Petrofac seen falling to FY underlying loss

Energy services company Petrofac warned on Tuesday that it expects to report a full-year underlying loss of approximately $100.0m, reflecting "adverse commercial settlements", further unrecovered cost overruns in its legacy portfolio and cost increases on the group's Thai Oil Clean Fuel joint venture.

Petrofac stated it had delivered a "continued strong performance" in its asset solutions and integrated energy services units. However, challenges in its engineering and construction division offset the good performance seen elsewhere.

The FTSE 250-listed group anticipates a $190.0m underlying loss in its E&C unit, while group revenues were pegged to be approximately $2.5bn.

As far as the group's Thai Oil joint venture was concerned, Petrofac stated it will work closely with its partners to mitigate increases over the remainder of the contract in addition to seeking to realise other portfolio upsides.

Chief executive Sami Iskander said: "We have maintained strong momentum in Asset Solutions and IES, however, group performance for 2022 has been impacted by further cost recovery challenges in E&C. Good progress has been made in the second half where we have completed or substantially completed six lump-sum contracts, with five of the remaining eight active lump-sum contracts scheduled to complete in 2023. This will largely close out the mature E&C portfolio that was heavily impacted by pandemic delays.

"Looking forward, whilst E&C awards were slower than expected in 2022, the market outlook remains positive and we are well positioned on a number of near-term prospects, with $1.5bn of E&C opportunities where we are at preferred bidder stage, and a further $3.5bn of bids submitted in E&C. We expect these opportunities to provide backlog growth in 2023 and lay the foundations for a return to profitability, positive free cash flow, and continued recovery thereafter."

As of 0815 GMT, Petrofac shares were down 7.53% at 66.90p.

Reporting by Iain Gilbert at Sharecast.com