Petrofac upgraded to 'buy' by UBS

UBS upgraded Petrofac to ‘buy’ from ‘neutral’ and raised the target price to 1,100p from 775p.

“The company has delivered sector-leading onshore engineering & construction margins and we believe the order intake outlook is relatively better than other areas of oil services,” said the bank.

It also said it reckons the market is over-discounting additional cost overruns on the Lagan-Tormore project.

“We think the provision to date of $400m to complete the project (versus original contract value of $800m) has likely been calculated on a conservative basis after two warnings,” said UBS.

It added that Petrofac's valuation is currently near trough levels both relative to its own historical valuation and relative to the wider European market.

“There is an opportunity to re-rate upwards if Petrofac can increase the return on capital employed profile,” the bank remarked.

At 12:58, shares were up 0.6% at 911.00p.