Petrofac Limited (LSE:PFC) shares fell more than 11% after warning of a widened EBIT loss after reviewing project costs and the timing of recognition of certain revenue streams.
As a result, the energy services company will now recognise an additional EBIT reduction of US$140mln to US$160mln in 2022.
This means Petrofac now expects to report a full-year group EBIT loss of around US$150mln to US$170mln for 2022, including an EBIT loss of approximately US$240mln to US$260mln in Engineering & Construction (E&C).
In the December 2022 trading update, the group EBIT loss was forecast to be US$100mln and the E&C EBIT loss was forecast to be US$190mln.
Petrofac said this comprises both incremental project costs and a cautious view of the quantum and timing of recognition of certain revenue claims that would have partly offset those costs.
The company said it had conducted a thorough review of the portfolio of contracts, associated outstanding contractual and commercial issues and opportunities to improve liquidity by accelerating working capital inflows.
Approximately 50% of these additional costs are expected to be paid over the remainder of 2023, with the balance spread over 2024 and 2025.
Petrofac said it remains focused on ensuring the group has sufficient liquidity to support its strategy and has made significant progress in extending its borrowing facilities.
Tareq Kawash, Petrofac’s group chief executive, said: “Although we are disappointed to announce additional costs on these legacy contracts, in particular the Thai Oil Clean Fuels project, ongoing collaboration with clients and partners will de-risk future delivery.”
Shares in the firm soared over 60% last week after it announced it has been awarded a multi-year framework agreement by Dutch group TenneT worth around €13bn, in partnership with Hitachi Energy.
The deal was the biggest in Petrofac’s history.