Petrofac Limited (LSE:PFC) posted results that were below expectations for 2021 and said revenue and margins will “remain subdued” for a while.
The oil services engineer reported a net loss of US$195mln for the 2021 calendar year, compared to a US$192mln loss a year earlier, with revenue of US$3.1bn down 25% on 2020. These were less than expected, analysts said.
The underlying business made a US$35mln net profit before the UK Serious Fraud Office (SFO) bribery investigation concluded with a US$106mln penalty imposed in the courts, with the company also taking a US$28mln refinancing cost and US$58mln impairment charge relating to a production-sharing contract in Malaysia.
With conclusion of the SFO probe meaning it’s no longer barred from persuing contracts in a number of lucrative markets, Petrofac said it spent the year with a focused effort to “rebalance, reshape and rebuild”, including recently being reinstated to the bidding list of the Abu Dhabi National Oil Company (ADNOC).
Petrofac said it is now “well positioned” to win more business, with a US$37bn pipeline of opportunities for 2022, which includes US$6.8bn of new energy opportunities, comprising projects in offshore wind, carbon capture and storage, hydrogen and waste-to-value.
However, in the near term it acknowledged that “revenue and margins will inevitably remain subdued”, with its main efforts in 2022 being on rebuilding its backlog of work, which stands at just US$4bn (with exposure to Russia at less than 1%).
The board’s medium-term ambition is to deliver revenues of US$4bn-US$5bn, including circa US$1bn from new energies, with a 6%-8% EBIT margin and a return to a net cash position.
Petrofac shares, already down more than 85% over the past five years, fell 9% to 107.3p on Wednesday morning.
Laura Hoy, equity analyst at Hargreaves Lansdown, said: “Petrofac’s finally getting over the impact of the SFO investigation, but it looks like the bounce back will be relatively muted. Tentative spending among Engineering & Production Services clients held back performance as capital discipline takes top billing."
On the pipeline, she said "with an impressive win rate so far, we could see a marked increase in next year’s order book", but the market was "understandably disappointed by management’s forecast for subdued margins and tepid revenue growth".
**Adds shares and broker comment**