Wednesday share tips: Petrofac, Ladbrokes

The latest trading update from oil field services firm Petrofac showed that losses at its North Sea Laggan­Tormore project were now estimated to be $50m higher. That resulted from labour unrest with its associated delays and costs and came on top of another $650m in unexpected charges to date. However, that project is now 99% complete. So the risk of further cost overruns is largely contained.

The news sent the stock vaulting 6% higher. The company also announced it was in talks to sell some of the low margin oil producing contracts of its integrated energy services arm to Mexico's PEMEX. That division has been major disappointment, having incurred in a $463m loss last year. Nonetheless, those sales could generate as much as $400m in fresh funds. The company also still enjous a three­year order backlog, including with firms such as Saudi Aramco. Even so, trading on an enterprise value at eight times this year's operayting profitsthe stock is well­priced. Chief Ayman Asfari says the worst has passed. He had better be right this time, writes the Financial Times's Lex column.

Shares in Ladbrokes surged after the company announced it had kicked off merger talks with rival bookmaker Coral. A combination makes sense. There is scope to pare back­office costs and for singeries and greater growth from their bringing together digital operations. Reducing the number of high street betting shops is another option open to the two firms.

They own 45% of those but the high street is growing at just 1% a year. An all­share deal would see Ladbroke's debt rise to three times operating earnings, from two times that at present. However, it would leave the firm with more of other people's money to gamble with. Even so, Coral's private equity backers may decide the time has come to part company in the medium­term which could put downwardspressure on the sales, says Lex.