Troubled oil services group Petrofac PLC (LON:PFC) has tried to reassure investors that it is ‘business as usual’ despite the ongoing Unaoil corruption scandal which has engulfed the company.
The Jersey-based outfit has seen its share price collapse in recent weeks after it was forced to suspend its chief operating officer amid a Serious Fraud Office investigation.
It looks to have eased some of those concerns today though, after telling shareholders that its key engineering and construction (E&C) division – from which it derives the bulk of its earnings – has made “good progress” in the first half of the year.
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FTSE 250-listed Petrofac added that it has continued to see a “high level of tendering activity” in its core E&C markets, following on from the pick-up in the business at the end of 2016.
The E&C division has so far won almost US$2bn worth of contracts in the first half, with analysts looking for around US$3bn for the year as a whole after reducing their targets in the wake of the recent scandal.
IES forecasts lowered, EPS in line with expectations
Things weren’t so hunky-dory in the integrated energy services (IES) business and Petrofac slashed its full-year forecasts for this particular arm of the company.
It now expects IES to deliver full year underlying earnings of between US$80 to US$100mln, a far cry from the US$140mln to US$160mln it predicted back in February.
The lowered guidance is largely due to lower oil price, lower contribution from the Greater Stellar Area as well as lower investment in Mexico, Petrofac said.
A profit warning for any division is never good, but the company has been winding down its IES business for a little while now so it isn’t as big an issue as it once might have been.
Its third division, engineering and production services (EPS), is performing in line with expectations, Petrofac said.
The company recently secured a decade-long contract with Petroleum Development Oman to provide various engineering, procurement and construction services.
That deal could put Petrofac in good shape to clinch one of the US$1.5bn packages for Oman Duqm refinery project when they come up for grabs later this year.
Outlook
Petrofac is expecting underlying net profit for the six months to the end of this month to come in between US$135mln and US$145mln – similar to the US$135mln it posted in the same period last year.
It also expects net debt to be around US$1.1bn at the end of the month, while it currently has a backlog of US$13bn.
‘Positive start to the year’
“Our core business continues to trade in line with expectations and we remain competitive, securing new contract awards in both our E&C and EPS divisions throughout the last six months,” said chief executive Ayman Asfari.
“The high level of tendering activity is evidence of greater confidence in our core markets and we continue to have a very good pipeline of bidding opportunities.
“In IES, performance in the first half of 2017 has been impacted by lower realised oil prices, lower capital investment in Mexico and our delayed entry onto the Greater Stella Area development licence.”
There was a brief word on the elephant in the room, with chairman Rijnhard van Tets commenting: “An independent committee of the board will continue to engage with the SFO and its investigation.”
Petrofac shares openend 1% higher at 427p on Tuesday.
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