Petrofac 'well-positioned' to end year as forecast

Petrofac reported continued strong performance in engineering and production services in a trading update on Thursday, but said Covid-19 disruption was still impacting engineering and construction project schedules and costs.

The London-listed firm said group net profit was “broadly in line” with market expectations for 2021, supported by tax provision releases of $17m in the first half, and around $35 million in the second half.

New order intake was $2bn for the year to date, up from $0.5bn at the half-year, with engineering and production services on track to deliver a book-to-bill ratio of 1.0x for the full year.

The board noted that a “comprehensive” refinancing was completed following the resolution of the Serious Fraud Office investigation, with year-end net debt expected to be “broadly flat” compared to the third quarter, at approximately $0.2bn.

Petrofac said it was on track to deliver on its cost saving target of $250m by year-end, adding that it was “well-positioned”, with a group pipeline of $40bn for award in 2022, of which $7bn was in new energies.

“In 2021 Petrofac has taken an important step forward, closing out the SFO investigation and embedding a strategy focused on future growth,” said group chief executive officer Sami Iskander.

“During this period we have continued to deliver projects and operations safely for our clients worldwide, despite the ongoing challenges of the Covid-19 pandemic which continue to impact our current engineering and construction portfolio.

“Earlier this year I set out a plan to rebalance, reshape and rebuild Petrofac.”

Iskander said the recent refinancing provided a long-term, stable capital structure for the business, and largely completed the work to “rebalance” the group.

“Operationally, we are making good progress in reshaping the organisation to consistently deliver to best-in-class global standards through local execution.

“Our priority now is to rebuild our order backlog.

“We secured $1.5bn of new awards in the second half to date and the outlook for awards is improving in a more supportive macro environment.”

Iskander said Petrofac's cost-competitive model and “strong” client relationships meant it was “well-positioned”, with a healthy pipeline of opportunities scheduled for award in 2022.

“While challenges will persist in 2022, I remain confident about the prospects for Petrofac over the medium-term as we capitalise on our strong positions in attractive and growing markets and accelerate our progress in New Energies, where we see significant near and long-term growth in exciting areas such as offshore wind, carbon capture, waste to value and hydrogen.”

At 0937 GMT, shares in Petrofac were up 2.5% at 111.32p.