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Petrofac downgraded as Jefferies uncertain over contract wins

Jefferies moves to 'hold' as it focusses on the group's effort to secure US$3.5bn of new business for the year
oil and gas operations
Jefferies retains a 640p price target

Petrofac PLC's (LON:PFC) sales efforts could be slipping short of the necessary pace, that’s according to Jefferies, which has downgraded the oil services firm.

Stepping away from a previously bullish view, Jefferies now sees Petrofac as a ‘hold’ with an unchanged price target of 640p.

Analyst Mark Wilson, in a note, highlighted that Petrofac’s new bank facility and the Mexico sell-down alleviates balance sheet fears, as a bond matures this October, however, new business is needed.

READ: Petrofac secures US$300mln of new bank facilities

“What remains is to deliver the $3.5bn of new Lump-Sum E&C awards we see as a minimum during 2018,” the analyst said in a note.

Wilson reckons it is “more than possible” for Petrofac to achieve the contract wins, with US$1.8bn so far landed in the year-to-date, though he cautions that no “true anchor” project (US$1bn or more for any single project) has been secured – albeit, he notes company guidance that major contracts could come at in late Q3 or Q4.

Adding to the uncertainty, the analyst added: “The unknown headline risk that also means we choose to exercise price target discipline and move to hold is the ongoing SFO investigation.

“We include a $400m cash fine across 2019-2020 and continue to point to industry awards as PFC's fundamental business answer to that situation.”

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Petrofac Limited Timeline

February 28 2019

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