Petrofac – Recovery Delayed

Petrofac – Recovery Delayed
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Petrofac Limited (LON:PFC)’s full year revenue declined 25% to $3.1bn, as double-digit declines in Integrated Energy Services and Engineering & Construction more than offset an increase in Asset Solutions. This was largely due to Covid-related disruption, asset sales and unplanned disruption to production.

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Together with rising costs meant group underlying cash profits fell from $211m to $104m. Including non-cash charges related to refinancing, the SFO investigation and the likely expiration of a production sharing contract in Malaysia, the group reported a $195m net loss.

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Revenue and margins are expected to be “subdued” in the near term. CEO Sami Iskander said, “While clients continue to prioritise cash preservation over new investments, we expect the increasingly supportive energy price environment to improve the outlook for awards as the year progresses.”

Shares fell 4.5% following the announcement.

Petrofac’s Bounce Back Will Be Relatively Muted

Laura Hoy, Equity Analyst at Hargreaves Lansdown:

“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. But a recovery could be in the works.  The group’s interests in Russia have taken 0.6% of potential projects off the table, but the conclusion of the SFO investigation means it’s no longer barred from trading in some of the most lucrative markets in the world. The group can bid on $37bn worth of projects which will be awarded  by the end of 2022 and with an impressive win rate so far, we could see a marked increase in next year’s order book.

However, the market was understandably disappointed by management’s forecast for subdued margins and tepid revenue growth. The group’s recovery appears to be pushed back another year and given the ongoing volatility sooner would have been better.”

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Updated on Mar 23, 2022, 5:20 pm

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