% of Offshore Engineering & Operations' revenue is generated in the UKCS, with these revenues generally denominated in sterling. The average US dollar to sterling exchange rate for 2010 was broadly similar to the rate for 2009.

Net profit increased by 34.5% to US$17.2 million (2009: US$12.8 million), again reflecting increased activity levels. Net margin on revenue excluding pass-through revenue increased to 3.3%, compared to 2.9% in 2009, driven by new higher margin contracts.

Over the year, Offshore Engineering & Operations grew its headcount from 4,100 to 4,400, mostly attributable to the staff added on new contracts, including Laggan Tormore and the Sharjah Government Duty Holder contract.

Backlog for Offshore Engineering & Operations increased to a record high of US$2.4 billion at 31 December 2010 (2009: US$1.6 billion). This includes approximately half of the backlog booked in relation to the Total EPC contract awarded in October 2010. The remainder of the backlog has been booked by Engineering & Construction, as it will support Offshore Engineering & Operations on the project.

Engineering, Training Services and Production Solutions

The Engineering Services, Training Services and Production Solutions business units are reported together within this segment.

Engineering Services provides early stage engineering studies, including conceptual studies and FEED studies, primarily on a reimbursable basis. Engineering Services has two offices in India - in Mumbai and Chennai - which primarily support Engineering & Construction and a UK office in Woking which is more externally focused. Activity levels were significantly higher at our Indian offices in 2010, reflecting Engineering & Construction's increased demand for the unit's services, resulting from the reporting segment's record backlog entering into 2010 and its contract wins throughout the year. At our Woking office activity levels were marginally lower. Utilisation rates rose across all three offices throughout 2010.

Training Services provides competence-led training services, consultancy and managed solutions which are designed to increase competence and minimise risk. Services are provided primarily on a reimbursable basis. Delegate numbers were slightly higher than in 2009, and we saw strong growth from international markets, including our facilities at Sakhalin Island, Russia, and Baku, Azerbaijan. In October 2010, our training centre located near Homs in Syria was opened at a ceremony attended by the Syrian Prime Minister. The facility, which Petrofac will operate for five years, will deliver operations and maintenance training for Syrian graduates joining the oil & gas industry.

Training Services remains focused on strategic business development opportunities, both in the UK and internationally. Demand for our Training Services business is driven by a number of factors, including the 'nationalisation' of government workforces, the ageing of the industry's personnel and the potential increase in industry regulation in the wake of the Gulf of Mexico incident; these provide us with interesting medium to long-term opportunities.

Production Solutions provides customers with a wide range of services to help improve production, profitability, operational efficiency, asset integrity and the recovery of their reserves. In addition to providing these specialist services on a stand-alone basis, we are increasingly offering customers these services packaged together where we are remunerated on a tariff or quasi-equity basis. We were awarded our first such 'production enhancement' contract by Petrom in early July 2010. Under the terms of the 15-year contract, which includes an option for extension by a further ten years, Petrofac will provide production enhancement services to Petrom as the concession holder for the Ticleni oilfield and its eight satellite fields in Romania. We will be paid a tariff per barrel of oil produced, including an enhanced tariff for incremental production. Petrofac successfully completed the transition to assume full operational responsibility for these fields in November 2010: average oil production volumes from the first two months of operation were around 2.3% above baseline production.

In November 2010, Production Solutions entered into a strategic alliance with Seven Energy International Limited ('Seven Energy'), a Nigerian production and development company. Under the terms of the agreement Petrofac agreed to invest US$100 million to acquire a 15% interest in Seven Energy (12.6% on a fully diluted basis) and will assist Seven Energy with the development of its production, processing and transportation assets. Seven Energy has also issued warrants which, subject to the satisfaction of certain performance conditions and milestones in relation to project execution, will enable us to invest up to a further US$52 million, and take our interest to 19.2% on a fully diluted basis. Petrofac is providing experienced personnel to Seven Energy and is represented on its Board and management committees. The opportunity to co-invest and co-develop with Seven Energy, while deploying some of our own people, will give us the platform to establish a local presence in Nigeria, a high growth market where we have been seeking commercial opportunities for some years.

In October 2010, following a successful three and a half years of our service operator contract for Dubai Petroleum's offshore oil & gas assets, we successfully completed the transition to a technical services agreement with the Government of Dubai. The technical services agreement will be reported through Offshore Engineering & Operations.

Acquisitions

Within Engineering Services, the acquisition of TNEI represents the first step in positioning Petrofac in the renewable energy sector. TNEI was acquired in June 2010 for a total consideration of £6.1 million (see note 10 to the financial statements). TNEI is a specialist consultancy providing services in the areas of power transmission and distribution, particularly in relation to offshore wind projects, planning and environmental consent and energy management. TNEI has 50 staff in Newcastle and Manchester. The acquisition further broadens Petrofac's technical consulting capacity.

Results

Reported revenue for the year was slightly higher at US$355.3 million (2009: US$349.7 million) as was revenue excluding 'pass-through' revenue at US$322.8 million (2009: US$309.7 million), with an increase in revenues in both Engineering Services and Training Services being partially offset by lower revenues in Production Solutions as a consequence of the transition of our role on the Dubai Petroleum contract from service operator to a technical services agreement (and now accounted for in Offshore Engineering & Operations).

Net profit was 14.8% lower at US$27.6 million (2009: US$32.4 million), principally reflecting the change in scope on the Dubai Petroleum contract. This was also the primary driver for net margin on revenue excluding pass-through revenue falling to 8.5% (2009: 10.4%).

At 31 December 2010, headcount - including long-term contractors - was higher at 3,400 (2009: 2,900).The addition of approximately 900 Romanian workers on the Ticleni oilfield more than offset the reduction in headcount that followed the transfer of Dubai Petroleum staff to the Government of Dubai. We also continued to grow our Mumbai and Chennai offices, which are reported through Engineering Services but predominantly support the businesses in our Engineering & Construction reporting segment. We have recently decided to open a third Indian office in Delhi, and expect to accomplish this during 2011.

Backlog for the Engineering, Training Services and Production Solutions reporting segment was unchanged at year-end, at US$0.3 billion (2009: US$0.3 billion). The main factors affecting backlog related to Production Solutions, which saw order intake - primarily arising from the Ticleni contract - offset by the change in scope on the Dubai Petroleum contract.

Energy Developments

Where we can leverage our service capabilities to realise value, mitigate risks and reduce costs, Energy Developments provides a fully integrated service for resource holders under flexible commercial models that are aligned to their requirements. Projects cover upstream developments, both greenfield and brownfield, and related energy infrastructure projects, and can include the provision of capital.

In the first demonstration of our 'build and harvest' strategy, we completed the demerger of Energy Developments' UKCS assets, including its investments in the Don fields, in April 2010. These assets were demerged to create EnQuest PLC, an independent company which subsequently listed on the London and Stockholm stock exchanges. Our investment in the Don project generated a capital gain of US$124.9 million and an internal rate of return from inception to demerger of approximately 35%. We believe this transaction demonstrates the value of our 'build and harvest' strategy.

During the year, good progress was made on Energy Developments' portfolio of operational assets (Cendor, Ohanet, Chergui and the Kyrgyz Petroleum Company (KPC) refinery), as explored below:

Cendor PM304, Malaysia

Energy Developments operates the Cendor field, in Block PM304, offshore Peninsular Malaysia, in which it holds a 30% interest. This interest was acquired in 2004 and is held by way of a production sharing contract (PSC). Energy Developments' partners on this field are PETRONAS, Kuwait Foreign Petroleum Exploration Company (KUFPEC) and PetroVietnam, which hold interests of 30%, 25% and 15% respectively.

The Cendor field had another year of good performance, producing an average of 13,300 bpd of oil (2009: 14,400 bpd) and achieving production uptime of over 99%. Production is now in decline as a result of the natural decrease in field pressure. Energy Developments received approval for the Field Development Programme (FDP) for the second phase of development of Block PM304 in November 2010. This second phase will involve the replacement of the existing Mobile Offshore Production Unit (MOPU) and Floating Storage and Offloading (FSO) vessel with a Floating Production, Storage and Offloading (FPSO) vessel and fixed wellhead structures, designed to increase production capacity to 35,000 bopd. Preparations for this second phase are progressing well with the aim of beginning work in the first half of 2011.

Ohanet, Algeria

Energy Developments, in a joint venture with BHP Billiton (as joint venture operator), Japan Ohanet Oil & Gas Co and Woodside Energy (Algeria), has invested more than US$100 million for a 10% share in a RSC with Sonatrach, Algeria's national oil company. Through Engineering & Construction, we undertook the EPC contract for the gas processing facilities in joint venture with ABB Lummus and were responsible for part of the on-site commissioning works. As part of the RSC, the joint venture contractors are reimbursed for development costs and their share of the project's operating costs. The joint venture contractors' return for undertaking this investment is earned by way of remuneration equivalent to a percentage of the eligible development costs and our entitlement is paid from the monthly liquids production; hence any changes in production will vary the number of days over which the entitlement is earned.

Overall production was slightly lower than in 2009, averaging approximately 113,000 bpd of oil equivalent (2009: 123,100 bpd of oil equivalent). On average, we earned our share of the monthly liquids production by the 11th day of the month (2009: 15th), reflecting higher average oil & gas prices, partly offset by slightly lower production rates. The RSC contract is due to expire at the end of October 2011; eight years from first gas, over which time we expect to have earned our defined return.

Chergui field, Tunisia

In Tunisia, Energy Developments has a 45% operating interest in the Chergui gas plant. This interest was obtained in 2007 from Entreprise Tunisienne d'Activités Pétrolières (ETAP), the Tunisian national oil company, which holds the remaining 55% interest. Energy Developments' interest is held through a Concession. The commercial export of gas commenced in August 2008. Produced gas is sold to the national gas company, Société Tunisienne de Lélectricité et du Gaz (STEG), under a gas pricing formula fixed by existing law, in which the price of gas is linked to free-on-board Mediterranean (FOB Med) fuel oil prices.

The Chergui gas plant produced an average of 27.77 million standard cubic feet per day (mmscfd) of gas during the year (2009: 26.5 mmscfd), above the original nameplate design capacity of 20 mmscfd. A third production well was tied into the plant in early July 2010 to boost the production rate and increase gas recovery: production in December 2010 was the highest recorded rate since the start-up of the gas plant in June 2008. The development programme for 2011 includes the commitment to drill two to three wells to increase reserves and to explore the production of oil, as well as gas, from the field. Following recent civil unrest in Tunisia, we have had some short unplanned shut-ins of production, but generally the plant is operating normally. We continue to keep the situation under review.

KPC refinery, Kyrgyzstan

Energy Developments owns a 50% share in the Kyrgyz Petroleum Company (KPC) which is engaged in the refining of crude oil and the marketing of oil products from the 10,000 bpd capacity KPC refinery. KPC is jointly owned by Petrofac and Kyrgyzneftegaz, the state-owned oil & gas company in the Kyrgyz Republic. Petrofac has managed KPC's facilities and operations since 1998.

During 2010, the refinery performed in line with expectations, producing an average of approximately 1,700 bpd (2009: 2,000 bpd), principally of gasoline, diesel and fuel oil. The decrease in throughput was primarily due to civil unrest in the country, which shut down operations and halted processing at the refinery in April and June 2010. On both occasions the demobilisation of expatriate and local staff was deemed necessary.

FPF1 Floating Production Facility, undeployed

In July 2009, Energy Developments acquired a floating production facility, AH001 (subsequently renamed the FPF1), from Hess and Endeavour Energy UK. The FPF1 had been deployed on the Hess-operated Ivanhoe and Rob Roy Fields, in the UK North Sea, from 1989, with the Renee and Rubie Fields produced over it since 1999. The vessel has a processing capacity of 45,000 bpd of oil and 56 mmscfd of gas with water injection capability of 90,000 bpd and water treatment of 40,000 bpd.

The vessel remains quayside at the McNulty offshore facility in Newcastle-upon-Tyne, while options for its redeployment on fields, including those where Energy Developments has or can take an interest, are considered. Several options for deployment, including in the UK North Sea, have been identified and are being pursued with conceptual engineering and proposal preparation work. We expect that a redeployment contract for the vessel will be secured in 2011. We are currently completing general repair and upgrade work on the vessel, which will be followed by planned specific dry-dock work to satisfy external verification requirements to obtain a class certificate. This will enable the FPF1 continued operation in the harsh environment of the UK North Sea for ten years, without the need for a special survey.

Gateway Storage Company Limited, UK

In December 2010, Energy Developments acquired a 20% interest in Gateway Storage Company Limited (Gateway), to progress and develop the Gateway Gas Storage project in the East Irish Sea. This project would add nearly 30% to the current gas storage capacity in the UK market, and has secured the first gas storage licence from the UK Department of Energy & Climate Change in February 2010. Petrofac joined Gateway as the technical project operator and is represented on Gateway's board.

Berantai field development and East Fortune FPSO, Malaysia

In January 2011, Energy Developments signed a RSC to lead the development of the Berantai field, offshore Peninsular Malaysia, for PETRONAS, Malaysia's national oil company. Petrofac has a 50% interest in the RSC, alongside our Malaysian partners Kencana Energy Sdn Bhd and Sapura Energy Ventures Sdn Bhd, both of which hold a 25% interest (together known as the 'Berantai partners'). The Berantai partners will develop the field and will subsequently operate the field for a period of seven years after first gas production.

The capital budget for the full field development, excluding delivery of the FPSO, is approximately US$800 million, of which Petrofac's share is 50%. Under the terms of the RSC, the Berantai partners are expected to receive a rate of return linked to their performance against an agreed incentive structure, including project costs, timing to first gas and sustained gas delivery measured six months after project completion, with an ongoing incentive structure based on operational uptime.

Acquisitions

Petrofac completed the acquisition of CO2DeepStore in April 2010, a UK-based CO2 storage company (see note 10 to the financial statements). The combination of CO2DeepStore and Petrofac establishes a leading development capability for CO2 storage projects, providing a complete service for power generators and other CO2 emitters.

In October 2010, CO2DeepStore signed an agreement with Shell U.K. Limited (Shell) for the re-development of the Goldeneye gas field in the North Sea as a potential CO2 storage facility. The agreement will see CO2DeepStore and Shell work together to develop the potential CO2 storage solution for the ScottishPower Carbon Capture and Storage (CCS) project. Work on the initial design phase for the project is due to complete in the first half of 2011 and, subject to satisfactory contract negotiations, achieve contract award later in the year.

Results

Energy Developments' revenue was lower at US$188.2 million in 2010 (2009: US$248.7 million), primarily due to the disposal of the Don assets following the April 2010 demerger. On a like-for-like basis (excluding the contribution of the Don assets), Energy Developments' revenue was marginally higher at US$172.8 million this year (2009: US$170.4 million).

Including the gain on the EnQuest demerger, net profit for Energy Developments rose by 238% to US$156.4 million (2009: US$46.2 million). Excluding this gain, despite the higher average oil price in 2010(7) and notwithstanding the non-recurring NT/P68 write-off of US$3.7 million in the prior year, the loss of contribution from the Don assets as well as lower production on Cendor meant that profit was lower at US$31.5 million (2009: US$46.2 million). On a like-for-like basis (excluding the contribution of the Don assets and the gain on the EnQuest demerger), trading net profit for Energy Developments was US$29.4 million in 2010 (2009: US$33.5 million).

At 31 December 2010, headcount had grown to 600 (2009: 500).

An analysis of Energy Developments' oil & gas reserve entitlements is presented on page 186.

Financial review

Revenue

Group revenue increased by 19.1% to US$4,354.2 million (2009: US$3,655.4 million) due to strong growth in Engineering & Construction and Offshore Engineering & Operations, partly offset by a decrease in Energy Developments following the EnQuest demerger in April 2010. The strong growth in the Engineering & Construction reporting segment (up 29.7%), which accounted for approximately three-quarters of the group's revenue, was as a result of high levels of activity on lump-sum EPC contracts, particularly on those contracts awarded in 2009 and late 2008. The increase in revenues in Offshore Engineering & Operations (up 15.2%) was as a result of activity on major contracts awarded in the second half of 2009 and 2010 and a general improvement in market conditions.

Operating profit

Group operating profit for the year was US$663.5 million (2009 restated: US$432.0 million), an increase of 53.6%. Excluding the gain on the EnQuest demerger, group operating profit increased by 24.7% to US$538.6 million (2009 restated: US$432.0 million) and operating margins increased to 12.4% (2009 restated: 11.8%). The increase in operating margin was predominantly due to an increase in the operating margin in Engineering & Construction, but also higher operating margins in Energy Developments and Offshore Engineering & Operations, partially offset by a reduction in operating margin in the Engineering, Training Services and Production Solutions reporting segment and a decrease in the proportion of group operating margin generated by the high margin Energy Developments reporting segment following the EnQuest demerger.

Net profit

Reported profit for the year attributable to Petrofac Limited shareholders increased 57.8% to US$557.8 million (2009 restated: US$353.6 million). Excluding the gain on the EnQuest demerger of US$124.9 million (2009: nil), profit for the year attributable to Petrofac Limited shareholders increased to US$433.0 million (2009: US$353.6 million), an increase of 26.4% on a like-for-like basis(2). The increase was driven primarily by strong revenue growth in Engineering & Construction along with an increase in net margin due to excellent operational performance, with good progress on our portfolio of projects, including the completion or substantial completion of five large EPC projects during the year and first time profit recognition on a number of projects. The net margin for the group, excluding the gain on the EnQuest demerger, increased to 9.9% (2009: 9.7%), due to net margin improvement in Engineering & Construction and Offshore Engineering & Operations, offset by net margin reduction in the Engineering, Training Services and Production Solutions and Energy Developments reporting segments and an increase in net corporate and other costs. Net corporate and other costs increased due to a reduction in intra-group interest income earned as a result of Petrofac Limited capitalising a loan to Energy Developments as part of the EnQuest demerger, corporate support costs incurred in relation to the demerger and an increase in other shareholder related costs.

EBITDA

Reported EBITDA increased 38.1% to US$759.4 million (2009 restated: US$549.7 million). Excluding the gain on the EnQuest demerger of US$124.9 million (2009: nil), EBITDA increased by 15.4% to US$634.5 million (2009 restated: US$549.7 million), representing an EBITDA margin of 14.6% (2009 restated: 15.0%). Despite an increase in EBITDA margins in the Engineering & Construction and Offshore Engineering & Operations reporting segments, only partially offset by lower margins in the Engineering, Training Services and Production Solutions and Energy Developments reporting segments, the group EBITDA margin was lower due to a reduction in the share of group EBITDA, excluding the effect of corporate, consolidation and elimination adjustments, from the higher margin Energy Developments reporting segment following the EnQuest demerger (from 28.7% in 2009 (restated) to 17.8% in 2010). Engineering & Construction's share of group EBITDA, excluding the effect of corporate, consolidation and elimination adjustments, and the gain on the EnQuest demerger, increased to 72.7% (2009 restated: 60.2%) due to strong revenue and margin growth in the Engineering & Construction reporting segment and the relative decrease in Energy Developments' contribution.

Backlog

The group's combined backlog at the end of 2010 stood at record levels of US$11.7 billion (2009: US$8.1 billion), reflecting high levels of order intake during the year, both in Engineering & Construction (US$6.0 billion) and Offshore Engineering & Operations (US$1.6 billion).

Exchange rates

The group's reporting currency is US dollars. A significant proportion of Offshore Engineering & Operations' revenue is generated in the UKCS and those revenues and associated costs are generally denominated in sterling; however, there was little change in the average exchange rate for the US dollar against sterling for the years ended 31 December 2010 and 2009 and therefore little exchange rate impact on our US dollar reported results. The table below sets out the average and year-end exchange rates for the US dollar and sterling as used by the group for financial reporting purposes.

Interest

Net finance income for the year was lower at US$5.1 million (2009: US$6.4 million) due to lower average net cash balances compared to the prior year (see 'Operating cash flow and liquidity').

Taxation

An analysis of the income tax charge is set out in note 6 to the financial statements. The income tax charge for the year as a percentage of profit before tax was 16.5%. Excluding the gain from the EnQuest demerger (upon which there was no chargeable gain for UK corporate tax purposes), the income tax charge for the year as a percentage of profit before tax was marginally higher than the prior year at 20.3% (2009 restated: 19.3%). The increase was due to Energy Developments' effective tax rate (excluding the gain from the EnQuest demerger) which increased to 50.3% (2009: 30.8%) due to ring fence expenditure supplement no longer being available for claim following the EnQuest demerger. Notwithstanding the adjustments made in the prior year in respect of the applicability of the lower tax rate to the group's projects in Oman, the Engineering & Construction effective tax rate decreased to 16.8% (2009 restated: 18.8%) due to material changes in the jurisdictions in which profits were earned.

Earnings per share

Fully diluted earnings per share increased to 162.46 cents per share (2009: 103.19 cents), an increase of 57.4%, in line with the group's increase in profit for the year attributable to Petrofac Limited shareholders. Excluding the gain on the EnQuest demerger, fully diluted earnings per share increased by 22.2% to 126.09 cents per share (2009: 103.19 cents).

Operating cash flow and liquidity

The net cash generated from operations was US$207.3 million (2009: US$1,276.3 million), representing 32.7% of EBITDA excluding the gain on the EnQuest demerger (2009: 228.3%). The lower net cash inflow compared to the prior year was due principally to an unwinding of advance payments received from customers in relation to Engineering & Construction projects, with the 20% advance payment on our major award in Turkmenistan not being received until after the year-end, and a build up of in work in progress. Much of the increase in work in progress related to one Engineering & Construction project, where billing was delayed pending contractual amendments. The work in progress position on this project began to improve during the second half of 2010 following finalisation of the contractual amendments and we expect it to normalise over the coming months.

At 31 December 2010, the group's net cash was lower at US$975.3 million (2009: US$1,300.1 million) as the net result of cash generated from operating profits before working capital and other non-current changes of US$667 million, less:

·; net working capital outflows of US$451 million, including a reduction in advance payments received from customers and an increase in work in progress in relation to Engineering & Construction projects, totalling US$491 million (in 2009 the group received net working capital inflows of US$714 million, including US$439 million of advance payments on Engineering & Construction projects)

·; investing activities of US$254 million, including:

o the investment of US$100 million to acquire a 15% stake in Seven Energy (12.6% on a fully diluted basis; see page 30 for details)

o the acquisition of TNEI, CO2Deepstore, Scotvalve and Stephen Gillespie Consultants at a cost of US$15 million and the investment of an initial US$8 million for a 20% stake in Gateway Gas Storage (see page 12)

o capital expenditure of US$59 million in relation to Energy Developments' portfolio of assets, including US$26 million on the Don fields prior to the EnQuest demerger and US$16 million on Cendor PM304 near field development

o capital expenditure on other property, plant and equipment of US$72 million, including temporary project camp facilities, office equipment and furniture and site-based vehicles, predominantly in Engineering & Construction

·; financing activities of US$201 million, including:

o payment of the 2009 final dividend and 2010 interim dividend totalling US$132 million

o repayment of interest-bearing loans and borrowings of US$32 million

o financing the purchase of treasury shares for the purpose of making awards under the group's share schemes of US$36 million

·; taxes paid of US$99 million

The group reduced its levels of interest-bearing loans and borrowings to US$87.7 million (2009: US$117.3 million) following scheduled loan repayments in 2010. Despite a reduction in the net assets of the group as a result of the EnQuest demerger, the group's gross gearing ratio fell to 11.3% (2009 restated: 13.1%) reflecting the reduction in interest-bearing loans and borrowings.

The group's total gross borrowings before associated debt acquisition costs at the end of 2010 were US$91.8 million (2009: US$123.1 million), of which 39.5% was denominated in US dollars (2009: 51.0%) and 60.5% was denominated in sterling (2009: 49.0%).

As detailed in note 33 to the financial statements, the group maintained a balanced borrowing profile at 31 December 2010 with 51.7% of borrowings maturing within one year and 48.3% maturing between one and five years (2009: 47.2% and 52.8%). The borrowings repayable within one year include US$28.9 million of bank overdrafts (representing 31.5% of total gross borrowings), which are expected to be renewed during 2011 in the normal course of business (2009: US$46.6 million and 37.9% of total gross borrowings repayable within one year, including US$20.0 million of revolving credit facilities).

None of the Company's subsidiaries are subject to any material restrictions on their ability to transfer funds in the form of cash dividends, loans or advances to the Company.

Capital expenditure

Capital expenditure on property, plant and equipment was lower during the year ended 31 December 2010 at US$116.2 million (2009: US$375.4 million), as almost three-quarters of the capital expenditure in the prior year was in relation to the now demerged Don assets. The principal elements of capital expenditure during the year were:

·; investment in temporary project camps, office improvements, equipment and furniture and vehicles in Engineering & Construction, reflecting the increase in activity levels and personnel, of US$60.1 million

·; additions to Energy Developments' oil & gas assets, including:

o development expenditure on the Don assets prior to demerger of US$26.1 million

o upgrade works on the FPF1 floating production facility of US$7.3 million

Capital expenditure on intangible oil & gas assets during the year was US$15.6 million (2009: US$29.2 million) in respect of capitalised expenditure on near field appraisal wells in relation to Energy Developments' interest in Block PM304, offshore Malaysia.

Shareholders' funds

Total equity at 31 December 2010 was US$779.1 million (2009 restated: US$897.5 million). The main elements of the net movement were: net profit for the year of US$557.9 million, less dividends paid in the year of US$132.0 million, the distribution on the EnQuest demerger of US$544.5 million (see note 11 to the financial statements) and the purchase of treasury shares of US$36.5 million, which are held in the Petrofac Employees Benefit Trust for the purpose of making awards under the group's share schemes (see note 23 to the financial statements).

Return on capital employed(8)

The group's return on capital employed, including the gain on the EnQuest demerger, for the year ended 31 December 2010 was 65.2% (2009: 46.9%).

Dividends and distribution

The Company proposes a final dividend of 30.00 cents per share for the year ended 31 December 2010 (2009: 25.10 cents), which, if approved, will be paid to shareholders on 20 May 2011 provided they were on the register on 26 April 2011. Shareholders who have not elected (before 4 March 2011) to receive dividends in US dollars will receive a sterling equivalent of 18.42 pence per share.

Together with the interim dividend of 13.80 cents per share (2009: 10.80 cents), equivalent to 8.91 pence, this gives a total dividend for the year of 43.80 cents per share (2009: 35.80 cents), an increase of 22.3%.

In addition to the interim and final dividends, the Company made a non-cash distribution of one EnQuest share for every one Petrofac Limited share held immediately prior to the demerger, which for accounting purposes had a total fair value of US$553.3 million, equivalent to 160.08 cents per share.

Notes

(1) Net profit for the year attributable to Petrofac Limited shareholders.

(2) Like-for-like net profit growth excludes the gain of US$124.9 million on the EnQuest demerger and the trading net profit from Energy Developments' demerged assets of US$12.7 million for the year ended 31 December 2009 and US$2.1 million for the year ending 31 December 2010.

(3) Backlog consists of the estimated revenue attributable to the uncompleted portion of lump-sum engineering, procurement and construction contracts and variation orders plus, with regard to engineering services and facilities management contracts, the estimated revenue attributable to the lesser of the remaining term of the contract and, in the case of life-of-field facilities management contracts, five years. The group uses this key performance indicator as a measure of the visibility of future earnings. Backlog is not an audited measure.

(4) The group reports its financial results in US dollars and, accordingly, will declare any dividends in US dollars together with a Sterling equivalent. Unless shareholders have made valid elections to the contrary, they will receive any dividends payable in Sterling. Conversion of the 2010 final dividend from US dollars into Sterling is based upon an exchange rate of US$1.6290:£1, being the Bank of England Sterling spot rate as at midday on 4 March 2011.

(5) Contracts where the group takes full responsibility for managing a customer's asset and is responsible for the safety case of the asset, reporting to the UK Department of Energy and Climate Change.

(6) Pass-through revenue refers to the revenue recognised from low or zero margin third-party procurement services provided to customers.

(7) For example, Brent, a benchmark crude oil, averaged US$79.50 per barrel for 2010 (2009: US$61.67 per barrel).

(8) ROCE is calculated as EBITA (earnings before interest, tax, amortisation and impairment charges, calculated as EBITDA less depreciation per note 3 to the financial statements) divided by average capital employed (being total equity and non-current liabilities per the consolidated balance sheet).

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2010

 The attached notes 1 to 35 form part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2010

 The attached notes 1 to 35 form part of these consolidated financial statements.

The financial statements on pages 108 to 167 were approved by the Board of Directors on 4 March 2011 and signed on its behalf by Keith Roberts - Chief Financial Officer.

The attached notes 1 to 35 form part of these consolidated financial statements.

The attached notes 1 to 35 form part of these consolidated financial statements.

The attached notes 1 to 35 form part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2010

Attributable to shareholders of Petrofac Limited

* Shares held by Petrofac Employee Benefit Trust.

The attached notes 1 to 35 form part of these consolidated financial statements.

Attributable to shareholders of Petrofac Limited