TIDMPFC
RNS Number : 0629X
Petrofac Limited
17 December 2019
17 December 2019
PETROFAC LIMITED
TRADING UPDATE
Petrofac issues the following pre-close trading update ahead of
the announcement of its full year results for the year ending 31
December 2019 on 25 February 2020.
-- Trading in line with guidance
-- New order intake (1) of US$3.0 billion in the year to date
-- Net debt (2) expected to be around US$0.1 billion at 31 December 2019
Ayman Asfari, Petrofac's Group Chief Executive, commented:
"We remain on course to report good results for 2019 in line
with prior guidance, which reflect solid operational performance
across the business and continued progress delivering our
strategy.
"We are encouraged by the improving market outlook and our busy
tendering pipeline, with US$39 billion of bid opportunities
scheduled for award by the end of 2020 in both core and growth
markets. We have seen delays in E&C bidding processes in the
second half of the year, which has further impacted new order
intake following the previously announced loss of awards in Saudi
Arabia and Iraq in the first half. However, we are well-placed on
several opportunities.
"We remain committed to our strategy of best-in-class delivery,
enhancing returns and positioning the business for a return to
growth. This year we have made further good progress improving cost
competitiveness and divesting non-core assets, whilst maintaining a
strong balance sheet. Looking forward, the fundamentals of our
business remain robust, with an improving market outlook, a strong
competitive position and excellent customer relationships. We are
therefore investing in maintaining our bench strength and technical
capability to position Petrofac for a recovery in new orders in
2020 and future growth."
Engineering & Construction (E&C)
We are making steady progress delivering our portfolio of
E&C projects, with revenue and net margin for 2019 in line with
previous guidance. The BorWin 3 offshore grid connection project in
the North Sea, the RAPID project in Malaysia, the Upper Zakum Field
Development in the UAE, the Jazan North tank farm and Fadhili
projects in Saudi Arabia, and the KNPC Clean Fuels project in
Kuwait are all substantially complete. A major milestone was also
recently achieved on the Lower Fars Heavy Oil plant in Kuwait with
the commencement of steam injection. The Khazzan Phase 2 (Ghazeer)
gas development in Oman remains ahead of schedule.
Our EPCm projects are also progressing well. The Al Taweelah
Alumina Refinery in the UAE has started up, the Rabab Harweel
Integrated Project in Oman has commenced production and gas has
recently been introduced into TurkStream in Turkey.
New order intake of US$2.0 billion in the year to date (2018:
US$4.3 billion(3) ) includes: a lump-sum engineering, procurement
and construction (EPC) contract for the Ain Tsila Development
Project in Algeria; the Mabrouk Project in Oman; and, the second of
two platforms for the HKZ offshore wind project.
Engineering & Production Services (EPS)
Engineering & Production Services is performing in line with
expectations, with growth in Projects more than offsetting lower
activity from Operations.
The recovery in market conditions is reflected in the
acceleration of orders in the second half. In total, US$1.0 billion
of awards and contract extensions have been secured in the UK North
Sea, Oman, UAE, Malaysia and Azerbaijan (2018: US$0.7 billion(3) ).
We have also secured contract extensions in Iraq in the second half
of the year.
The Group also recently completed the small bolt-on acquisition
of W&W Energy Services ("W&W"). This provides the Group
with an entry-level position in the US onshore operations and
maintenance market and an additional platform for growth in the
attractive Permian basin.
Integrated Energy Services (IES)
Net production is expected to be approximately 4.2 million
barrels of oil equivalent (mmboe) in 2019 (2018: 6.2 mmboe), in
line with expectations and reflecting divestments in the second
half of 2018. The average realised oil price (net of royalties) for
the year is expected to be approximately US$66 per barrel of oil
equivalent (2018: US$59/boe) reflecting higher commodity prices and
production mix.
Financial position
Group backlog stood at US$7.4 billion at 30 November 2019:
Backlog (3) 30 November 31 December
2019 2018
US$ billion US$ billion
Engineering & Construction 5.9 8.0
Engineering & Production Services 1.5 1.6
Group 7.4 9.6
Net debt is expected to be around US$0.1 billion at 31 December
2019 (2018: US$0.1 billion net cash) reflecting lower order intake
and delays in some commercial settlements, which we expect to be
resolved in 2020.
Outlook
We expect to report good results for 2019 in line with prior
guidance. Group revenue for the full year is expected to be
approximately US$5.5 billion. We continue to expect E&C results
for the full year to be in line with management guidance, with
revenue around US$4.4 billion and net margin at the low end of
guidance. EPS revenue is expected to be around US$0.9 billion for
the full year and net margin in the middle of our guidance range.
IES is expected to report a modest profit reflecting average
realised oil prices in the year.
Looking further forward, we continue to expect a decrease in
Group revenue in 2020 reflecting low new order intake in recent
years. We currently have c.US$4.0 billion of secured revenue for
2020, comprising US$3.4 billion in E&C and US$0.6 billion in
EPS. As previously guided, net margins in E&C are expected to
decline in 2020 reflecting a higher contribution from contract
awards in lower margin markets and a c.US$30 million investment in
maintaining bench strength and technical capability in 2020. This
investment ensures Petrofac can capitalise on the improving market
outlook and best positions the Group for a recovery in new orders
in 2020 and growth thereafter.
Conference call
Alastair Cochran, Chief Financial Officer, will host a
conference call for analysts and investors at 8am today.
Notes
(1) New order intake comprises new contract awards and
extensions, net variation orders and the rolling increment
attributable to EPS contracts which extend beyond five years.
(2) Net debt comprises interest-bearing loans and borrowings
less cash and short-term deposits (i.e. excludes IFRS 16 lease
liabilities).
(3) On 1 January 2019, the EPCm business was reclassified from
the EPS division to the E&C division. The EPCm business is
presented within the E&C division in prior year comparative
figures.
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
Jonathan Low, Head of Investor Relations
jonathan.low@petrofac.com
Aaron Clark, Investor Relations & Communications Manager
aaron.clark@petrofac.com
Alison Flynn, Group Head of Communications
alison.flynn@petrofac.com
+44 (0) 207 811 4913
Tulchan Communications Group
+44 (0) 207 353 4200
petrofac@tulchangroup.com
Martin Robinson
LEI 2138004624W8CKCSJ177
Notes to Editors
Petrofac is a leading international service provider to the oil
& gas production and processing industry, with a diverse client
portfolio including many of the world's leading integrated,
independent and national oil & gas companies. Petrofac is
quoted on the London Stock Exchange (symbol: PFC).
Petrofac designs and builds oil & gas facilities; operates,
maintains and manages facilities and trains personnel; enhances
production; and, where it can leverage its service capability,
develops and co-invests in upstream and infrastructure projects.
Petrofac's range of services meets its clients' needs across the
full life cycle of oil & gas assets.
With around 11,250 employees, Petrofac operates out of seven
strategically located operational centres, in Aberdeen, Sharjah,
Abu Dhabi, Woking, Chennai, Mumbai and Kuala Lumpur and has a
further 24 offices worldwide.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
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END
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