Petrofac profits beat forecasts, sees recovery in oil prices

Oil field services outfit Petrofac delivered 2014 full-year profits at the bottom end of previous guidance, although it lowered its profit forecasts for 2015 exclusively as a result of the lower oil price.

Full-year 2014 revenues dipped to $6.2bn from $6.3bn in the year before. Analysts had anticipated sales of $6.6bn.

That saw net profits retreat 11% to $581m, settling at the bottom end of the company’s previous guidance for between $580m and $600m, though they still came in ahead of the consensus estimate of $572m.

Company chief Ayman Asfari said: “We remain on course to deliver net profit in 2015 in line with our previous guidance (not taking into account the drop in oil prices)."

However, the fall in crude prices since the company last updated the market means net profits will now reach about $460m, and not $500m, based on a current average forward oil price of approximately $60 per barrel.

Also looking forward, the firm said clients in its core onshore markets in the Middle East and North Africa were continuing to commit to ongoing investment in large strategic projects.

“We’ll see oil at $70 to $80 sooner than most people expect.”

The backlog in engineering, construction, operations and maintenance (ECOM) continues to stand at record levels, the company highlighted.

Within its onshore, engineering and construction (OEC) unit, which is a part of the broader ECOM division, the company recognised a cumulative loss of around $180m on the Laggan-Tormore project. However, it also reached a commercial settlement which management believes will see Petrofac record no further profit or loss related to Laggan-Tomore.

The company’s other main division, integrated energy services (IES), was described as entering 2015 with lower capital intensity and the company remains focused on improving capital returns.

Oil will soon return above $70 per barrel

Speaking on Bloomberg TV Asfari emphasised that the industry's current cost structure is unsustainable, while asking for tax relief from Westminster.

Nevertheless, Petrofac’s boss added: “we’ll see oil at $70 to $80 sooner than most people expect.”

The full-year dividend was maintained at 65.8 cents with the final dividend coming in at 43.8 cents.

The shares have been pummelled over the last year on the back of the decline on oil prices, with the stock down by 40.38%.