Petrofac rallies on $780m Kuwait pipeline contract win

Shares in oil and gas services provider Petrofac rallied after the company said it has been awarded a $780m contract from Kuwait Oil Company for its manifold group trunkline in the north of the country.

Petrofac said the lump-sum engineering, procurement and construction project, is integral to KOC's plans to increase and maintain crude production over the next five years.

Three new gathering centres, which form part of the broader project, are already under construction.

The system is due for completion towards the end of 2017 and each of the three gathering centres will be capable of producing around 100,000 barrels of oil per day together with associated water and gas, the company said.

Marwan Chedid, chief executive of Petrofac’s Engineering, Construction, Operations and Maintenance division, said: “We have a long track record in Kuwait which extends over the last 15 years and the MGT award represents our twelfth project in the country. Kuwait is, and will continue to be, one of our core markets and is of strategic importance to Petrofac's ambitions in the Middle East. We look forward to working with KOC to deliver this project safely and on schedule."

Paul Singer, equity analyst at Whitman Howard, said: “Petrofac remains a solid company with a good overall operational performance - the backlog is healthy.”

He added that the shares are attractively valued, trading on prospective 2016 price-to-earnings multiples of around 9 times with a yield of around 5 %.

“Current share price levels still provide a good opportunity for the medium/longer term.”

Whitman Howard rates the stock at ‘buy’.

At 09:47, shares were up 2% at 868.50p.