Petrofac delays results, says it may need to convert existing debt to equity

Petrofac tumbled on Monday as it announced a delay to the publication of its full-year results and said it may have to convert a significant proportion of its existing debt to equity.

The company said it expects a short delay in issuing its 2023 results, which it now expects to publish by 31 May 2024.

It also said that as part of its ongoing financial restructuring, an ad-hoc group of senior secured noteholders have made a proposal to provide further credit of up to $300m, comprising $200m of new funds and $100m of credit support to help secure performance guarantees for certain of its existing contracts.

This non-binding proposal is dependent upon - among other things - Petrofac securing these performance guarantees, and would require the conversion of a significant proportion of the group’s existing debt to equity.

Petrofac said it’s in active discussions with credit providers to obtain the required guarantees, which would release more than $200m of collateral and retentions, and will provide an update on the outcome of those discussions "as appropriate".

The company also provided an update on trading. Back in December, it had highlighted a risk in relation to the timing of the negotiations on the Thai Oil Clean Fuels project.

It said that it and its joint venture partners remain engaged with its client in relation to the reimbursement of additional project costs.

"At the time of reporting the full year 2023 results, management does not expect to have progressed discussions sufficiently to recognise the expected outcome of the negotiations in its accounts," it said.

As a result, it expects to recognise an incremental loss in its E&C division of about $130m for 2023.

In addition, the Asset Solutions business has incurred additional costs on one of its engineering, procurement, construction, and commissioning (EPCC) contracts, and expects to report an EBIT for 2023 which could be up to $15m to $20m lower than previously guided, depending on the outcome of negotiations.

"The group’s financial performance for the year ended 31 December 2023 is otherwise expected to be broadly in line with the trading Update of 20 December 2023," it said.

At 0840 BST, the shares were down 14.7% at 19.02p.