Petrofac Regulatory News (PFC)

Press Release

27 February 2013

PETROFAC LIMITED

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012

·; Revenue up 9% to US$6.3 billion (2011: US$5.8 billion)

·; Net profit(1) up 17% to US$632 million (2011: US$540 million)

·; Earnings per share (diluted) up 17% to 183.88 cents (2011: 157.13 cents)

·; Final dividend of 43.00 cents (28.40 pence(2)) per share (2011: 37.20 cents); full year dividend up 17% to 64.00 cents per share (2011: 54.60 cents)

·; Backlog(3) up 9% to US$11.8 billion at 31 December 2012 (2011: US$10.8 billion)

Ayman Asfari, Petrofac's Group Chief Executivecommented on the final results:

"We have delivered another year of strong financial results and good operational performance. Our portfolio of existing projects is in excellent shape, which we expect will help us to maintain our sector-leading onshore margins, and we see many new and attractive opportunities across our business.  

"Petrofac has a clear strategy for long-term sustainable growth based on three key drivers: expanding our existing business into new geographies; developing our leading EPC offering offshore; and delivering on our plans for Integrated Energy Services. To achieve this we have continued to build our capability and strengthen the team across the Group. We are expanding in new markets, such as Mexico, where we now have four long-term contracts; we have laid out a clear plan to progress our offshore strategy; and we have achieved significant milestones on our portfolio of Integrated Energy Services projects, which are building long-term sustainable earnings for the Group.

"I am excited and confident about our prospects for the coming year and beyond. We expect to deliver good growth in net profit in 2013 and our strategy underpins long-term earnings growth, including the achievement of our 2015 earnings target(4)."

OPERATIONAL HIGHLIGHTS

ENGINEERING, CONSTRUCTION, OPERATIONS & MAINTENANCE (ECOM)

Onshore Engineering & Construction

·; Completed the Kauther project in Oman, introduced hydrocarbons on the Asab oil field development in Abu Dhabi and substantially completed the Karan project in Saudi Arabia

·; The gas processing facility at El Merk in Algeria is ready for commencement of initial production

·; Made good progress across the rest of our portfolio, including on the GASCO 4th NGL train in Abu Dhabi and the South Yoloten gas field development in Turkmenistan, which remain on schedule for completion in 2013

·; Achieved order intake in 2012 of US$3.0 billion, securing major new awards in Iraq, Kuwait and Saudi Arabia

Offshore Projects & Operations

·; Delivered record activity levels during 2012, from both long-term operations support contracts and offshore capital projects

·; Achieved order intake of US$2.2 billion, including: operations and maintenance projects in Iraq for BP and South Oil Company; engineering and construction services to all of Apache's UK North Sea assets; and a platform refurbishment contract for PETRONAS in Malaysia

·; Mapped out a clear plan to build a differentiated offshore EPIC business that will give access to top tier projects, including deepwater and SURF, supported by building our own installation capability, with a capital outlay of around US$1 billion over the next five years

Engineering & Consulting Services

·; Awarded a number of conceptual and front end engineering and design (FEED) studies in Africa and the CIS

·; Acquired KW Limited, a high-end subsea pipeline consulting and engineering services business which will enable us to strengthen our leading engineering proposition offshore

INTEGRATED ENERGY SERVICES (IES)

·; Achieved gas export on the Berantai Risk Service Contract in Malaysia, following full field development, including FPSO topsides upgrade and modification, in less than 21 months

·; Made a good start on the Magallanes and Santuario Production Enhancement Contracts (PECs) in Mexico and were awarded a further two PECs for the Pánuco (in conjunction with Schlumberger) and Arenque contracts areas

·; Completed the upgrade of the MOPU for the West Desaru field in Malaysia and made significant progress on the second phase of Cendor; both are expected to commence production in 2013

·; Entered into a strategic alliance agreement with Bowleven to develop the Etinde Permit in Cameroon, subject to an agreed Field Development Plan and other conditions

OUTLOOK

In ECOM, given our competitive positioning and a strong pipeline of bidding opportunities for onshore engineering and construction projects, particularly in the Middle East, Africa and the Commonwealth of Independent States, we anticipate growth in our Onshore Engineering & Construction backlog during 2013. We enter 2013 with a record backlog in Offshore Projects & Operations, and we continue to see high levels of bidding activity in both operations support contracts and offshore capital projects. We expect to maintain our sector-leading net margins in Onshore Engineering & Construction and grow our margins in Offshore Projects & Operations over the medium-term as we undertake more offshore capital projects.

In Integrated Energy Services, we remain focused on building our execution track record, with important delivery milestones throughout 2013 on our existing projects. We are making good progress on our transition activities on the Pánuco and Arenque contract areas in Mexico and we expect to commence field operations during the first half of 2013. On Block PM304 in Malaysia, we expect to commence production from the West Desaru fault block and the second phase of Cendor during the year, which should substantially increase production. We continue to see strong industry demand for commercially innovative integrated oilfield services, and we are looking at a number of additional opportunities with hydrocarbon resource holders (both National Oil Companies and niche explorers).

Overall, we are confident in our prospects for the coming year and beyond. We expect to deliver good growth in net profit in 2013 and remain on target to more than double our recurring 2010 Group earnings by 2015.

Notes

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

(2) 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 2012 final dividend from US dollars into sterling is based upon an exchange rate of US$1.5142:£1, being the Bank of England sterling spot rate as at midday on 26 February 2013.

(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, operations, maintenance and Integrated Energy Services contracts, the estimated revenue attributable to the lesser of the remaining term of the contract and five years. Backlog will not be booked on Integrated Energy Services contracts where the Group has entitlement to reserves. The Group uses this key performance indicator as a measure of the visibility of future revenue. Backlog is not an audited measure.

(4) Our Group earnings target is net profit after tax of more than US$862 million by 2015, a doubling of 2010 recurring earnings.

Ends

Analyst presentation:

A presentation for analysts will be held at 9.30am today, which will be webcast live via http://cache.cantos.com/webcast/static/ec2/4000/5275/9523/10717/Lobby/default.htm

Disclaimer:

This announcement contains forward-looking statements relating to the business, financial performance and results of Petrofac and the industry in which Petrofac operates. These statements may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast" and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither Petrofac nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.

For further information contact:

Petrofac Limited +44 (0) 20 7811 4900

Jonathan Low, Head of Investor Relations

Jonathan Edwards, Investor Relations Officer

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

Stephen Malthouse

Martin Robinson

petrofac@tulchangroup.com

Notes to Editors

Petrofac

Petrofac is a leading international service provider 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).

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 more than 18,000 employees, Petrofac operates out of seven strategically located operational centres, in Aberdeen, Sharjah, Abu Dhabi, Woking, Chennai, Mumbai and Kuala Lumpur and has a further 24 offices worldwide.

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 2012. Page number references refer to the full Annual Report when available.)

Operating review

Segmental analysis

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

(1)Profit from operations before tax and finance costs.

(2)Operating profit and EBITDA includes the Group's share of results of associates.

(3)Profit for the year attributable to Petrofac Limited shareholders.

Engineering, Construction, Operations & Maintenance (ECOM)Engineering, Construction, Operations & Maintenance designs and builds oil and gas facilities and operates, manages and maintains them on behalf of our customers.

Onshore Engineering & Construction

Onshore Engineering & Construction delivers onshore engineering, procurement and construction projects. We are predominantly focused on markets in the Middle East, Africa and the Commonwealth of Independent States.

During 2012, we completed the Kauther gas compression project in Oman, introduced hydrocarbons on the Asab oil field development in Abu Dhabi and substantially completed the Karan utilities and cogeneration project in Saudi Arabia. The El Merk gas processing facility in Algeria is ready for the introduction of hydrocarbons. We made good progress across our portfolio of projects during 2012, including on the GASCO 4th NGL train in Abu Dhabi and the South Yoloten gas field development in Turkmenistan, which remain on schedule for completion in 2013. Following the recent terrorist attack at the In Amenas natural gas site in Algeria, at the request of our customer, we have evacuated our staff on a temporary basis from the In Salah southern fields development in that country. We will recommence activities on the site when agreed with our customer.

New awards

Order intake during the year totalled US$3.0 billion and included the following major awards:

Badra oilfield development project, Iraq

In February 2012, we were awarded a US$330 million lump-sum EPC contract by Gazprom for the first phase of the Badra oilfield development project. We are providing detailed design, engineering, procurement, construction, pre-commissioning, commissioning and start-up work on the Badra development's central processing facility, which comprises three crude oil processing trains. The first phase of the project is expected to come on stream in the second half of 2013, with final completion scheduled during the second half of 2015.

Petro Rabigh Phase II petrochemical expansion project, Saudi Arabia

In July 2012, we announced the award of two EPC contracts for Petro Rabigh's (a joint venture between Saudi Aramco and Sumitomo Chemical Co Ltd) Phase II petrochemical project in Saudi Arabia. The EPC contracts are for tank farms in the north and south areas and common utilities. The projects, which are scheduled to be undertaken within 36 months, will be delivered from our Saudi Arabia office in Al-Khobar.

Power distribution network, Kuwait

In September 2012, we were awarded a US$200 million EPC contract by Kuwait Oil Company (KOC) for a new power distribution network in north Kuwait, which is expected to be completed in 24 months. Under the terms of the contract, we will construct three new substation buildings as well as laying approximately 900 kilometres of buried cable to connect the site's substations to the distribution network. When complete, the new facilities will provide a more robust power supply to support the development of the onshore oil fields in north Kuwait.

Jazan refinery and terminal project, Saudi Arabia

In December 2012, we were awarded two EPC packages for Saudi Aramco's Jazan Refinery and Terminal project, with a combined value of around US$1.4 billion. When complete, the refinery will produce around 400,000 barrels of oil per day and have associated terminal facilities on the Red Sea near Jazan in the southwest of the Kingdom of Saudi Arabia. Petrofac's Saudi Arabia office will lead the delivery of the work scope which covers tank farms in the north and south areas of the development. These are some of the first major awards made by Saudi Aramco under its In-Kingdom EPC programme and both packages are scheduled to be undertaken within three years.

Results

Revenue for the year increased by 5.1% to US$4,358 million (2011: US$4,146 million), reflecting an increase in activity levels compared with the prior year. Five projects contributed over three-quarters of the revenue for the reporting segment: the South Yoloten gas plant in Turkmenistan, the Asab onshore oil field development in Abu Dhabi, the El Merk gas processing facility and the In Salah southern fields development in Algeria and the gas sweetening facilities project in Qatar.

EBITDA decreased by 0.8% to US$580 million US dollars with the EBITDA margin slightly lower than the prior year at 13.3% (2011: 14.1%). While we had high levels of activity and significant margin delivery on contracts which are nearing completion, we also saw increased bid costs due to the high level of bidding activity in 2012.

Net profit for the year increased by 3.5% to US$479 million (2011: US$463 million), representing a net margin of 11.0%, broadly in line with the prior year (2011: 11.2%). The increase in net profit reflects the movement in EBITDA and a decrease in the effective tax rate for the reporting segment.

Onshore Engineering & Construction headcount increased from 6,600 to 7,800 reflecting the increase in activity levels.

Onshore Engineering & Construction backlog stood at US$5.1 billion at 31 December 2012 (2011: US$6.4 billion).

Offshore Projects & OperationsOffshore Projects & Operations, which includes our Offshore Capital Projects service line, specialises in both offshore engineering and construction services, for greenfield and brownfield projects, and the provision of operations and maintenance support, onshore and offshore.

Offshore Projects & Operations, which includes our Offshore Capital Projects service line, provides engineering and construction services at all stages of greenfield and brownfield offshore projects. In addition, through the provision of operations support services, we deliver production and maintenance support and extend field life. The majority of Offshore Projects & Operations' activities are currently in the UK Continental Shelf (UKCS), but a growing proportion of activities are outside the UK, including in the United Arab Emirates, Iraq, Malaysia and Thailand. Services are predominantly provided on a reimbursable basis, but often with incentive income linked to the successful delivery of performance targets. Many of our production and maintenance contracts are long-term (typically three to five years) and in the case of the provision of Duty Holder1 services are generally open-ended. Increasingly, we are delivering our engineering and construction services on a lump-sum basis on offshore capital projects, as we progress our strategy of taking our onshore EPC capability offshore.

We have delivered record activity levels in Offshore Projects & Operations during 2012, from both long-term operations support contracts and offshore capital projects, including work on a number of projects secured or extended during 2011 and 2012, including:

- engineering and construction services for Apache

- Duty Holder services for Centrica's Kittiwake platform

- the FPF3 (Jasmine Venture) Duty Holder contract in Thailand

- a maintenance contract for BP on the Rumaila field in Iraq

- upgrade of the FPF1 floating production facility for the Greater Stella Area project (see Integrated Energy Services)

- the FPF5 (Ocean Legend) modification and upgrade prior to deployment on the West Desaru fault block in Malaysia (see Integrated Energy Services)

- completion of the upgrade and modification of the FPSO Berantai, which is now deployed in the Berantai field in Malaysia (see Integrated Energy Services)

- In addition, we have now achieved sufficient progress to commence profit recognition on the Laggan-Tormore gas plant on Shetland in the UK.

New awards

Offshore Projects & Operations secured a number of contract wins and extensions during 2012, with an order intake totalling US$2.2 billion. New wins during the year included:

Bekok-C platform refurbishment, Malaysia

In May 2012, we were awarded a US$220 million contract by PETRONAS Carigali Sdn Bhd, a subsidiary of PETRONAS, the Malaysian national oil company, for the refurbishment of the Bekok-C platform, located in the south-eastern part of the Malay basin. The project will be executed on an engineering, procurement, construction, installation and commissioning (EPCIC) alliance basis. Bekok-C is a manned platform serving as a gas processing and compression hub exporting gas from the Guntong, Tiong and Bekok fields of Block PM9 in addition to production of crude oil and gas from its own wells. Under the terms of the refurbishment project we will provide EPCIC services to the platform with the overall project expected to be completed in around 15 months.

Apache engineering and construction services, UK

In July 2012, we announced a three-year contract (with two optional one-year extensions), worth approximately US$160 million per annum, to provide onshore engineering and both onshore and offshore construction services to all of the Apache North Sea assets including the Beryl Alpha and Bravo platforms in the northern North Sea and the Scottish Area Gas Evacuation (SAGE) gas processing plant at St Fergus, Aberdeenshire. The contract represents an extension to the previous service contract which Petrofac held for Apache's Forties platforms. Under the terms of the new contract our scope will also include topside brownfield and greenfield activity in addition to interfacing with subsea contractors.

Inspection, maintenance and repair contract, Iraq

In November 2012, we won a further inspection, maintenance and repair contract for the Rumaila oil field in southern Iraq with our joint venture partner, China Petroleum Engineering & Construction Corporation (CPECC). The US$229 million contract was awarded by BP Iraq NV (BP), via the Rumaila Operating Organisation (ROO), following a competitive tender. The three-year contract, which is worth more than US$160 million to Petrofac, covers the inspection, maintenance and repair of degassing stations, rotating machinery and cluster pumping stations and came into effect on 1 November 2012.

Offshore operations contract, Iraq

In August 2012, we secured a contract worth approximately US$100 million to provide offshore operations and maintenance services for the Iraq Crude Oil Expansion Project. Awarded by Iraq's South Oil Company (SOC), the 12-month contract commenced following a three-month mobilisation period. There is also additional scope for the contract to be extended via two one-year contract extension options. Offshore Projects & Operations will provide operations and maintenance services for the new oil export facilities situated approximately 60 kilometres offshore the Al Fao Peninsula in southern Iraq. The facilities include: an offshore platform, metering station, single point moorings, subsea pipelines and tanker operations.

Results

Reported revenue for the year increased by 12.1% to US$1,403 million (2011: US$1,252million), reflecting high activity levels on both long-term operations support contracts and offshore capital projects.

Around 70% of Offshore Projects & Operations' revenue was generated in the UK and those revenues are generally denominated in sterling. The average US dollar to sterling exchange rate was broadly in line with the prior year.

Notwithstanding that the prior year benefitted from a provision release following completion of a long-term maintenance services contract, net profit increased by 40.1% to US$61 million (2011: US$44 million), reflecting the high levels of activity and first time profit recognition on the Laggan-Tormore gas plant project.

Net margin increased to 4.3% (2011: 3.5%), due to an increasing proportion of higher margin non-UK business and an increasing proportion of lump-sum offshore capital projects, including first time profit recognition on the Laggan-Tormore gas plant on Shetland.

Headcount increased to 4,300 at 31 December 2012, reflecting the higher levels of activity (2011: 4,100).

Offshore Projects & Operations backlog increased to US$3.5 billion at 31 December 2012 (2011: US$2.7 billion), following the new contract wins and extensions during 2012.

Engineering & Consulting Services

Engineering & Consulting Services operates as our centre of technical engineering excellence. From offices in the UK, India and Malaysia, we support the life cycle of oil and gas assets. This is through engineering studies, including conceptual, front-end engineering and design (FEED) and detailed design work, across onshore and offshore oil and gas fields, to external customers and in support of ECOM and IES projects, primarily on a reimbursable basis.

We secured a number of conceptual and FEED studies during the year which has led to increased activity levels. For example, we were awarded a FEED study on behalf of Rialto Energy and Société Nationale d'Opérations Pétrolières de la Côte d'Ivoire for the Gazelle field in Côte d'Ivoire.

During the year, we established an engineering office in Lagos to support our Nigerian operations and we are evaluating options to establish further engineering offices in other countries to enhance our local delivery capabilities.

Acquisitions

As announced in February 2012, we acquired KW Limited, a high-end subsea engineering and consulting business which complements our existing skills in Engineering & Consulting Services and will enable us to strengthen our leading engineering proposition offshore. KW Limited has an extensive track record, ranging from conventional subsea tie-back projects, to deepwater projects, high-pressure high-temperature (HPHT) wells and extreme natural environments.

Results

Reported revenue for the year increased 19.1% to US$248 million (2011: US$208 million), reflecting the increase in activity levels. Net profit was marginally lower at US$29 million (2011: US$31 million), as Engineering & Consulting Services recognised a US$3 million loss (being 50%) on fair value changes in Seven Energy warrants (2011: US$3 million gain; the other 50% of the fair value changes were recognised in Integrated Energy Services; see note 12 to the financial statements for more detail).

Headcount was higher at 31 December 2012 at 2,800 (31 December 2011: 2,300), reflecting the increase in activity levels, particularly in our engineering offices in India and Woking, UK.

Engineering & Consulting Services' backlog increased to US$0.2 billion at 31 December 2012 (2011: US$nil).

Integrated Energy Services

Integrated Energy Services comprises three discrete but connected service lines, Developments, Production Solutions and Training Services. Where we can leverage our service capabilities to enhance value, mitigate risks and reduce costs, Integrated Energy Services provides a fully integrated service for hydrocarbon 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 financial capital.

Our service offering is underpinned by our ability to develop resource holders' local capability through the provision of technical skills training with competency development and assurance frameworks. For example, in January 2012, we were awarded a five-year contract to run Saudi Petroleum Services Polytechnic Centre for Construction Skills and Drilling training. We received our first intake of students in April, which included local workers for Aramco along with staff from its contractor base.

Integrated Energy Services deploys its services to meet the individual needs of customers using a range of commercial frameworks, including: Production Enhancement Contracts (PEC), Risk Service Contracts (RSC) and traditional upstream equity investment models including both Production Sharing Contracts (PSC) and concession agreements.

Production Enhancement Contracts

During the year, we were awarded the Pánuco and Arenque PECs in Mexico by PEMEX, following a competitive bidding process. We expect to commence field operations on the Pánuco contract area, jointly with Schlumberger, and on the Arenque offshore contract during the first half of 2013.

We commenced field operations on the Magallanes and Santuario PECs in Mexico on 1 February 2012 and we now have three drilling rigs and two workover rigs active on the blocks. The drilling programme on the Ticleni PEC for Petrom in Romania is progressing with one rig operational on the field with additional activity focusing on sidetracks and well workovers.

We earn a tariff per barrel on the PECs for an agreed level of baseline production and an enhanced tariff per barrel on incremental production. We earned tariff income on a total of 5.2 million barrels of oil equivalent (mboe) (2011: 1.3 mboe) during the year, which included eleven months of field operations on the Magallanes and Santuario PECs and our second full year of operations on the Ticleni PEC.

Risk Service ContractsIn January 2011, we secured our first RSC in Malaysia, to lead the development of the Berantai field, offshore Peninsular Malaysia, for PETRONAS. We have a 50% interest in the RSC, alongside local partner SapuraKencana.

Under the terms of the RSC, we receive a rate of return linked to our performance against an agreed incentive structure, including project costs, timing of first gas and sustained gas delivery measured six months after project completion, with an ongoing incentive structure based upon operational uptime. We achieved a key milestone on the Berantai RSC in October 2012, with the commencement of processing and export of gas.

In November 2012, we announced a strategic alliance agreement with Bowleven to develop the Etinde Permit in Cameroon. Subject to an agreed Field Development Plan and satisfaction of certain other conditions, including co-venturer and government approvals, the strategic alliance's risk service arrangements envisage that Petrofac will subsequently execute the planned development through the provision of project management, engineering, procurement and construction services.

Equity Upstream InvestmentsOn Block PM304 in Malaysia, the upgraded West Desaru Mobile Offshore Production Unit (MOPU) (formerly the Ocean Legend) recently sailed from the conversion yard and the conductor support structure is presently being constructed. Also on Block PM304, we have made significant progress on the second phase of Cendor, with installation of all in-field facilities and good progress made on the floating, production, storage and offloading (FPSO) vessel. We expect production from West Desaru and the second phase of Cendor to commence in 2013.

In Tunisia, we have drilled two additional production wells during the year, which are expected to extend the production plateau for the Chergui gas plant.

In October 2011, we signed an agreement that will see the deployment of the floating production facility FPF1 ('the FPF1') on the Greater Stella Area development in the North Sea. Following the FDP submission in early 2012, we finalised the sale of 75% of the share capital in the company holding the FPF1 to Ithaca Energy Inc ('Ithaca') and Dyas BV. Upon first production we will acquire a combined 20% interest in the Greater Stella Area from the other co-venturers in the development, consisting of three UKCS licences. The Greater Stella Area development is expected to commence production in 2014.

Our net entitlement from production for the year from our PSC and concession agreements (which currently includes the first phase of Block PM304 (Cendor) and the Chergui gas plant) was 1.4 mboe (2011: 1.7 mboe).

Seven EnergyWe have a 24.1%2 interest in Seven Energy International Limited, a leading Nigerian gas development and production company. Seven Energy commenced production from the Uquo field in late 2012 and Stubb Creek will come on-stream during 2013.

Results

Integrated Energy Services' revenue increased by 38.6% to US$719 million (2011: US$519 million), reflecting substantial progress on the Berantai RSC and commencement of the Magallanes and Santuario PECs.

Net profit for the year increased 293.4% to US$89 million (2011: US$22 million), reflecting first time profit recognition on the Berantai RSC, the profit from the sale of 75% of the share capital in the company holding the FPF1 and the commencement of the Magallanes and Santuario PECs. As a result of loss of control over the company holding the FPF1, which arises on sale of 75% of the share capital, accounting standards require us to fair value our remaining investment in associate and recognise the uplift in the fair value in the profit and loss account. The total contribution from the FPF1 transaction was approximately US$36 million.

Headcount increased to 3,000 at 31 December 2012 (2011: 2,300), primarily due to the commencement of the Magallanes and Santuario PECs and development of our projects in Malaysia.

Integrated Energy Services' backlog stood at US$3.0 billion at 31 December 2012 (2011: US$1.6 billion).

Financial review

RevenueGroup revenue increased by 9.0% to US$6,324 million (2011: US$5,801 million) driven by growth in revenues in all four reporting segments. 64% of the Group's revenues were from Onshore Engineering & Construction, which grew 5.1% in the year. The strongest growth was in Integrated Energy Services, reflecting significant progress on the Berantai Risk Service Contract (RSC) and the commencement of the Magallanes and Santuario Production Enhancement Contracts (PECs) in Mexico. Revenues from Engineering & Consulting Services and Offshore Projects & Operations also grew strongly due to high levels of activity.

Operating profit3Group operating profit for the year increased 11.6% to US$758 million (2011: US$680 million), representing an operating margin of 12.0% (2011: 11.7%). The increase in operating margin was principally a function of the strong growth in the higher margin Integrated Energy Services reporting segment.

Net profitReported profit for the year attributable to Petrofac Limited shareholders increased 17.2% to US$632 million (2011: US$540 million). The increase was driven predominantly by: Integrated Energy Services, due to first-time profit recognition on the Berantai RSC, the profit from the sale of 75% of the share capital in the company holding the FPF1 and the commencement of the Magallanes and Santuario PECs; Onshore Engineering & Construction, reflecting high activity levels and significant margin delivery on certain contracts, which are reaching completion; and Offshore Projects & Operations, due to high levels of activity, an increasing proportion of higher margin non-UK business and an increasing proportion of lump-sum offshore capital projects, including first-time profit recognition on the Laggan-Tormore gas plant on Shetland. The net margin for the Group increased to 10.0% (2011: 9.3%), reflecting particularly strong growth in the higher margin Integrated Energy Services reporting segment.

Earnings Before Interest, Tax, Depreciation, Amortisation and Impairment (EBITDA)3

EBITDA increased 16.9% to US$888 million (2011: US$760 million), representing an EBITDA margin of 14.0%, an increase from the prior year (2011: 13.1%). EBITDA margins were lower in Onshore Engineering & Construction at 13.3% (2011: 14.1%), reflecting significant margin delivery on contracts nearing completion offset by increased bid costs in light of a step-up in tendering activity in the year. The EBITDA margin for Offshore Projects & Operations increased from 4.9% to 6.8% due to an increasing proportion of higher margin non-UK business and an increasing proportion of lump-sum offshore capital projects. EBITDA margin was significantly higher in Integrated Energy Services at 27.3% (2011: 17.3%), primarily due to first-time profit recognition on the Berantai RSC, the profit resulting from the sale of 75% of the share capital in the company holding the FPF1 and the commencement of the Magallanes and Santuario PECs. While EBITDA margins were lower in Onshore Engineering & Construction, which contributes the majority of the Group's EBITDA (64% in 2012; 74% in 2011), this was more than offset by strong growth in Integrated Energy Services, which accounted for 22% of the Group's EBITDA in 2012 (2011: 12%).

BacklogThe Group's backlog increased to US$11.8 billion at 31 December 2012 (2011: US$10.8 billion), due to new projects in Integrated Energy Services and Offshore Projects & Operations more than offsetting a reduction in Onshore Engineering & Construction backlog.

Exchange ratesThe Group's reporting currency is US dollars. A significant proportion of Offshore Projects & Operations' revenue is generated in the UKCS (approximately two-thirds) 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 2012 and 2011 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.

InterestNet finance income for the year increased to US$7 million (2011: US$1 million), due to the unwinding of discounting of long-term receivables on the Berantai RSC.

TaxationOur policy in respect of tax is to:

·; operate in accordance with the terms of the Petrofac Code of Conduct

·; act with integrity in all tax matters

·; work together with the tax authorities in jurisdictions where we operate to build positive long-term relationships

·; where disputes occur, to address them promptly

·; manage tax in a proactive manner to maximise value for our customers and shareholders

Responsibility for the tax policy and management of tax risk rests with the Chief Financial Officer and Group Head of Tax who report the Group's tax position regularly to the Group Audit Committee. The group's tax affairs and the management of tax risk are delegated to a global team of tax professionals.

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 lower at 17.7% (2011: 20.7%). A number of factors have impacted the effective tax rate including a net release of tax provisions held in respect of income taxes, the recognition of tax losses previously unrecognised, and the mix of profits in the jurisdictions in which profits are earned.

Earnings per share

Fully diluted earnings per share increased to 183.88 cents per share (2011: 157.13 cents), an increase of 17.0%, in line with the Group's increase in profit for the year attributable to Petrofac Limited shareholders.

Operating cash flow and liquidity

Cash used in operations was US$315 million (2011: US$1,423 million generated).

The decrease in cash generated from operations was due principally to the cash generated from operating profits before working capital and other non-current items of US$907 million (2011: cash generated US$796 million) less net working capital outflows of US$918 million (2011: US$757 million inflow) and an increase in customer receivables within 'Other financial asset' of US$300 million (2011: US$130 million) in relation to the Berantai RSC and in respect of development of the Greater Stella Area.

The main net working capital outflows included an increase in trade and other receivables of US$549 million (2011: US$301 million), a reduction in accrued contract expenses of US$525 million (2011: US$7 million), partly offset by an increase in trade and other payables of US$253 million (2011: US$735 million).

The other key movements in cash included:

·; net cash outflows from investing activities of US$544 million (2011: US$523 million), including:

o capital expenditure on Integrated Energy Services projects of US$433 million, predominantly in relation to the acquisition and upgrade of supporting infrastructure and field development costs in relation to PECs and development expenditure on Block PM304, offshore Malaysia

o other capital expenditure of US$136 million, including, assets under construction, leasehold improvements and office furniture and equipment

o investment of a further US$25 million in Seven Energy (see note 12 to the financial statements for details)

o proceeds from the sale of 75% of the share capital in the company holding the FPF1

·; net cash outflows from financing activities of US$36 million (2011: US$227 million), including:

o payment of the 2011 final dividend and 2012 interim dividend totalling US$201 million

o financing the purchase of treasury shares for the purpose of making awards under the Group's share schemes of US$76 million

o US$303 million of proceeds drawn under the Group's revolving credit facility (see note 24 to the financial statements) less repayment of Group's term loan of US$43 million

·; net income taxes paid of US$83 million (2011: US$157 million)

The net result of the above was the Group's net cash stood at US$265 million at 31 December 2012 (2011: US$1,495 million). Following the drawdown under the Group's revolving credit facility, interest-bearing loans and borrowings increased to US$349 million (2011: US$77 million), resulting in the Group's gross gearing ratio increasing to 23% (2011: 7%).

The Group's total gross borrowings before associated debt acquisition costs at the end of 2012 were US$360 million (2011: US$80 million). The Group entered into a US$1.2 billion five-year committed revolving credit facility in September 2012, which is available for general corporate purposes. The majority of interest bearing loans and borrowings at 31 December 2012 is in relation to the revolving credit facility (see note 24 to the financial statements).

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 expenditureExpenditure capitalised on property, plant and equipment totalled US$430 million in the year ended 31 December 2012 (2011: US$435 million). The principal elements of capital expenditure during the year were:

·; capital expenditure on Integrated Energy Services projects of US$309 million, predominantly in relation to the acquisition and upgrade of supporting infrastructure and field development costs in relation to PECs

·; expenditure on assets under construction of US$53 million, which includes expenditures incurred in relation to our new office building in the united Arab Emirates and the Group's Enterprise Resource Planning project

·; other capital expenditure of US$68 million, including leasehold improvements and office furniture and equipment

Capital expenditure on intangible oil and gas assets during the year was US$165million (2011: US$40million) including development costs in relation to Integrated Energy Services' interest in Block PM304, offshore Malaysia.

Shareholders' fundsTotal equity at 31 December 2012 was US$1,550 million (2011: US$1,115 million). The main elements of the net movement were: net profit for the year of US$630 million, less dividends paid in the year of US$198 million and the purchase of treasury shares of US$76 million, which are held in the Petrofac Employees Benefit Trust for the purpose of making awards under the Group's share schemes (see note 22 to the financial statements).

Return on capital employedThe Group's return on capital employed for the year ended 31 December 2012 was lower at 46% (2011: 62%), in part reflecting the Group's deployment of capital in the Integrated Energy Services reporting segment.

DividendsThe Company proposes a final dividend of 43.00 cents per share for the year ended 31 December 2012 (2011: 37.20 cents), which, if approved, will be paid to shareholders on 24 May 2013, provided they were on the register on 19 April 2013. Shareholders who have not elected (before 26 February 2013) to receive dividends in US dollars will receive a sterling equivalent of 28.40 pence per share.

Together with the interim dividend of 21.00 cents per share (2011: 17.40 cents), equivalent to 13.45pence, this gives a total dividend for the year of 64.00 cents per share (2011: 54.60cents), an increase of 17.2%, in line with the increase in net profit.