Bernstein downgrades Petrofac to 'underperform'

Bernstein, which only recently lowered the stock to 'market perform', said worries an investigation from the Serious Fraud Office would continue to suppress new work, increased net debt and a "too optimistic" sell-side had all led to its decision to drop its rating on the firm yet again.

The analysts said they were "sufficiently concerned" about working capital, stating current outstanding invoices represented the "largest amount of money owed" in the company history - with around 214 days of sales yet to be received.

In turn, Bernstein stated this meant Petrofac now owed the most money to suppliers in its own history.

"The combined value of these balances - $5.7bn on an absolute basis - is more than 10 times market cap," said Bernstein, which also cut its target price on the stock from 170.0p to 110.0p.

"For an E&C company already suffering material loss of work from the SFO investigation, we consider operating in such extremes of working capital is a material risk."

As far as the SFO investigation was concerned, Bernstein added that "nobody knows" how it will turn out, but noted that there was a good chance it would spell the end for chief executive Ayman Asfari.

"We are uncomfortable with what Petrofac looks like without Asfari at the helm," added the analysts, who urged the group to clarify its thoughts on his succession.