Shares in oil infrastructure engineering firm Petrofac (LON:PFC) jumped today as it ended its contract with ZPMC.
Usually, losing a contract is met with a sell-off in shares, but the loss of the unpopular contract saw it rise to near the top the FTSE 350 table.
Petrofac took the contentious decision to enter the deepwater installation market in 2013 when it agreed to spend US$800mln on the JSD-6000 vessel.
With the collapse of the oil price, concerns have been heightened over the project, which Investec reckons Petrofac has already spent US$300mln on, with another US$100mln in commitments.
It is mainly on equipment, however, and the broker says it has three options.
Firstly, it can move the hull construction contract to another shipyard; secondly Petrofac may put the equipment into storage and revisit the hull construction at a later date; or finally, and most likely, it cancels the vessel entirely and tries to sell the equipment.
“Given that the vessel was not due to start work until 2019,” Investec said, “there will be little impact on near-term consensus earnings.”
Shares rose more than 10% to 946p this morning.