Last checked at 21 Jun 2016 07:00
Press Release
21 June 2016
PETROFAC LIMITED
TRADING UPDATE
Petrofac issues the following pre-close trading update ahead of the announcement of its interim results for the six months ending 30 June 2016 on 30 August 2016.
· Expect to deliver net profit in 2016 in line with our previous guidance(1)
· Net profit(2) is expected to be broadly evenly split between the first and second half of the year
· Group backlog stood at US$18.9 billion at 31 May 2016 (31 December 2015: US$20.7 billion), giving excellent revenue visibility
· Order intake of approximately US$0.8 billion in the year to date, mainly in Engineering & Production Services; strong bidding pipeline for 2H 2016 and 2017
· Net debt is expected to increase to around US$1.1 billion at 30 June 2016 (31 December 2015: US$0.7 billion), reflecting payment of the 2015 final dividend and capital expenditure on owner furnished equipment for the JSD6000 and on the Greater Stella Area development
Ayman Asfari, Petrofac's Group Chief Executive, commented:
"We are well-positioned in what is a challenging environment for the industry and we remain focused on our core proposition: strong project execution, a clear geographic focus, a disciplined approach to bidding and continued emphasis on cost management to maintain a sustainable, cost-effective structure.
"Our backlog gives us excellent revenue visibility for this year and beyond, and we are very active bidding on a strong pipeline of new opportunities as our clients continue to invest in our core markets.
"In IES, we remain committed to reducing the capital intensity of the portfolio and we expect to demonstrate significant progress over the remainder of the year."
Engineering & Construction (E&C)
We made good progress on our portfolio of lump-sum engineering and construction projects during the first half of the year, including the commencement of production from the central processing facility for the In Salah southern fields development in Algeria, mechanical completion of the third train on the Badra project in Iraq and reaching around 90% completion on the SARB3 project, offshore Abu Dhabi. The Laggan-Tormore gas plant on Shetland was inaugurated in May, and has been operating successfully and exporting gas since February.
As expected, there has been a lower level of project awards during the first half of the year, however, we see continuing investment from our clients in our core markets of the Middle East and North Africa, in both key upstream and downstream projects. In addition to a number of submitted bids where the outcome is pending, we are currently actively bidding on a large number of projects where award is expected in the second half of the year or early 2017.
We have an unrivalled track record in our core markets and a very cost-competitive delivery capability. This, coupled with the quality and size of our backlog, enables us to remain focused on maintaining our bidding discipline and continuing to deliver sector leading margins.
Engineering & Production Services (E&PS)
We have made a good start to the year in our reimbursable business, securing a number of new contracts and extensions, and continuing to deliver good progress across the portfolio, including on our engineering, procurement and construction management (EPCm) projects in Oman and Abu Dhabi.
We have secured new awards and extensions totalling more than US$0.4 billion in the year to date, including a new five-year US$250 million Duty Holder contract in the North Sea for Anasuria Operating Company Limited, a UK joint venture formed between Hibiscus Petroleum Berhad and Ping Petroleum Limited. We were also awarded a Duty Holder contract from BP to support the late life management of the Miller platform, located in the Central North Sea, in preparation for the next phase of its planned decommissioning programme, and an enhanced US$100 million three-year contract extension on the Alwyn and Dunbar platforms in the Northern North Sea for Total E&P UK.
Integrated Energy Services (IES)
Equity Upstream Investments
The FPF1 floating production facility is expected to be ready for sailaway to the Greater Stella Area development by the end of this month. First production from the development remains scheduled for summer 2016. On Block PM304 in Malaysia, the uptime of the facilities remains high and production levels are in line with expectations. Production from the Chergui gas concession in Tunisia is expected to recommence shortly after several months of shutdowns due to civil unrest.
Production Enhancement Contracts
As part of the ongoing energy reforms in Mexico, we continue to work towards migration of our Production Enhancement Contracts (PECs) to Production Sharing Contracts (PSCs). We now expect formally to exit the Ticleni PEC in Q3 2016.
Risk Service Contracts
On the Berantai risk service contract, production is ahead of target with high uptime during the year to date.
Financial position
Group backlog stood at US$18.9 billion at 31 May 2016 (31 December 2015: US$20.7 billion), giving excellent revenue visibility:
| 31 May 2016 | 31 December 2015 |
| US$ billion | US$ billion |
Engineering & Construction | 11.6 | 13.3 |
Engineering & Production Services | 4.2 | 4.4 |
Integrated Energy Services | 3.1 | 3.0 |
Group | 18.9 | 20.7 |
Net debt is expected to increase to around US$1.1 billion at 30 June 2016 (31 December 2015: US$0.7 billion), reflecting payment of the 2015 final dividend and capital expenditure on owner furnished equipment for the JSD6000 and on the Greater Stella Area development.
Notes
(1) As noted in our full year results presentation on 24 February 2016, IES is expected to make a loss of between US$30 million to US$40 million at the then prevailing forward curve, with the rest of the Group delivering net profit broadly in line with consensus. Company compiled consensus net profit for the Group excluding IES and before recognising the final charge on the Laggan-Tormore project of approximately £70 million (US$100 million), as announced on 6 May 2016, is approximately US$445 million. The final charge on the Laggan-Tormore project will be recognised in the first half of 2016.
(2) Before the final charge on the Laggan-Tormore project of approximately £70 million (US$100 million), which will be recognised in the first half of 2016.
Conference call
Tim Weller, Chief Financial Officer, will host a conference call for analysts and investors at 7.45am today. The participant details are as follows:
UK and international: +44 203 139 4830
Passcode: 60977663#
Ends
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) 207 811 4900
Jonathan Low, Head of Investor Relations
Jonathan Edwards, Investor Relations Officer
Alison Flynn, Group Head of Communications +44 (0) 207 811 4913
Tulchan Communications Group Ltd +44 (0) 207 353 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 client 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 clients' needs across the full life cycle of oil & gas assets.
With around 19,000 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.