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OPEC should make the headlines, but Petrofac and other oilfield services firms provide a big, black cloud

Petrofac was the London market’s biggest faller, with its share price plunging by nearly 30% to reach its lowest level since the first half of 2009, wiping around £630mln off its total market value

Oil rig
Aside from Petrofac’s plunge, other oilfield services contractors were also unnerved by concerns over the implications of the SFO probe into Unaoil’s activities

Oil producers could have been expected to have been the main focus today, with the OPEC cartel meeting in Vienna to decide on likely further output cuts, but it was the oilfield services stocks that were taking the headlines at lunchtime - for all the wrong reasons.

Petrofac PLC (LON:PFC) was the London market’s biggest faller, with its share price plunging by nearly 30% to reach its lowest level since the first half of 2009, wiping around £630mln off its total market value after it said it had suspended its chief operating officer, Marwan Chedid amid a corruption probe by the Serious Fraud Office.

READ: Petrofac suspends COO, ring-fences CEO's activities

Petrofac shares shed nearly 13% of their value earlier this month when the SFO probe was first revealed, and have remained under pressure since, meaning the stock has almost halved in value.

Chedid’s suspension came after the company’s revelation on May 12 that he, and Petrofac’s chief executive, Ayman Asfari, had been arrested and questioned by police as part of the SFO's ongoing investigation of suspected bribery, corruption and money laundering related to Unaoil, a Monaco-based oil services company.

Although Asfari is to continue in his role as chief executive,  the company said today that he will not be involved in any matters related to the SFO investigation, and "will have no role or responsibilities for engaging with or liaising with agents and consultants".

Chedid and Asfari were both released without charge after questioning, and  Petrofac said its actions “do not in any way seek to pre-judge the outcome of the SFO's investigation.”.

Petrofac said Unaoil had engaged by the FTSE 250-listed company for consultancy services in Kazakhstan between 2002 and 2009.

Petrofac’s recent operating success rendered “all but irrelevant”, says analyst

In a post on its website, Hargreaves Lansdown equity analyst, Nicholas Hyett commented: “The announcement of a wide ranging Serious Fraud Office (SFO) investigation in May has rendered recent operating success all but irrelevant. The shares have fallen more than 45% since details first emerged, and it has embroiled much of the company's senior management team.”

He added: “The impact of the SFO investigation is almost impossible to predict, but Petrofac can at least say that many of the operating challenges the group faced in 2016 are behind it.”

Hyett concluded: “Overall, Petrofac looks pretty well placed at an operating level, despite industry wide challenges. However, it's the SFO investigation that's likely to drive the shares in the near term.”

Aside from Petrofac’s plunge, other oilfield services contractors were also unnerved by concerns over the implications of the SFO probe into Unaoil’s activities.

Also on the FTSE 250 index, shares in John Wood Group PLC (LON:WG.) lost 3.2%, or247p at 722.5p, and its takeover target Amec Foster Wheeler PLC (LON:AMFW) fell 5%, or 26.5p at 507.5p.

Repercussions for Wood Group takeover of Amec

Media reports said that a circular published to disclose details of Wood Group's acquisition of its energy support services rival revealed that Amec is also co-operating with the SFO over its criminal investigation into potential bribery corruption and money laundering.

Meanwhile the circular said as well that an internal probe by Wood Group also revealed that one of its joint ventures made payments to Unaoil.

A prosecution from the SFO could result in a large fine for the firm further putting its takeover of Amec under threat.

Wood and Amec agreed the terms of the £2.2bn takeover in March, creating a company with a combined value of about £5bn.

Quick facts: Petrofac Limited

Price: 406.5 GBX

LSE:PFC
Market: LSE
Market Cap: £1.41 billion
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