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JP Morgan downgrades Petrofac as shareholders band together to launch £400mln legal claim

Petrofac has been under investigation from the Serious Fraud Office for almost two years, and shareholders are now looking to recoup some of their “substantial losses”
petrofac worker
Petrofac’s former global head of sales admitted to 11 counts of bribery last week

A group of disgruntled Petrofac Limited (LON:PFC) shareholders are suing the scandal-hit oil services provider for more than £400mln.

Last week, Petrofac’s former global head of sales, David Lufkin, admitted to offering bribes in an attempt to secure contracts worth over US$4bn in Iraq and Saudi Arabia.

READ: SFO launches Petrofac investigation

Litigation funder Innsworth and law firm Keystone have today confirmed they are putting together a group of shareholders, including major UK and US pension funds, in order to take action against Petrofac.

They are looking to sue Petrofac and its board in a bid to recoup some of the “substantial losses” they claim to have suffered as a result of the firm’s alleged involvement in bribery, corruption and money laundering.

They also allege that Petrofac compounded the issue by publishing “false and misleading statements” and failing to disclose "material information regarding [its] compliance and corporate governance policies and business performance and prospects”.

Innsworth, which is funded by Elliott, is engaging investors who held shares from 2010.

The SFO opened its initial investigation into Petrofac almost two years ago which led to more than £1bn being wiped from the company’s value almost overnight.

Its share price, which was above 900p before news of the investigation broke, immediately collapsed to below 400p, where it still finds itself today.

Petrofac pleads innocence

Petrofac’s stock was again hit when Lufkin admitted charges at Westminster Magistrates’ Court last week, tumbling by more than a quarter.

Rene Medori, chairman of Petrofac, said at the time: “The SFO has chosen to bring charges against a former employee of a subsidiary company.

“It has deliberately not chosen to charge any group company or any other officer or employee. In the absence of any charge or credible evidence, Petrofac intends as a matter of policy to stand by its employees.

“Petrofac has policies and procedures in place designed to ensure that we operate at the highest levels of compliance and ethics.”

JP Morgan in need of more reassurance

Despite the protestations of innocence, JP Morgan Cazenove has taken a “more cautious stance” and has downgraded Petrofac to ‘neutral’ and slashed its price target by a quarter to 500p.

“We have been mindful that the SFO investigation would create some volatility in PFC share price; however, headlines from the SFO about a former PFC employee pleading guilty to bribery associated with more recent contracts won by PFC in Iraq and Saudi Arabia, reflects negatively on the stock, in our view,” read a note to clients.

“We recognize that there is a value case to be argued and no charges have been brought against the company (as of now) and that PFC’s stance against the investigation can yet be proven correct; but given (i) risk of further escalation, and (ii) a need again for reassurance that PFC’s competitive position is not diminished, we have less confidence in the outlook.”

Petrofac shares rose 1.5% to 399p on Monday morning.

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Petrofac Limited Timeline

February 28 2019

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