Petrofac Regulatory News (PFC)

6 Sep 2007 07:01

Petrofac Limited06 September 2007 PETROFAC LIMITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Petrofac Limited (Petrofac, the group or the Company), a leading internationalprovider of facilities solutions to the oil & gas production and processingindustry, today announces its interim results for the six months ended 30 June2007. FINANCIAL HIGHLIGHTS* • Revenue up 14% to US$1,057 million (2006: US$927 million) • EBITDA(1) up 55% to US$137.3 million (2006: US$88.8 million) • Net profit(2) up 47% to US$77.2 million (2006: US$52.6 million) • First half order intake(3) of US$0.6 billion (2006: US$1.0 billion) with backlog(4) of US$3.9 billion at 30 June 2007 (31 December 2006: US$4.2 billion) • Earnings per share (diluted) up 47% to 22.36 cents (2006: 15.23 cents) • Interim dividend up 104% to 4.90 cents (2.44 pence(5)) per share (2006: 2.40 cents) * continuing operations Commenting on the results, Ayman Asfari, Petrofac's Group Chief Executive, said: "I am delighted to be able to report that Petrofac has continued to perform wellin the first half of 2007. Continued excellent project execution allowed ourEngineering & Construction division to deliver another period of strong netmargins and profit. Prospects for new contracts remain strong and we areconfident of awards before the end of the year that will underpin sustainedrevenue growth in future years. We also achieved strong growth in revenue andprofit in the Operations Services division, in part, due to the commencement ofour facilities and well management contract with Dubai Petroleum, and in theEnergy Developments division, with a strong contribution from the Cendor field.With strong demand for our services, we are confident that the group is wellpositioned to deliver 2007 results ahead of expectations and excellent growth in2008 and beyond." Notes (1) EBITDA means earnings before interest, tax, depreciation and amortisationand is calculated as profit from continuing operations before tax and netfinance costs adjusted to add back charges for depreciation, amortisation andimpairment. (2) Net profit for the period attributable to Petrofac Limited shareholders. (3) Order intake comprises new contracts awarded, growth in scope of existingcontracts and the rolling increment attributable to contracts which extendbeyond five years. Order intake is not an audited measure. (4) Backlog consists of the estimated revenue attributable to the uncompletedportion of lump-sum engineering, procurement and construction contracts andvariation orders plus, with regard to engineering services and facilitiesmanagement contracts, the estimated revenue attributable to the lesser of theremaining term of the contract and, in the case of life-of-field facilitiesmanagement contracts, five years. The group uses this key performance indicatoras a measure of the visibility of future earnings. Backlog is not an auditedmeasure. (5) The group reports its financial results in US dollars and, accordingly, willdeclare any dividends in US dollars together with a Sterling equivalent. Unlessshareholders have made valid elections to the contrary, they will receive anydividends payable in Sterling. Conversion of the 2007 interim dividend from USdollars into Sterling is based upon an exchange rate of US$2.0107:£1, being theBank of England Sterling spot rate as at midday on 5 September 2007. Ends For further information, please contact: Petrofac Limited +44 (0) 20 7811 4900Ayman Asfari, Group Chief ExecutiveKeith Roberts, Chief Financial OfficerJonathan Low, Head of Investor Relations Bell Pottinger Corporate & Financial +44 (0) 20 7861 3232Ann-marie WilkinsonOlly Scott Notes to Editors Petrofac Petrofac is a leading international provider of facilities solutions to the oil& gas production and processing industry, with a diverse customer portfolioincluding many of the world's leading integrated, independent and national oil &gas companies. Petrofac is quoted on the London Stock Exchange (symbol: PFC) andis a constituent of the FTSE 250 Index. Through its three divisions, Engineering & Construction, Operations Services andEnergy Developments, Petrofac designs and builds oil & gas facilities; operates,maintains or manages facilities and trains personnel; and, where return criteriaare met and service revenue synergies identified, co-invests with clients andpartners. Petrofac's range of services allows it to help meet its customers'needs across the life cycle of oil & gas assets. With more than 9,500 employees, Petrofac operates out of four strategicallylocated international centres, in Aberdeen, Sharjah, Woking and Mumbai and afurther 16 offices worldwide. The predominant focus of Petrofac's business is onthe UK Continental Shelf (UKCS), Africa, the Middle East, the Commonwealth ofIndependent States (CIS) and the Asia Pacific region. For additional information, please refer to the Petrofac website atwww.petrofac.com. The attached is an extract from the group's interim condensed consolidatedfinancial statements for the six months ended 30 June 2007. BUSINESS REVIEW Results We are pleased to report that the group performed strongly during the first halfof 2007 with continued growth in revenue and profit. In the six months ended 30June 2007, revenue increased by 14% to US$1,057.1 million compared to thecorresponding prior period (2006: US$926.9 million) and net profit increased by47% to US$77.2 million (2006: US$52.6 million). EBITDA increased by 55% toUS$137.3 million (2006: US$88.8 million). Net interest receivable for the period was US$2.8 million compared to netinterest payable of US$0.7 million for the corresponding period in 2006 dueprincipally to higher average cash balances and higher rates of interest earnedon these balances. The tax charge for the six months ended 30 June 2007 of US$40.0 million (2006:US$21.9 million), based on the anticipated divisional effective tax rates forthe year ending 31 December 2007, results in an effective tax rate for theperiod of 34.1% (2006: 29.4%). The principal reason for the increase is that ahigher proportion of group profits were generated by the Energy Developments(formerly Resources) division, which has the highest divisional effective taxrate, and which had a higher effective tax rate than in the previous period dueto profits generated by the Cendor field which commenced production in thesecond half of 2006. Net cash(1) generated from operations in the period was US$126.4 million (2006:US$186.6 million), representing 92.1% of EBITDA (2006: 210.1%). The group's netcash increased to US$391.0 million at 30 June 2007 (31 December 2006: US$340.7million) as a result of profits generated and some improvement in workingcapital utilisation, partly offset by increased cash outflows from investingactivities, including the financial completion of the group's acquisition of anoperating interest in the Chergui field in Tunisia, and increased cash outflowsfrom financing activities, in particular, equity dividend payments and thepurchase of company shares for the purpose of making employee share schemeawards. The group's working capital balances are subject to significantmovements due to the timing of award and stage of completion of lump-sumengineering, procurement and construction (EPC) contracts. The group's verystrong cash generation during the corresponding prior year period reflected asignificant decrease in working capital utilisation in that period.Interest-bearing loans and borrowings increased marginally during the currentperiod to US$127.2 million (31 December 2006: US$117.2 million). (1) Net cash represents cash and short-term deposits less interest-bearing loansand borrowings. Diluted earnings per share attributable to continuing operations for the sixmonths ended 30 June 2007 increased to 22.36 cents per share (2006: 15.23 centsper share) reflecting the group's improved profitability. At 30 June 2007, the group's combined backlog for the Engineering & Constructionand Operations Services divisions was US$3.9 billion (31 December 2006: US$4.2billion), representing 2.0 times revenues for the trailing 12 months. During thefirst six months of 2007, order intake across the group amounted to, inaggregate, US$0.6 billion (2006: US$1.0 billion). We have been successful in addressing the resource challenges faced by the groupand the industry in general. We now have over 9,500 employees, compared toaround 7,700 at 30 June 2006. While a large number of employees have beenrecruited in conjunction with the assumption of operational responsibility forexisting infrastructure, for example, on the Dubai Petroleum contract, we havealso been successful in growing our engineering and construction capacity. TheEngineering & Construction division now has 3,600 employees (30 June 2006:2,600), with strong growth arising in our Woking and Sharjah offices and throughthe opening of the new Chennai office. Dividend The Board has declared an interim dividend of 4.90 cents per share (2006: 2.40cents), an increase of 104%, which will be paid on 26 October 2007 to eligibleshareholders on the register at 28 September 2007. Shareholders who have notelected to receive dividends in US dollars will receive a Sterling equivalent of2.44 pence per share. The Board will set the total of dividends payable for theyear in the light of full year earnings to 31 December 2007, however, given thecontinued strong cash generation of the business, the Board anticipatesincreasing the percentage of earnings it distributes by way of dividend toapproximately 30% of full year post tax profits. Segmental review We present below an update on each of the group's three operating divisions: US$'000 Revenue Operating Net profit EBITDA profitFor the 6 months 2007 2006 2007 2006 2007 2006 2007 2006ended 30 June Engineering & Construction 569,637 578,958 67,584 55,694 54,704 44,320 74,878 60,671Operations Services 427,662 325,337 16,782 12,296 11,046 7,203 19,715 14,007Energy Developments 68,904 23,113 31,821 7,550 15,760 3,898 44,586 14,745Corporate, consolidation andelimination (9,094) (469) (1,724) (373) (4,292) (2,859) (1,924) (579) ------------------------------------------------------------------- Group 1,057,109 926,939 114,463 75,167 77,218 52,562 137,255 88,844 =================================================================== Growth / margin Revenue growth Operating Net margin EBITDA marginanalysis marginFor the 6 months 2007 2006 2007 2006 2007 2006 2007 2006ended 30 June Engineering & Construction (1.6%) 45.1% 11.9% 9.6% 9.6% 7.7% 13.1% 10.5%Operations Services 31.5% 16.3% 3.9% 3.8% 2.6% 2.2% 4.6% 4.3%Energy Developments 198.1% 2.4% 46.2% 32.7% 22.9% 16.9% 64.7% 63.8%Group 14.0% 33.9% 10.8% 8.1% 7.3% 5.7% 13.0% 9.6% Engineering & Construction The division's lump-sum EPC activities continue to be focused on the MiddleEast, North Africa and the Caspian regions. Whilst the division's customersinclude both national oil companies (NOCs) and integrated and independent oilcompanies, during the period, the majority of the division's Middle East andNorth Africa lump-sum EPC work was undertaken in conjunction with NOCs.Approximately two-thirds of the division's lump-sum EPC revenues in the periodwere directly associated with NOCs, In the Middle East, the division has made good progress on the Harweel projectin Oman which has entered the construction phase. The Kauther gas plant, also inOman, is substantially complete with commissioning expected to commence duringthe second half of the year. The facilities upgrade project for Kuwait OilCompany is on schedule, with substantial progress achieved on the constructionphase during the period. The focus in North Africa has been on the mobilisation of contracts awarded inlate 2006: the Salam gas plant project in Egypt and the Hasdrubal gas plantproject in Tunisia. Significant progress has already been made with theengineering and procurement services on the Salam gas plant project reflectingthe relatively short completion schedule. The Hasdrubal project is in itsrelatively early stages with work proceeding according to plan. In Kazakhstan, good progress has been made on the Kashagan constructionmanagement contract and the engineering, procurement and construction managementcontract for the Karachaganak 4th stabilisation and sweetening train, awarded inJanuary 2007. The group's reimbursable engineering services delivered strong growth during theperiod. The group's growing role in the multi-billion dollar, multi-phase,Karachaganak development was further extended in June 2007 with the award of thegroup's largest ever front-end engineering and design (FEED) study for Phase IIIof the development. The contract with Karachaganak Petroleum Operating BV (a BGGroup and ENI led consortium) is scheduled to run to mid-2008 and is expected toinvolve up to 400 engineering and other professional staff, principally in thedivision's Woking office. The division also provided reimbursable engineering services on the Kovyktacontracts with RUSIA Petroleum and the East Siberian Gas Company. FollowingTNK-BP's agreement to sell their interest in these projects, it is likely thatthe group will undertake a staged demobilisation during the second half of theyear. The division's revenue was marginally lower than the corresponding period in2006 at US$569.6 million (2006: US$579.0 million), principally reflecting thelevel of activity on, and stage of completion of, lump-sum EPC contracts.Reported revenue demonstrated sequential six-monthly period growth of 13.4% andis expected to grow more strongly in the second half of 2007. Net profitincreased by 23.4% to US$54.7 million (2006: US$44.3 million), representing anet margin of 9.6% (2006: 7.7%), which is expected to be broadly maintained forthe remainder of 2007. The increase in margin is due to continued strongexecution, a low proportion of early-stage work (no profit is recognised in theearly stages of projects) and the recognition of profit arising from contractsin their later-stages. The division's backlog was marginally lower at US$2.1billion (31 December 2006: US$2.2 billion) reflecting the anticipated timing ofnew project awards expected during the second half of the current year. Operations Services Working closely with Dubai Petroleum, an entity wholly owned by the Governmentof Dubai, the Operations Services division achieved a smooth and safe transitionto assume full operational responsibility for facilities and well management ofDubai's offshore oil & gas assets on 2 April 2007. The contract, which is openended, represents the division's largest international contract to date and itsfirst international turnkey contract comparable to its UK duty holder serviceoffering. Petrofac Brownfield and the division's Training businesses experienced goodgrowth over the period with a number of new international contract awards. Thiswas achieved, in part, through leveraging existing Operations Services andEngineering & Construction division customer relationships and strong demand fortheir services. The UK Continental Shelf (UKCS) market remains buoyant, with continued strongoperational performance across the division. In January 2007, the division acquired a majority interest in SPD Group Limited(SPD), a specialist provider of well operations services, in particular wellproject management, well engineering optimisation, well engineering studies andconsultancy services. SPD's core operations are in Africa and Europe and fornational and international oil companies in the Middle East, including DubaiPetroleum. SPD has been successfully integrated into the division and the marketfor its services is particularly strong. Reported revenue for the period increased by 31.5% to US$427.7 million (2006:US$325.3 million). Revenue excluding 'pass-through' revenue(1) (net revenue)increased by 54.8%. The significant increase in net revenue is principallyattributable to the commencement of the Dubai Petroleum contract, theacquisition of SPD and growth in the Brownfield engineering and Trainingbusinesses, but is also positively impacted by the strong Sterling to US dollarexchange rate as the majority of the division's revenues are denominated inSterling. (1) Pass-through revenue refers to the revenue recognised from low orzero-margin third-party procurement services provided to customers. The division's net profit increased by 53.4% to US$11.0 million (2006: US$7.2million), representing a net margin on revenue excluding pass-through revenue of3.3% (2006: 3.3%). Net margins are expected to be higher in the second half of2007 when the Dubai Petroleum contract will make a full period contribution. Theunderlying net margin, adjusted to eliminate amortisation and interest chargesrelating to acquisition intangibles and deferred consideration, increased to3.8% (2006: 3.3%) due principally to the impact of the Dubai Petroleum contractand the acquisition of SPD. The division's backlog ended the period marginally lower at US$1.8 billion (31December 2006: US$1.9 billion). Energy Developments Energy Developments' operational assets (Cendor, Ohanet and the KPC refinery)performed well during the period and in line with expectations. The Cendor field, offshore Peninsular Malaysia, produced an average of 14,300barrels per day (bpd) during the period and had produced over 3.7 millionbarrels of oil by 30 June 2007. Full cost recovery was achieved in March. Adrilling programme is scheduled for the second half of the year, after whichfurther development phases will be assessed. In the UKCS, a draft field development plan (FDP) for the Don Southwest fieldwas submitted to the Department of Trade and Industry (DTI) and possibledevelopment solutions for the West Don field were progressed. Subject toconsultation with the DTI and the approval of an Environmental Statement, formalFDP approval for Don Southwest is anticipated early next year with productionexpected to commence in 2009. The acquisition of the division's 45% operating interest in the Chergui field inTunisia was completed in February and, with construction work on both theoffshore pipelines and onshore production processing facilities well in-hand,production is expected to commence around the turn of the year. In May 2007, the division farmed into a 10% operated interest in permit NT/P68in northern Australian waters. The terms of the farm-in require the division tofund 25% of the cost of two appraisal wells, up to a capped level ofexpenditure, to be drilled during the second half of 2007(2). Petrofac willbecome operator for any follow-on delineation, development and productionactivities. (2) See note 12 to the financial statements for further terms of the farm-in. The division's revenues increased significantly to US$68.9 million (2006:US$23.1 million) reflecting the commencement of production from the Cendor fieldin September 2006. Net profit increased to US$15.8 million (2006: US$3.9million) due to the significant contribution from Cendor, particularly duringthe cost recovery period to the end of March. Outlook Demand for our services remains strong, underpinned by a number of long termdrivers. Specifically, expenditure on capital programmes and the associatedoperating expenditures are expected to remain strong as the oil & gas industryresponds to increased global energy demand and the depletion of existingproduction. Furthermore, limited capacity within the oil service sector,particularly in relation to non-capital intensive services, coupled with thestrong demand for services, should ensure that favourable market conditions aresustained for the foreseeable future. While the industry has seen the postponement of some projects due to escalatingcosts, we believe this is a necessary response to some capacity constraintswithin the industry. Indeed, we consider this to have the positive effect ofextending the longevity and sustainability of capital programmes. Nonetheless,we have been successful in growing our own capacity during the period and remainconfident that our longstanding relationships with local subcontractors andsuppliers in our core regions will assist us to continue to deliver strongproject execution. The Board considers the group well positioned to benefit from expenditure inregions where the development of hydrocarbon reserves is controlled by NOCs,such as in the Middle East and North Africa, where we see a growing appetite forNOCs to contract directly with the service sector. In addition, we will continueto build upon our longstanding customer relationships with integrated andindependent oil companies, particularly in regions where we can positionourselves for long-term participation, such as the multi-billion dollarmulti-phase developments in Kazakhstan. Overall, we are confident that the group is well positioned to deliver 2007results ahead of expectations and excellent growth in 2008 and beyond. Rodney Chase Ayman AsfariChairman Group Chief Executive INTERIM CONDENSED CONSOLIDATED INCOME STATEMENTFor the six months ended 30 June 2007 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Audited Notes US$'000 US$'000 US$'000 Continuing operations Revenue 4 1,057,109 926,939 1,863,873 Cost of sales 5 (868,464) (809,660) (1,593,462) ------------------------------------------ Gross profit 188,645 117,279 270,411 Selling, general and administration (74,794) (42,438) (103,029)expensesOther income 1,249 829 4,870Other expenses (637) (503) (1,133) ------------------------------------------ Profit from continuing operationsbefore taxand finance income/(costs) 114,463 75,167 171,119 Finance costs (4,948) (3,552) (7,168)Finance income 7,738 2,870 9,296 ------------------------------------------ Profit before tax 117,253 74,485 173,247 Income tax expense - UK (6,115) (4,329) (13,886)- Overseas (33,920) (17,546) (37,454) ------------------------------------------ 6 (40,035) (21,875) (51,340) Profit for the period from continuing operations 77,218 52,610 121,907 Discontinued operations Profit/(loss) for the period fromdiscontinued operations 12 (49) (1,575) ------------------------------------------ Profit for the period 77,230 52,561 120,332 ========================================== Attributable to:Petrofac Limited shareholders 77,230 52,513 120,332Minority interests - 48 - ------------------------------------------ 77,230 52,561 120,332 ========================================== Earnings per share (US cents) 7 From continuing and discontinuedoperations:- Basic 22.53 15.25 34.98- Diluted 22.36 15.21 34.87 From continuing operations:- Basic 22.53 15.26 35.44- Diluted 22.36 15.23 35.32 The attached notes 1 to 21 form part of these interim condensed consolidatedfinancial statements. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETAt 30 June 2007 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Audited Notes US$'000 US$'000 US$'000ASSETSNon-current assetsProperty, plant and equipment 10 176,288 125,294 143,176Goodwill 11 72,397 53,361 56,732Intangible assets 12 21,582 12,532 17,959Available-for-sale financial assets 1,619 4,379 1,726Other financial assets 13 461 906 1,947Deferred income tax assets 1,747 5,885 2,902 -------------------------------------- 274,094 202,357 224,442 -------------------------------------- Current assetsInventories 2,035 1,109 1,943Work in progress 321,240 354,389 367,869Trade and other receivables 442,813 278,802 330,515Due from related parties 20 3,422 20,177 7,725Other financial assets 13 12,887 14,497 10,133Cash and short-term deposits 15 518,261 379,338 457,848 -------------------------------------- 1,300,658 1,048,312 1,176,033 -------------------------------------- Assets of discontinued operations classified as held for sale - 1,667 1,372 --------------------------------------TOTAL ASSETS 1,574,752 1,252,336 1,401,847 ====================================== EQUITY AND LIABILITIESEquity attributable to Petrofac LimitedshareholdersShare capital 16 8,636 8,629 8,629Share premium 16 68,203 66,210 66,210Capital redemption reserve 10,881 10,881 10,881Treasury shares 17 (19,715) (8,144) (8,144)Other reserves 18 30,832 19,839 19,611Retained earnings 282,720 167,938 227,508 --------------------------------------- 381,557 265,353 324,695Minority interests 209 257 209 --------------------------------------- TOTAL EQUITY 381,766 265,610 324,904 --------------------------------------- Non-current liabilitiesInterest-bearing loans and borrowings 92,074 74,212 90,705Provisions 15,837 9,723 12,498Other financial liabilities 14 20,438 7,214 7,373Deferred income tax liabilities 2,403 2,659 2,794 -------------------------------------- 130,752 93,808 113,370 -------------------------------------- Current liabilitiesTrade and other payables 426,963 226,082 346,706Due to related parties 20 50 110 182Interest-bearing loans and borrowings 35,148 43,739 26,475Other financial liabilities 14 1,884 5,494 172Income tax payable 56,001 19,724 33,045Billings in excess of cost and estimated earnings 186,152 130,370 124,990Accrued contract expenses 356,036 467,399 432,003 --------------------------------------- 1,062,234 892,918 963,573 --------------------------------------- TOTAL LIABILITIES 1,192,986 986,726 1,076,943 --------------------------------------- TOTAL EQUITY AND LIABILITIES 1,574,752 1,252,336 1,401,847 ======================================= The attached notes 1 to 21 form part of these interim condensed consolidatedfinancial statements. INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2007 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000 OPERATING ACTIVITIESNet profit/(loss) before income taxesand minority interest:Continuing operations 117,253 74,485 173,247Discontinued operations 12 (49) (1,575) --------------------------------------- 117,265 74,436 171,672Adjustments for:Depreciation, amortisation and impairment 22,792 13,677 28,807Share-based payments 1,820 315 1,281Difference between other long-termemployment benefitspaid and amounts recognised in the income statement 3,025 1,439 3,082Finance (income)/ costs (2,790) 682 (2,128)Gain on disposal of investments - - (1,671)Gain on disposal of property, plant and equipment (8,541) (6,605) (11,681)Other non-cash items, net 619 816 1,203 -------------------------------------- Operating profit before working capital changes 134,190 84,760 190,565 Trade and other receivables (106,800) 48,349 (2,355)Work in progress 46,629 (119,342) (132,822)Due from related parties 4,303 8,225 20,677Inventories (92) 47 (787)Current financial assets (427) 348 983Trade and other payables 83,152 9,355 129,896Billings in excess of cost and estimated earnings 61,162 60,594 55,214Accrued contract expenses (75,967) 103,929 68,533Due to related parties (132) (1,225) (1,153)Current financial liabilities - (193) - -------------------------------------- 146,018 194,847 328,751Other non-current items, net 87 69 (139) -------------------------------------- Cash generated from operations 146,105 194,916 328,612 Interest paid (3,629) (3,331) (7,848)Income taxes paid, net (16,538) (5,542) (19,087) -------------------------------------- Net cash flows from operating activities 125,938 186,043 301,677 -------------------------------------- Of which discontinued operations (496) (537) (416) The attached notes 1 to 21 form part of these interim condensed consolidatedfinancial statements. INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2007 (continued) 6 months 6 months Year ended ended Ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Audited Notes US$'000 US$'000 US$'000 INVESTING ACTIVITIESPurchase of property, plant and equipment (56,604) (27,566) (58,332)Acquisition of subsidiaries, net of cash acquired 9 (3,137) (568) (3,865)Purchase of intangible oil & gas assets (1,776) (1,137) (6,187)Purchase of available-for-sale financial assets - (501) (501)Proceeds from disposal of property, plant and equipment 11,205 16,575 22,823Proceeds from disposal of available-for-sale financial assets - - 2,250Net foreign exchange differences 2,023 2,480 1,366Interest received 7,863 2,054 7,927 ---------------------------------------- Net cash flows used in investing activities (40,426) (8,663) (34,519) ---------------------------------------- Of which discontinued operations - 2 2 FINANCING ACTIVITIESProceeds from interest-bearing loans and borrowings - 767 766Repayment of interest-bearing loans and borrowings (1,157) (9,400) (10,361)Shareholders' loan note transactions, net 173 148 198Treasury shares purchased 17 (11,571) (8,127) (8,127)Equity dividends paid (22,374) (6,820) (15,069) --------------------------------------- Net cash flows used in financing activities (34,929) (23,432) (32,593) --------------------------------------- Of which discontinued operations - - - NET INCREASE IN CASH AND CASHEQUIVALENTS 50,583 153,948 234,565 Cash and cash equivalents at 1 January 437,406 202,841 202,841 --------------------------------------- CASH AND CASH EQUIVALENTS AT PERIOD END 15 487,989 356,789 437,406 ======================================= The attached notes 1 to 21 form part of these interim condensed consolidatedfinancial statements. INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 30 June 2007 Attributable to shareholders of Petrofac Limited Issued Capital share Share redemption Treasury Other Retained Minority Total capital premium reserve shares reserves earnings Total interests equity (note 18) US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$' 000 US$' 000 US$' 000 For the six monthsended 30 June 2007 Balance at 1 January 2007 8,629 66,210 10,881 (8,144) 19,611 227,508 324,695 209 324,904 -------------------------------------------------------------------------------- Foreign currency translation - - - - 2,288 - 2,288 - 2,288 Net gain onmaturity of cashflow hedgesrecognised in income statement - - - - (5,607) - (5,607) - (5,607) Net changes in fair value ofderivatives - - - - 6,736 - 6,736 - 6,736 Net changes infair value ofavailable-for-sale financial assets - - - - (121) - (121) - (121) Share-based payments charge - - - - 1,820 - 1,820 - 1,820 ------------------------------------------------------------------------------- Total income andexpenses for theperiodrecognised in equity - - - - 5,116 - 5,116 - 5,116 Net profit for the period - - - - - 77,230 77,230 - 77,230 ------------------------------------------------------------------------------- Total income and expenses for theperiod - - - - 5,116 77,230 82,346 - 82,346 Shares issued on acquisition (note16) 7 1,993 - - - - 2,000 - 2,000 Treasury shares (note 17) - - - (11,571) - - (11,571) - (11,571) Transfer toreserve forshare-based payments - - - - 6,105 - 6,105 - 6,105 Dividends (note 8) - - - - - (22,018) (22,018) - (22,018) -------------------------------------------------------------------------------- Balance at 30 June 2007 (unaudited) 8,636 68,203 10,881 (19,715) 30,832 282,720 381,557 209 381,766 ================================================================================ The attached notes 1 to 21 form part of these interim condensed consolidatedfinancial statements. INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 30 June 2007 (continued) Attributable to shareholders of Petrofac Limited Issued Capital share Share redemption Treasury Other Retained Minority Total capital premium reserve shares reserves earnings Total interests equity (note 18) US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 For the six monthsended 30 June 2006 Balance at 1 January 2006 8,629 66,210 10,881 (17) (12,426) 121,850 195,127 - 195,127 --------------------------------------------------------------------------------- Foreign currency translation - - - - 3,736 - 3,736 - 3,736 Net loss onmaturity of cashflow hedgesrecognised in income statement - - - - 5,064 - 5,064 - 5,064 Net changes in fair value ofderivatives - - - - 18,322 - 18,322 - 18,322 Net changes in fairvalue ofavailable-for-sale financial assets - - - - 1,465 - 1,465 - 1,465 Share-based payments charge - - - - 315 - 315 - 315 -------------------------------------------------------------------------------- Total income andexpenses for theperiodrecognised in equity - - - - 28,902 - 28,902 - 28,902 Net profit for the period - - - - - 52,513 52,513 48 52,561 -------------------------------------------------------------------------------- Total income and expenses for theperiod - - - - 28,902 52,513 81,415 48 81,463 Treasury shares - - - (8,127) - - (8,127) - (8,127) Transfer to reserve for share-basedpayments - - - - 3,363 - 3,363 - 3,363 Dividends (note 8) - - - - - (6,425) (6,425) - (6,425) Minority interests acquired - - - - - - - 209 209 --------------------------------------------------------------------------------- Balance at 30 June 2006 (unaudited) 8,629 66,210 10,881 (8,144) 19,839 167,938 265,353 257 265,610 ================================================================================= For the year ended31 December 2006 Balance at 1 January 2006 8,629 66,210 10,881 (17) (12,426) 121,850 195,127 - 195,127 -------------------------------------------------------------------------------- Foreign currency translation - - - - 7,449 - 7,449 - 7,449 Net gain onmaturity of cashflow hedgesrecognised in income statement - - - - (2,378) - (2,378) - (2,378) Net changes in fair value ofderivatives - - - - 22,931 - 22,931 - 22,931 Realised gains onthe sale ofavailable-for- salefinancial assetsrecognised in income statement - - - - (1,671) - (1,671) - (1,671) Net changes in fairvalue ofavailable-for-sale financial assets - - - - 1,062 - 1,062 - 1,062 Share-based payments charge - - - - 1,281 - 1,281 - 1,281 ------------------------------------------------------------------------------- Total income andexpenses for theyearrecognised in equity - - - - 28,674 - 28,674 - 28,674 Net profit for the year - - - - - 120,332 120,332 - 120,332 ------------------------------------------------------------------------------- Total income and expenses for theyear - - - - 28,674 120,332 149,006 - 149,006 Treasury shares - - - (8,127) - - (8,127) - (8,127) Transfer to reserve for share-basedpayments - - - - 3,363 - 3,363 - 3,363 Dividends (note 8) - - - - - (14,674) (14,674) - (14,674) Minority interests acquired - - - - - - - 209 209 -------------------------------------------------------------------------------- Balance at 31 December 2006 8,629 66,210 10,881 (8,144) 19,611 227,508 324,695 209 324,904 ================================================================================ The attached notes 1 to 21 form part of these interim condensed consolidatedfinancial statements. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the six months ended 30 June 2007 1 CORPORATE INFORMATION Petrofac Limited is a limited liability company registered in Jersey under theCompanies (Jersey) Law 1991 and is the holding company for the internationalgroup of Petrofac subsidiaries (together "the group"). The group's principalactivity is the provision of facilities solutions to the oil & gas productionand processing industry. The interim condensed consolidated financial statementsof the group for the six months ended 30 June 2007 were authorised for issue inaccordance with a resolution of the Board of Directors on 5 September 2007. 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES Basis of preparation The interim condensed consolidated financial statements have been prepared on ahistorical cost basis, except for derivative financial instruments andavailable-for-sale financial assets that have been measured at fair value. Thepresentation currency of the interim condensed consolidated financial statementsis United States dollars (US$), as a significant proportion of the group'sassets, liabilities, income and expenses are US$ denominated. All values arerounded to the nearest thousand (US$'000) except where otherwise stated. Certaincomparative information has been reclassified to conform to current periodpresentation. Statement of compliance The interim condensed consolidated financial statements of Petrofac Limited andall its subsidiaries for the six months ended 30 June 2007 have been prepared inaccordance with IAS 34 'Interim Financial Statements' and applicablerequirements of Jersey law. They do not include all of the information anddisclosures required in the annual financial statements and should be read inconjunction with the consolidated financial statements of the group as at andfor the year ended 31 December 2006. Accounting policies The accounting policies and methods of computation adopted in the preparation ofthese interim condensed consolidated financial statements are consistent withthose followed in the preparation of the group's financial statements for theyear ended 31 December 2006, except as noted below. The group has adopted new and revised Standards and Interpretations issued bythe International Accounting Standards Board (IASB) and the InternationalFinancial Reporting Interpretations Committee (IFRIC) of the IASB that arerelevant to its operations and effective for accounting periods beginning on orafter 1 January 2007. The principal effects of the adoption of these new andamended standards and interpretations are discussed below: IAS 1 Amendments - Capital disclosures and IFRS 7 Financial instruments:Disclosures The group has adopted the above mentioned amendments and standard with effectfrom 1 January 2007. IAS 1 amendments and IFRS 7 require additional informationrelating to capital and financial instruments. These disclosures are notrequired for the interim condensed financial statements and will be disclosed inthe year end financial statements. The adoption of this amendment and interpretation did not affect the group'soperating results or financial position for the period ended 30 June 2007. IFRIC 10 Interim Financial Reporting and Impairment The group adopted IFRIC 10 'Interim Financial Reporting and Impairment' witheffect from 1 January 2007. The interpretation lays out guidelines for thetreatment of impairment losses during an interim period, namely that an entitymust not reverse an impairment loss recognised in a previous interim period inrespect of goodwill or an investment in either an equity instrument or afinancial asset carried at cost. The adoption of this interpretation did not affect the group's operating resultsor financial position for the period ended 30 June 2007 as the managementbelieves that there have been no indications of impairment during this period. 3 SEGMENT INFORMATION The group's primary continuing operations are organised on a worldwide basisinto three business segments: Engineering & Construction, Operations Servicesand Energy Developments. The following tables present revenue and profitinformation relating to the group's primary business segments for the six monthsended 30 June 2007, six months ended 30 June 2006 and the year ended 31 December2006. Included within the consolidation and eliminations columns are certainbalances, which due to their nature, are not allocated to segments. Continuing operations Engineering Consolidation & Operations Energy adjustments & Discontinued Total Construction Services Developments Corporate eliminations Total operations operations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000Six monthsended 30 June2007(unaudited) RevenueExternal sales 567,030 421,175 68,904 - - 1,057,109 - 1,057,109 Inter-segment sales 2,607 6,487 - - (9,094) - - - ------------------------------------------------------------------------------------------ Total revenue 569,637 427,662 68,904 - (9,094) 1,057,109 - 1,057,109 ========================================================================================== Segment operatingresults 67,584 16,782 31,821 - (70) 116,117 12 116,129 Unallocated corporatecosts - - - (1,654) - (1,654) - (1,654) ------------------------------------------------------------------------------------------ Profit/(loss)before taxand finance income/(costs) 67,584 16,782 31,821 (1,654) (70) 114,463 12 114,475 Finance costs (442) (2,205) (367) (4,549) 2,615 (4,948) - (4,948) Finance income 7,750 608 121 1,934 (2,675) 7,738 - 7,738 ------------------------------------------------------------------------------------------ Profit/(loss)beforeincome tax 74,892 15,185 31,575 (4,269) (130) 117,253 12 117,265 Income tax (expense)/income (20,188) (4,139) (15,815) 105 2 (40,035) - (40,035) ------------------------------------------------------------------------------------------ Profit/(loss) for the period 54,704 11,046 15,760 (4,164) (128) 77,218 12 77,230 ========================================================================================== Other segmentinformationDepreciation 7,294 1,966 12,765 125 (325) 21,825 - 21,825Amortisation - 967 - - - 967 - 967Other long-termemploymentbenefits 2,685 626 44 16 - 3,371 - 3,371Share-based payments 885 441 195 299 - 1,820 - 1,820 ------------------------------------------------------------------------------------------ 3 SEGMENT INFORMATION (continued) Continuing operations Engineering Consolidation & Operations Energy adjustments & Discontinued Total Construction Services Developments Corporate eliminations Total operations operations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000Six monthsended 30 June2006(unaudited) RevenueExternal sales 578,832 324,994 23,113 - - 926,939 33 926,972 Inter-segment sales 126 343 - - (469) - - - ------------------------------------------------------------------------------------------ Total revenue 578,958 325,337 23,113 - (469) 926,939 33 926,972 ========================================================================================== Segment operatingresults 55,694 12,296 7,550 - 342 75,882 (51) 75,831 Unallocated corporate costs - - - (715) - (715) - (715) ------------------------------------------------------------------------------------------- Profit/(loss)before tax andfinance income/ (costs) 55,694 12,296 7,550 (715) 342 75,167 (51) 75,116 Finance costs (147) (1,312) (128) (3,966) 2,001 (3,552) - (3,552) Finance income 3,313 83 56 1,419 (2,001) 2,870 2 2,872 ------------------------------------------------------------------------------------------ Profit/(loss)beforeincome tax 58,860 11,067 7,478 (3,262) 342 74,485 (49) 74,436 Income tax (expense)/income (14,540) (3,816) (3,580) 40 21 (21,875) - (21,875) Minority interests - (48) - - - (48) - (48) ----------------------------------------------------------------------------------------- Profit/(loss) for the period 44,320 7,203 3,898 (3,222) 363 52,562 (49) 52,513 ========================================================================================= Other segmentinformationDepreciation 4,977 1,613 7,195 216 (422) 13,579 - 13,579Amortisation - 98 - - - 98 - 98Other long-term employmentbenefits 1,884 173 32 22 - 2,111 - 2,111Share-based payments 98 65 24 128 - 315 - 315 ---------------------------------------------------------------------------------------- Year ended 31 December 2006(audited) RevenueExternal sales 1,079,236 722,850 62,125 - (338) 1,863,873 33 1,863,906 Inter-segment sales 2,043 6,390 - - (8,433) - - - --------------------------------------------------------------------------------------- Total revenue 1,081,279 729,240 62,125 - (8,771) 1,863,873 33 1,863,906 ======================================================================================= Segment operating results 117,209 29,100 25,065 - 707 172,081 (1,577) 170,504 Unallocated corporate costs - - - (962) - (962) - (962) -------------------------------------------------------------------------------------- Profit/(loss) beforetax and finance income/ (costs) 117,209 29,100 25,065 (962) 707 171,119 (1,577) 169,542 Finance costs (347) (2,754) (470) (8,042) 4,445 (7,168) - (7,168) Finance income 10,040 438 236 3,027 (4,445) 9,296 2 9,298 -------------------------------------------------------------------------------------- Profit/(loss) beforeincome tax 126,902 26,784 24,831 (5,977) 707 173,247 (1,575) 171,672 Income tax (expense)/ income (31,522) (8,681) (10,466) (707) 36 (51,340) - (51,340) ---------------------------------------------------------------------------------------Profit/(loss) for the year 95,380 18,103 14,365 (6,684) 743 121,907 (1,575) 120,332 ======================================================================================= Other segmentinformationDepreciation 10,049 3,433 15,042 402 (804) 28,122 - 28,122Amortisation - 390 - - - 390 - 390Impairment losses - - - - - - 295 295Other long-term 3,814 430 67 (7) - 4,304 - 4,304employment benefitsShare-based payments 358 287 65 571 - 1,281 - 1,281 ------------------------------------------------------------------------------------- 4 REVENUES 6 months 6 months Year ended ended Ended 30 June 30 June 31 2007 2006 December 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000 Rendering of services 1,007,030 922,966 1,840,519 Sale of crude oil 46,014 - 15,656 Sale of processed hydrocarbons 4,065 3,973 7,698 ---------------------------------------- 1,057,109 926,939 1,863,873 ======================================== Included in revenues from rendering of services are Operations Services revenuesof a "pass-through" nature with zero or low margins amounting to US$94,836,000(six months ended June 2006: US$110,290,000; for the year ended 31 December2006: US$221,790,000). 5 COST OF SALES Included in cost of sales for the six months ended 30 June 2007 is US$8,296,000(June 2006: US$6,500,000) profit on disposal of property, plant and equipmentused to undertake an engineering and construction contract. 6 INCOME TAX The taxation charge for the six months ended 30 June 2007 of US$40,035,000represents 34.1% of the profit before tax (June 2006: 29.4%). The charge for thesix months ended 30 June 2007 has been arrived at by applying the anticipatedfull year ending 31 December 2007 divisional effective tax rates (which equateto a full year group composite rate of 33.1%) to the results for the six monthsended 30 June 2007. The major components of the income tax expense are as follows: 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000 Current income taxCurrent income tax charge 39,392 22,008 49,512Adjustments in respect of current income tax of previous years (466) 308 (364) Deferred income taxRelating to origination and reversal of temporary differences 1,109 (459) 1,963Adjustment in respect of deferred income tax - 18 229 -------------------------------------of previous years 40,035 21,875 51,340 ===================================== 7 EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing the net profit forthe period attributable to ordinary shareholders by the weighted average numberof ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profitattributable to ordinary shareholders, after adjusting for any dilutive effect,by the weighted average number of ordinary shares outstanding during the period,adjusted for the effects of ordinary shares granted under the employee shareaward schemes which are held in trust. The following reflects the income and share data used in calculating basic anddiluted earnings per share: 6 months 6 months Year ended ended ended 30 June 30 June 31 2007 2006 December 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000 Continuing and discontinued operations Net profit attributable to ordinaryshareholders for basicand diluted earnings per share 77,230 52,513 120,332 Continuing operations Less net (gain)/loss for the period from discontinued operations (12) 49 1,575 ---------------------------------------- Net profit attributable to ordinaryshareholders for basic and diluted earningsper share 77,218 52,562 121,907 ======================================== 6 months 6 months Year ended ended ended 30 June 30 June 31 2007 2006 December 2006 Unaudited Unaudited Audited '000 '000 '000Weighted average number of ordinary shares forbasic earnings per share 342,701 344,390 344,003Weighted average number of ordinary sharesgranted under share-based payment schemes heldas treasury shares 2,707 770 1,117 -------------------------------------Adjusted weighted average number of ordinaryshares for diluted earnings per share 345,408 345,160 345,120 ===================================== 8 DIVIDENDS PAID AND PROPOSED 6 months 6 months Year ended ended ended 30 June 30 June 31 2007 2006 December 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000Declared and paid during the period Equity dividends on ordinary shares: Final dividend for 2005: 1.87 cents per share - 6,425 6,425Interim dividend 2006: 2.40 cents per share - - 8,249Final dividend for 2006: 6.43 cents per share 22,018 - - -------------------------------------- 22,018 6,425 14,674 ====================================== On 5 September 2007, the Board approved an interim dividend of 4.90 cents pershare to be paid on 26 October 2007. 9 BUSINESS COMBINATION SPD Group Limited On 16 January 2007, the group acquired a 51% interest in the share capital ofSPD Group Limited (SPD), a specialist provider of well operations services. Theconsideration for the acquisition of the 51% interest inclusive of estimatedtransaction costs of US$172,000, was US$7,872,000. Consideration of US$7,700,000(excluding transaction costs) was settled by a cash payment of US$3,935,000,issuance of loan notes payable of US$1,765,000 and the balance of US$2,000,000by issuance of 274,938 new ordinary shares of the Company at market values atthe date of issue to the vendor over three years in equal instalments on theanniversary of the transaction. The terms of the sale and purchase agreement for the remaining 49% interest inthe share capital of SPD which convey call option rights on the acquirer andminority shareholder put option rights over these shares and the respectiverights to dividends and share of profits of the two parties are such that thistransaction has been accounted for as a 100% acquisition of the business by thegroup. The discounted deferred consideration for the remaining 49% of the sharecapital of SPD has been estimated at US$12,025,000 and this will be reassessedeach year to fair value and any adjustment to the deferred consideration arisingwill be reflected in goodwill except for the unwinding of interest which will bereflected in the income statement as interest expense. The total considerationfor the 100% interest therefore, including transaction costs, amounts toUS$19,897,000. The 100% fair values of the identifiable assets and liabilities of SPD GroupLimited on completion of the acquisition are analysed below: Recognised Carrying on acquisition value US$'000 US$'000 Property, plant and equipment 47 47Intangible assets 2,369 -Trade and other receivables 5,498 5,498Cash and short-term deposits 970 970 ------------------------Total assets 8,884 6,515 ------------------------ Less:Trade and other payables (3,210) (3,210)Income tax payable (10) (10) ------------------------Total liabilities (3,220) (3,220) ------------------------ Fair value of net assets acquired 5,664 3,295 ========Goodwill arising on acquisition 14,233 ---------Consideration 19,897 ========= Cash outflow on acquisition:Cash acquired with subsidiary 970Cash paid on acquisition (3,935)Legal and professional expenses paid on acquisition (172) --------Net cash outflow on the acquisition of subsidiary (3,137) ======== Intangible assets recognised on acquisition comprise customer contracts whichare being amortised over their remaining economic useful lives on a straightline basis. The residual goodwill above comprises the fair value of expected futuresynergies and business opportunities arising from the integration of thebusiness in to the group. From the date of acquisition, SPD has contributed a loss of US$71,000 to the netprofit of the group. 10 PROPERTY, PLANT AND EQUIPMENT During the period, the group incurred capital expenditure of US$6,979,000 (June2006: US$4,726,000) on the construction of a new office building. On 22 February 2007, the group completed the acquisition of a 45% interest inthe Chergui gas concession in Tunisia, for a final cash consideration ofUS$27,323,000, which, after including advance capital expenditure paid on behalfof the vendor of US$2,846,000, brought the total consideration for thetransaction to US$30,169,000, of which US$27,323,000 has been recognised duringthe period as additions to property, plant and equipment. Further postacquisition capital expenditure of US$7,570,000 was made during the period. 11 GOODWILL The increase in the goodwill balance in the current period represents exchangedifferences of US$1,432,000 and additional goodwill on the acquisition of SPDGroup Limited of US$14,233,000 (note 9). 12 INTANGIBLE ASSETS 6 months 6 months Year ended ended ended 30 June 30 June 31 2007 2006 December 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000Intangible oil & gas assetsAt 1 January 16,788 2,982 2,982Additions 1,776 7,876 12,926Exchange difference 445 211 880 ---------------------------------------At period end 19,009 11,069 16,788 --------------------------------------- Other intangible assetsCost:At 1 January 1,561 - -Additions (note 9) 2,369 1,561 1,561 ---------------------------------------At period end 3,930 1,561 1,561 --------------------------------------- Accumulated amortisation:At 1 January (390) - -Amortisation (967) (98) (390) ---------------------------------------At period end (1,357) (98) (390) --------------------------------------- Net book value of other intangible assets at period end 2,573 1,463 1,171 --------------------------------------- Total intangible assets 21,582 12,532 17,959 ====================================== On 29 May 2007, the group entered into a farm-in arrangement to acquire a 10%interest in Permit NT/P68 300km north north-west of Darwin in Australian watersand an option to acquire an interest in any LNG or methanol project in TassieShoal that results from this investment. The terms of the farm-in requirefunding a portion of two appraisal wells to be drilled in 2007 subject to anoption to terminate the agreement within sixty hours of the decision by theparties to the farm-in arrangement to plug and abandon the primary well. As aconsideration for the interest the group will pay 25% of the costs of both aprimary and secondary appraisal well (capped at US$13,200,000 and US$12,500,000respectively). Under the terms of the farm-in agreement, there is also an optionto acquire a further 5% interest in the licence by paying a further capitalcontribution towards the cost of these two appraisal wells with the amountpayable dependent on the timing of the exercise of the option. These costs willbe capitalised as property, plant and equipment in the period in which they areincurred. During the period, the group did not incur any capital expenditurerelating to this investment. There were cash outflows relating to capitalised costs of US$1,776,000 in thecurrent period arising from pre-development activities pertaining to oil & gasreserves. There are no assets other than intangible assets, liabilities, incomeor expenses arising from pre-development activities in the current period. Intangible oil & gas assets at 30 June 2007 relate to the group's interest inthree UK offshore oil & gas licences. Other intangible assets comprise the fair values of customer contracts arisingon acquisition (note 9). Customer contracts are being amortised over theirremaining economic useful lives on a straight line basis and the relatedamortisation charge is included in selling, general and administrative expenses. 13 OTHER FINANCIAL ASSETS The movement in other non-current and current financial assets in the period isprimarily due to changes in the fair value of derivative financial instrumentsthat the group uses to hedge its risk against foreign currency exposure onsales, purchases and borrowings that are entered into in a currency other thanUS dollars. 14 OTHER FINANCIAL LIABILITIES The increase in other non-current and current financial liabilities is primarilydue to deferred consideration of US$12,025,000 and a loan note payable ofUS$1,765,000 respectively, being recognised on the acquisition of SPD (note 9). 15 CASH AND CASH EQUIVALENTS For the purposes of the interim condensed consolidated cash flow statement, cashand cash equivalents comprise the following: 6 months 6 months Year ended ended ended 30 June 30 June 31 2007 2006 December 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000 Cash at bank and in hand 143,588 83,252 120,003Short-term deposits 374,673 296,086 337,845Bank overdrafts (30,272) (22,549) (20,442) ----------------------------------------- 487,989 356,789 437,406 ========================================= 16 SHARE CAPITAL On 19 January 2007, 274,938 shares with a fair value of US$2,000,000 were issuedas part of the consideration for the acquisition of SPD (note 9). This resultedin an increase in the issued share capital of US$7,000 and a share premium ofUS$1,993,000. 17 SHARE-BASED PAYMENTS During the period, the Company acquired 1,500,000 of its own shares at a cost ofUS$11,571,000 for the purpose of making awards under the group's PerformanceShare Plan and Deferred Bonus Share Plan. On 19 March 2007, 791,083 US$0.025 matching ordinary shares of the Company weregranted to members of the Deferred Bonus Share Plan. At the Annual General Meeting of the Company on 11 May 2007, shareholdersapproved a change in the rules of the Deferred Bonus Share Plan in respect ofthe March 2007 awards, such that the invested and matching share awards may atthe discretion of the Remuneration Committee of the Board of Directors vesteither 100% after the expiry of three years from the grant date of the award or33.333% after year one, a further 33.333% after year two and the final 33.333%of the award after the end of year three. The fair value of the equity-settled awards granted during the period ended 30June 2007 in respect of the Deferred Bonus Share Plan were estimated based onthe quoted closing market price of 415p per Company share at the date of grantwith an assumed vesting rate of 94% per annum over the vesting period of theplan. On 19 March 2007, 449,537 US$0.025 matching ordinary shares of the Company weregranted to participants in the Performance Share Plan. The fair value of the non-performance related equity-settled awards grantedduring the period ended 30 June 2007 representing 50% of the total PerformanceShare Plan award were estimated based on the quoted closing market price of 415pper Company share at the date of grant with an assumed vesting rate of 100% perannum over the three year vesting period of the plan. The remaining 50% of theseawards which are market performance based were fair valued by an independentvaluer at 245p per share using a Monte Carlo simulation model taking intoaccount the terms and conditions of the plan rules and using the followingassumptions at the date of grant: Share price volatility 29.0%Share price correlation with comparator group 17.0%Risk-free interest rate 5.2%Expected life of share award 3 years The group has recognised an expense in the income statement for the period to 30June 2007 relating to employee share-based incentives of US$1,820,000 (30 June2006: US$315,000) which has been transferred to the reserve for share-basedpayments along with US$6,105,000 of the remaining bonus liability accrued forthe year ended 31 December 2006 which has been voluntarily elected ormandatorily obliged to be settled in shares granted during the period. Thereserve for share based payments at 30 June 2006 has been restated to reflectthe transfer of the remaining bonus liability accrued for the year ended 31December 2005 (see note 18). 18 OTHER RESERVES Net unrealised gains on- Net unrealised available-for- (losses)/ Foreign Reserve for sale financial gains on currency share-based assets derivatives translation payments Total US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 1 January 2007 738 9,340 4,889 4,644 19,611 Foreign currency translation - - 2,288 - 2,288Net gain on maturity of cashflowhedges recognised in income statement - (5,607) - - (5,607)Net changes in fair value of derivatives - 6,736 - - 6,736Net changes in fair value ofavailable-for-salefinancial assets (121) - - - (121)Share-based payments charge (note 17) 1,820 1,820Transfer during the period (note 17) - - - 6,105 6,105 ------------------------------------------------------Balance at 30 June 2007 (unaudited) 617 10,469 7,177 12,569 30,832 ====================================================== Balance at 1 January 2006 1,347 (11,213) (2,560) - (12,426) Foreign currency translation - - 3,736 - 3,736Net gain on maturity of cashflowhedges recognised in income statement - 5,064 - - 5,064Net changes in fair value of derivatives - 18,322 - - 18,322Net changes in fair value ofavailable-for-salefinancial assets 1,465 - - - 1,465Share-based payments charge (note 17) - - - 315 315Transfer during the period (note 17) - - - 3,363 3,363 ------------------------------------------------------Balance at 30 June 2006 (unaudited) 2,812 12,173 1,176 3,678 19,839 ====================================================== Balance at 1 January 2006 1,347 (11,213) (2,560) - (12,426)Foreign currency translation - - 7,449 - 7,449Net gain on maturity of cashflowhedges recognised in income statement - (2,378) - - (2,378)Net changes in fair value of derivatives - 22,931 - - 22,931Realised gains on the sale ofavailable-for-salefinancial assets recognised in income statement (1,671) - - - (1,671)Changes in fair value ofavailable-for-salefinancial assets 1,062 - - - 1,062Share-based payments charge - - - 1,281 1,281Transfer during the year - - - 3,363 3,363 -----------------------------------------------------Balance at 31 December 2006 (audited) 738 9,340 4,889 4,644 19,611 ===================================================== 19 CAPITAL COMMITMENTS At 30 June 2007 the group had capital commitments of US$33,323,000 (31 December2006: US$21,819,000; 30 June 2006: US$33,628,000). Included in the above are commitments for the construction of a new officebuilding in Sharjah, United Arab Emirates amounting to US$19,609,000 (31December 2006: US$20,577,000; 30 June 2006: US$24,628,000). Also included in theabove commitments are the costs associated with a primary appraisal well cappedat US$13,200,000 arising from the company's farm-in arrangement for a 10%interest in Permit NT/P68 Australia (note 12). 20 RELATED PARTY TRANSACTIONS The following table provides the total amount of transactions which have beenentered into with related parties: Sales Purchases Amounts Amounts to from owed owed related related by to related related parties parties parties parties US$'000 US$'000 US$'000 US$'000 Joint ventures Six months ended 30 June 2007 (unaudited) 2,343 233 3,422 50 Six months ended 30 June 2006 (unaudited) 775 174 20,177 110 Year ended 31 December 2006 (audited) 4,520 3,282 7,725 133 Other Six months ended 30 June 2007 directors' (unaudited) - 254 - -interests Six months ended 30 June 2006 (unaudited) - - - - Year ended 31 December 2006 (audited) - 49 - 49 All sales to and purchases from joint ventures are made at normal market pricesand the pricing policies and terms of these transactions are approved by thegroup's management. All related party balances at 30 June 2007 will be settled in cash. Purchases in respect of other directors' interests of US$254,000 comprise ofmarket rate based costs of chartering the services of an aeroplane used for thetransport of senior management and directors of the Company on company business,which is owned by an offshore trust of which the Chief Executive of the Companyis one of the beneficiaries. Compensation of key management personnel 6 months 6 months Year ended ended ended 30 June 30 June 31 2007 2006 December 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000 Short-term employee benefits 1,233 1,098 4,412Other long-term employment benefits 22 20 40Share-based payments 395 68 288Fees paid to non-executive directors 255 198 415 ---------------------------------------- 1,905 1,384 5,155 ======================================== 21 EVENTS AFTER THE BALANCE SHEET DATE On 27 August 2007, the group entered into an exchange agreement whereby itswapped its 29% interest in the Crawford field for a 3.12% interest in West DonBlock 211/18a (equating to a unit interest of 2%), for nil consideration. Introduction We have been instructed by the Company to review the Interim CondensedConsolidated Financial Statements for the six months ended 30 June 2007 as setout on pages 6 to 21 and we have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof management and applying analytical procedures to the financial informationand underlying financial data and based thereon, assessing whether theaccounting policies have been applied. A review excludes audit procedures suchas tests of controls and verification of assets, liabilities and transactions.It is substantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Ernst & Young LLPLondon5 September 2007 SHAREHOLDER INFORMATION Petrofac shares are traded on the London Stock Exchange using code 'PFC.L'. Registrar Company Secretary and registered office Capita Registrars Ogier Corporate Services (Jersey) LimitedThe Registry Whiteley Chambers34 Beckenham Road Don StreetBeckenham St HelierKent BR3 4TU Jersey JE4 9WG Legal advisers to the Company As to English Law As to Jersey LawNorton Rose LLP Ogier3 More Place Riverside Whiteley ChambersLondon SE1 2AQ Don Street St Helier Jersey JE4 9WG Joint brokers Credit Suisse Lehman Brothers1 Cabot Square 25 Bank StreetLondon E14 4QJ London E14 5LE Auditors Corporate and financial PR Ernst & Young LLP Bell Pottinger Corporate & Financial1 More London Place 6th Floor Holborn GateLondon SE1 2AF 330 High Holborn London WC1V 7QD Financial calendar 28 September 2007 Interim dividend record date26 October 2007 Interim dividend payment31 December 2007 2007 financial year end10 March 2008 2007 full year results announcement Dates correct at time of print, but subject to change The group's investor relations website can be found through www.petrofac.com. This information is provided by RNS The company news service from the London Stock Exchange