Petrofac Limited ( PFC)
Petrofac Limited: Trading Update
20-Dec-2023 / 07:00 GMT/BST
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This announcement contains inside information
PETROFAC LIMITED
TRADING UPDATE
Petrofac issues the following pre-close trading update for the year ending 31 December 2023.
FINANCIAL AND STRATEGIC UPDATE:
-- Second contract award under the six-project, USUSD14 billion, multi-year Framework Agreement with TenneT
announced today. Petrofac's portion of the second contract valued at approximately USUSD1.4 billion.
-- Performance guarantee secured for the first contract awarded under the Framework Agreement with TenneT.
Performance guarantee terms agreed for the first ADNOC Habshan contract - expected to be issued by year end. Active
discussions ongoing to secure guarantees required for other new contracts.
-- Net debt(1) expected to be modestly higher than at the interim results, with positive free cash flow
generation by the business in the second half offset by an increase in collateral required for guarantees.
-- Near-term focus remains on strengthening the balance sheet with ongoing review of strategic and financial
options.
OPERATIONAL PERFORMANCE:
-- Asset Solutions and IES underlying performance in line with guidance, before a one-off bad debt provision
in Asset Solutions of approximately USUSD12 million.
-- Expect a full year EBIT loss in E&C of approximately USUSD215 million, including USUSD110 million one-off
write downs in contract settlements to protect cash flows.
-- Good progress in reaching contractual settlements in the second half, with approximately USUSD180 million
collected year-to-date.
-- Completion of remaining legacy E&C contracts progressing in line with guidance.
-- Thai Oil Clean Fuels project progress remains on track, with negotiations ongoing to recover additional
committed costs.
BACKLOG AND OUTLOOK:
-- Exceptional new order intake(2) across both E&C and Asset Solutions, totalling approximately USUSD6.8
billion in the year-to-date, with Group backlog(3) expected to be approximately USUSD8.0 billion at the end of the
year.
-- Robust business outlook underpinned by strong backlog and a healthy Group pipeline scheduled for award in
the next 18 months of USUSD62 billion, including the remaining projects in the TenneT multi-platform Framework
Agreement.
Tareq Kawash, Petrofac's Group Chief Executive, commented:
"Our focus on rebuilding the backlog and unwinding historic working capital has resulted in tangible progress against
our organic plan to strengthen the Group's financial position.
"To further accelerate progress, my near-term priority, and that of our Board and leadership, remains on improving
liquidity and materially strengthening the Group's balance sheet, to deliver on our long-term potential.
"We are completing contracts in the legacy portfolio as planned, we continue to deliver well in the initial phases of
the contracts awarded in 2023, and, as a result of excellent order intake, we enter 2024 with a high-quality backlog in
both traditional and renewable energy of approximately USUSD8 billion. This provides us with good revenue visibility and
demonstrates the continued confidence customers have in Petrofac's delivery."
FINANCIAL AND STRATEGIC UPDATE
The Group has made good progress on its near-term priorities, since its announcement on 4 December 2023. Today, we
announced that the Group has secured the performance guarantee for the first contract awarded under its Framework
Agreement with TenneT, which was also supplemented with the second contract award under the agreement. The Group
remains in active discussion with credit providers and its clients to secure the guarantees required for other new
contracts in its portfolio.
Cash flow and net debt(1)
The Group has continued to advance contractual settlements, collecting approximately USUSD180 million in the year to
date. As referenced in the business update on 4 December 2023, due to the delays in securing guarantees, the Group no
longer expects to collect advance payments on new contracts before the year-end.
Measures taken by management resulted in positive free cash flow in the second half, even in the absence of advance
payment receipts, albeit this was offset by an increase of over USUSD100 million in collateral for guarantees. As a
result, net debt at year-end is expected to be modestly higher than at the interim results (30 June 2023: USUSD584
million).
The Group has continued to maintain liquidity above its financial covenant.
Review of strategic and financial options
On 4 December 2023, the Group announced that Aidan de Brunner had joined the Company as a Non-Executive Director to
drive engagement with finance providers, investors and other stakeholders in an active review of strategic and
financial options with the objective of materially strengthening the Company's balance sheet, securing bank guarantees
and improving short-term liquidity. Further announcements will be made as appropriate.
GROUP TRADING
The Group continues to perform well for its clients. Management expects to report Group revenue of approximately USUSD2.5
billion, in line with guidance. Full-year business performance EBIT loss is expected to be approximately USUSD180
million. This includes approximately USUSD110 million one-off write-downs in contract settlements to protect cash flows
and a one-off bad debt provision of approximately USUSD12 million for a client going into administration in the Asset
Solutions business unit.
DIVISIONAL HIGHLIGHTS
Engineering & Construction (E&C)
The financial performance in E&C reflected the low opening backlog and the maturity of its legacy contract portfolio.
Full year E&C revenues are expected to be around USUSD1.0 billion, with a full year EBIT loss of approximately USUSD215
million, including approximately USUSD110 of one-off write-downs on legacy contracts to protect and accelerate cash
flows.
Following E&C's strongest order intake in many years, it has good visibility of future revenue and profit growth.
Guidance will be provided with the Group's annual results, as usual.
Operationally, the initial phases of the new contracts secured in 2023 are progressing well. We previously guided that
five of the remaining eight legacy contracts were expected to be completed or substantially completed(4) during 2023 or
early 2024. Progress remains on track, with two reaching that milestone in 2023 and the remaining three expected to
follow in early 2024.
With respect to the Thai Oil Clean Fuels project, good progress continues to be made on the construction phases and we
are achieving our interim milestones. Negotiations are ongoing with our client and partners in relation to the
reimbursement of additional committed costs. The timing of these negotiations is not wholly within the Company's
control and therefore, there is a risk to the 2023 EBIT numbers stated above. A project and commercial update will be
provided with the publication of the Group's full year results in 2024.
Year-to-date, following the second contract award under the TenneT framework agreement, E&C has secured new orders of
approximately USUSD5.3 billion, split broadly evenly between our core markets and energy transition projects under the
TenneT framework. Backlog is expected to be approximately USUSD5.9 billion at 31 December 2023, of which almost 90%
relates to contracts secured in 2023.
Asset Solutions
Asset Solutions has had another successful year, with order intake for the year-to-date of USUSD1.5 billion comprising
renewals and extensions in core markets and new contract awards in both core markets and new geographies.
Full year revenues are expected to be USUSD1.4 billion with EBIT of between USUSD20 million and USUSD25 million, following a
bad debt provision approximately USUSD12 million relating to a customer entering administration. Excluding this one-off
event, expected underlying EBIT of between USUSD32 million and USUSD37 million reflects the completion of historic high
margin contracts in 2022 and a higher contribution of pass-through revenues.
Integrated Energy Services (IES)
IES has continued to deliver ahead of expectations. Net production is expected to be broadly in line with the prior
year (2022: 1,261kboe). The average realised oil price (net of royalties)(5) for the year to date is expected to be
approximately USUSD90/bbl, including the impact of hedging (2022: USUSD110/bbl), with the full year EBITDA expected to
marginally exceed the guided range of USUSD65 million to USUSD75 million.
ORDER BACKLOG
The Group's backlog(3) is expected to be approximately USUSD8.0 billion at 31 December 2023 (30 June 2023: USUSD6.6
billion), reflecting the exceptional order intake in both E&C and Asset Solutions.
31 December 2023 (forecast) 30 June 2023
USUSD billion USUSD billion
Engineering & Construction 5.9 4.5
Asset Solutions 2.1 2.1
Group backlog 8.0 6.6
Conference call
Tareq Kawash, Group Chief Executive and Afonso Reis e Sousa,
Chief Financial Officer, will host a conference call for analysts
and investors at 8.30am today.
Analysts and investors can access the call on: +44 (0) 330 551
0200. Password: Quote 'Petrofac Trading Update' when prompted by
the operator.
NOTES 1. Net debt comprises interest-bearing loans and
borrowings less cash and short-term deposits (i.e.excluding IFRS 16
lease liabilities). 2. New order intake is defined as new contract
awards and extensions, net variation orders and the
rollingincrement attributable to Asset Solutions contracts which
extend beyond five years. 3. Backlog consists of: the estimated
revenue attributable to the uncompleted portion of Engineering
&Construction division projects; and, for the Asset Solutions
division, the estimated revenue attributable to thelesser of the
remaining term of the contract and five years. 4. Completed and
substantially completed contracts: contracts where (i) a
Provisional Acceptance Certificate(PAC) has been issued by the
client, (ii) transfer of care and custody (TCC) to the client has
taken place, or(iii) PAC or TCC are imminent, and no substantive
work remains to be performed by Petrofac. 5. Average net realised
price is inclusive of royalties and hedging gains or losses. It is
based on salesvolumes, which may differ from production due to
under/over-lifting in the period.
ENDS
Disclaimer:
This announcement contains forward-looking statements relating
to the business, financial performance and results of Petrofac and
the industry in which Petrofac operates. These statements may be
identified by words such as "expect", "believe", "estimate",
"plan", "target", or "forecast" and similar expressions, or by
their context. These statements are made on the basis of current
knowledge and assumptions and involve risks and uncertainties.
Various factors could cause actual future results, performance or
events to differ materially from those expressed in these
statements and neither Petrofac nor any other person accepts any
responsibility for the accuracy of the opinions expressed in this
presentation or the underlying assumptions. No obligation is
assumed to update any forward-looking statements.
For further information contact:
Petrofac Limited
+44 (0) 207 811 4900
James Boothroyd, Head of Investor Relations
James.boothroyd@petrofac.com
Sophie Reid, Group Director of Communications
Sophie.reid@petrofac.com
Teneo (for Petrofac)
+44 (0) 207 353 4200
petrofac@teneo.com
NOTES TO EDITORS
Petrofac
Petrofac is a leading international service provider to the
energy industry, with a diverse client portfolio including many of
the world's leading energy companies.
Petrofac designs, builds, manages and maintains oil, gas,
refining, petrochemicals and renewable energy infrastructure. Our
purpose is to enable our clients to meet the world's evolving
energy needs. Our four values - driven, agile, respectful and open
- are at the heart of everything we do.
Petrofac's core markets are in the Middle East and North Africa
(MENA) region and the UK North Sea, where we have built a long and
successful track record of safe, reliable and innovative execution,
underpinned by a cost effective and local delivery model with a
strong focus on in-country value. We operate in several other
significant markets, including India, South East Asia and the
United States. We have 8,500 employees based across 31 offices
globally.
Petrofac is quoted on the London Stock Exchange (symbol:
PFC).
For additional information, please refer to the Petrofac website
at www.petrofac.com
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transmitted by EQS Group. The issuer is solely responsible for the
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ISIN: GB00B0H2K534
Category Code: TST
TIDM: PFC
LEI Code: 2138004624W8CKCSJ177
Sequence No.: 292987
EQS News ID: 1800591
End of Announcement EQS News Service
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December 20, 2023 02:00 ET (07:00 GMT)
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