Petrofac runs down debt ahead of schedule, but cites near-term uncertainty

Petrofac managed to erase its net debt last year, witht falling revenues and profitability offset by asset sales.

On a reported basis, the oilfield services outfit posted a 10.3% drop in operating profits, with earnings before interest, taxes, depreciation and amortisation printing at $671m for the 2018 calendar year on the back of a 8.9% decline in sales to $5.83bn.

To take note of, no provision was made for potential future charges by the Serious Fraud Office against former or current staff so that, according to analysts at Jefferies, "[the risk] will remain an investment overhang until matters are indeed brought to a close."

For his part, commenting on the outfit's latest figures, company boss Ayman Asfari focused on the outfit's "healthy" order intake and strong competitive position, stable margins and "good progress" on delivering Petrofac's project portfolio.

Helped by asset sales, the company had also returned to a net cash position ahead of schedule, Asfari said.

Weakness was concentrated in the company's engineering and construction arm, where underlying net profits shrank by 16.7% to $285m.

In Engineering & Production Services meanwhile, on that same basis profits improved from $90m to $96m while in Integrated Energy Services they climbed from a loss of -$21m for 2017 to $39m this time around.

For the 12 months to 31 December, group net profits came in at $64m, versus $29m of red ink in 2017, while margins improved from -0.5% to 1.1%.

On an adjusted basis, net profits improved from $343m to $353m and margins from 5.4% to 6.1%.

Looking ahead, the company said it was "well-positioned" for 2019, describing its visibility on revenues as "good" and the tendering pipeline as "busy", adding that it was "well-placed" on several bids.

But "there is a higher degree of uncertainty in the level of awards in the near-term," the company said in a statement.

"We are nevertheless targeting a book to build of greater than one."

At period end, Petrofac had net cash of $90m on its books versus a debt pile of $612m at the conclusion of 2017 and pre-close guidance provided in December for $250m, thanks to $506m in net divestment proceeds.

Jefferies's Mark Wilson reiterated his 'buy' recommendation and 590p target price for the shares following the results.

As of 1226 GMT, shares in the company were edging higher by 0.67% to 418.20p but far below the 559p they had been trading at as recently as 6 February.