RBC Capital ups Petrofac to 'sector perform', highlights contract awards

RBC Capital Markets upgraded Petrofac to 'sector perform' form 'underperform' and lifted the price target to 500p from 420p.

The bank said that a number of contract wins for the oilfield services provider have boosted its backlog and eased concerns that the ongoing Serious Fraud Office investigation impedes its ability to win contracts.

It noted the group was awarded a $2bn 50/50 contract with Samsung Heavy Industries for the engineering, procurement and construction of the Duqm refinery in August and a $700m engineering and procurement contract for Sakhalin Island processing facility in September.

"Although we were concerned that the SFO investigation could impact Petrofac's ability to win major engineering and construction contracts, it has demonstrated that this is not the case. We estimate these have boosted Petrofac's backlog to over $14bn from $12.5bn at end H1/17."

Back in May, Petrofac said it was being investigated by the SFO in relation to Unaoil and other agents. At the time, the SFO did not consider Petrofac to be cooperating with its investigation but the company has since reiterated several times it is committed to assisting the SFO and has appointed a new senior external specialist.

"Although we expect the SFO investigation to take some time, we would expect a resolution with no findings of wrong-doing to materially boost Petrofac's share price," RBC said.

At 1030 BST, the shares were up 0.7% to 451.10p.