Petrofac shares tumble as it reports challenging first half
Petrofac Ltd.
15.49p
12:05 30/09/24
Petrofac reported a challenging first half on Monday, with revenue reaching $1.24bn, a slight increase from $1.23bn in the same period in 2023, as it recorded a first-half EBIT loss of $106m, widening from a $72m loss a year earlier.
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The London-listed company said its order backlog stood at $8bn, supported by a robust $0.9bn in new orders from its Asset Solutions division.
Net debt increased to $622m by the end of June, up from $583m at the close of 2023, reflecting a free cash outflow of $36m.
Gross liquidity stood at $164m.
Petrofac said it was working under an in-principle agreement with key stakeholders to implement a comprehensive financial restructuring, aimed at improving its balance sheet, liquidity, and access to performance guarantees.
Operationally, the Engineering and Construction (E&C) division faced ongoing difficulties from legacy contracts, leading to a business performance EBIT loss of $103m, despite a 13% increase in revenue to $600m.
Progress was being made on newer contracts secured in 2023, including the TenneT framework, with the company securing guarantees or alternative arrangements for $4.4bn of the $5.5bn E&C contracts awarded last year.
Asset Solutions reported an EBIT loss of $8m, driven by contract transitions and geographic expansion.
Looking ahead, Petrofac said its ability to maintain liquidity and complete its financial restructuring would be critical.
The company anticipated a higher level of operating activity in E&C for the rest of 2024, as it continued transitioning from legacy contracts to newer, more profitable projects.
Its substantial project pipeline, valued at $53bn over the next 18 months, could provide long-term growth opportunities, particularly in the MENA region and energy transition sectors.
“The first half of 2024 was another challenging period for Petrofac, set against the backdrop of a restructuring process which aims to put the business in a stronger financial position,” said group chief executive officer Tareq Kawash.
“While this has impacted the Group’s performance during the first half, our new projects are performing well, and we continue to make progress in closing our legacy contracts in E&C.
“The markets we operate in remain robust and we have secured a good level of new order intake in Asset Solutions.”
Kawash said that as announced last week, the company was moving forward with a financial restructuring that would enable it to look to the future.
“The board is grateful for the support of our stakeholders during this period and remains focused on delivering the best possible outcome for Petrofac and capitalising on the opportunities ahead of us.
“I am particularly proud of the continued dedication and commitment of our people and thank them for their ongoing and relentless focus on our customers at this important time.”
At 0935 BST, shares in Petrofac were down 21.04% at 15.37p.
Reporting by Josh White for Sharecast.com.