Petrofac's integrated energy services business expected to report a loss

Oilfield service provider Petrofac’s integrated energy services (IES) business is anticipated to report a loss due to low oil and gas prices, while the company expects full year profit to be in line with expectations.

Profit for the year ending 31 December is expected to be $410m in line with previous guidance, while excluding IES, profit is anticipated to be better than expected at $465m.

IES is to report a loss of $55m, due to low realised oil and gas priced and change in depreciation policy.

The company said that overall, IES is on track to deliver production expectations for the year across its portfolio of producing assets.

The company said that its full year results will benefit from record revenue, improved operational efficiency and a 25% reduction in the headcount.

Group order intake will be $1.4bn with a backlog of $14.5bn at the end of November 2016, which narrowed from $17.4bn in June.

The company reducing capital intensity with $300m of proceeds from the cessation of the Berantai risk service contract in Malaysia in September. It also left the Ticleni production enhancement contract in Romania.

Net debt currently expected to be flat around $900m, due to a lower-than-expected new order intake.

Lower operating cash flow from IES and higher activity-based work in progress in the engineering and construction division is expected to be offset by proceeds from the Berantai exit and a reduction in capital expenditure, which is anticipated to be around $300m, below previous guidance, “reflecting the re-phasing of expenditure”.

Chief executive Ayman Asfari said: "2016 has been a challenging year for the industry. The deferral and cancellation of project tenders has contributed to significantly reduced order intake in our lump-sum business year to date. Order intake in our reimbursable business has been more resilient, which will partially offset the anticipated reduction in EPC revenues in 2017 from record levels this year.

“Our existing backlog continues to provide excellent visibility for group revenue next year and our bidding activity has increased during the last quarter of the year. We remain very focused on maintaining our cost competitiveness and discipline in a competitive market, and are well-positioned for a recovery in our core markets."

The engineering and production services performed in line with expectations and is to contribute a larger proportion of earnings in 2016 and 2017 as it secured awards and extensions worth approximately $1.1bn predominantly in the North Sea and in Iraq.

Shares in Petrofac were down 5.71% to 858 at 0839 GMT.