When Petrofac issues its interims, the spotlight will likely be on sales, cash flow and debt reduction.
The rising oil price is looking healthier but having been on the back foot for so long in the wake of the slowdown in recent years the company has catching up to do.
Amid the sector recovery expectations, internal and external, are now somewhat higher in terms of contract wins and the work pipeline and the focus is also on the firm’s indebtedness.
Last Friday’s US$292mln deal to sell out of the Greater Stella development in the North Sea represented what chief executive Ayman Asfari described as “a further milestone in the journey back to a capital-light business.”
US investment bank Jefferies recently downgraded Petrofac, moving to ‘hold’ from ‘buy’, citing caution over the pace of major contract wins.
Petrofac’s new bank facility and the Mexico sell-down have alleviated balance sheet fears ahead of the maturation of a bond issue this October, but new business is needed, Jefferies argues.
“What remains is to deliver the US$3.5bn of new Lump-Sum E&C awards we see as a minimum during 2018,” the analyst said.
The broker reckons it is “more than possible” for Petrofac to achieve the contract wins, with US$1.8bn landed in the year-to-date, though no “true anchor” project (US$1bn or more for any single project) has been secured; the company has indicated that such contracts could come in the final four months of the year.
Acquisitions key for Diploma
Investors in fellow FTSE 250 technical products maker Diploma will have acquisitions on their minds on Wednesday.
The trading updates comes hot on the heels of the firm’s acquisition of cabling company FS Cable on 22 August, with chief executive Richard Ingram saying in Diploma’s half-year results in May that the group planned to make several purchases before the end of the year.
As FS Cable is the first acquisition to be announced so far since the interims, any inkling of another impending acquisition will turn heads.
Significant announcements expected on Wednesday:
Interims: Petrofac PLC (LON:PFC), IQE plc (LON:IQE), The Gym Group (LON:GYM)
Trading update: Diploma PLC (LON:DLPM)
Economic data: Nationwide UK house prices; US retail sales; US industrial production; Empire State manufacturing survey