Petrofac flags 'challenging' market conditions as Covid continues to hit home

Petrofac said on Monday that the Covid-19 pandemic was continuing to weigh heavily, with new orders in its core engineering and construction unit likely to remain depressed for the rest of the year as a result.

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Petrofac Ltd.

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Updating on first-half trading, the oilfield services firm said the E&C division - which accounted for around 75% of group revenues in 2020 - was facing "challenging" market conditions.

"First-half revenues in 2021 are expected to be around $1.0bn, reflecting lower levels of activity, a mutually-agreed re-scooping of the Sakhalin contract, and other disruption to project schedules caused by the Covid-19 pandemic," it said.

The collapse in oil prices last year also hit Petrofac, and while crude prices have since recovered, the firm said it had yet to benefit from the upswing.

"As expected, the recovery in oil prices has yet to manifest itself in a significant expansion in capital spending by our clients," it said. "Year-to-date, we have secured new awards worth $0.1bn in E&C [compared to $0.4bn a year ago], comprising the EPC contract for the Marmul Main Production Station Gas Compression project in Oman."

Sami Iskander, who took over as chief executive in January, said trading overall was in line with expectations.

He continued: "We are making good progress on our strategic objectives to rebalance, reshape and rebuild our business.

"As expected, new orders are likely to remain depressed in E&C in the current year, but the group has an active bidding pipeline of $48bn of opportunities due for award in the next 18 months.

"By continuing to deliver against our near-term strategic priorities, I am confident we will be successful in rebuilding our order backlog as the market recovers."

Petrofac reported a 26% slide in group revenues in 2020, to $4.07bn, and a net loss of $180m.

The firm is also the subject of an ongoing Serious Fraud Office investigation. In January, a former global head of sales pleaded guilty to a further three bribery offences, while in March, ADNOC - the United Arab Emirate’s state-backed oil firm - suspended Petrofac from competing for new contracts.

As at 1215 BST, shares in Petrofac were down 2% at 114.2p.