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Petrofac ‘well positioned’ for 2019 with first-half profit

Energy services firm Petrofac said it was “well positioned” for the remainder of 2019 as it posted a profit for the first half of the year.

Pre-tax profits were £157million, compared to a £42million loss in the same period in 2018, while revenues climbed slightly to £2.3bn from £2.26bn

Petrofac’s order backlog sits at £7billion, with a “busy tendering pipeline” ahead with £10.5billion worth of bid opportunities due for award in the second half of the year, reflecting the “improving market outlook”.

The UK took in the majority of revenues from the Engineering & Production Services (EPS) side of the business, with £222.5million of a total £362.7m globally.

That included new awards and extensions in the first half of the year worth £163million, such as an extension for operations and maintenance support to Total in the UK, along with a new appointment with Tullow Oil for its Thames Decommissioning Project in the North Sea.

However the overall EPS segment saw net income drop by 15% to £18.7m.

Engineering and Construction brought the lion’s share of revenues at  £1.8bn, but net profit for the segment was also down to £120.6m, compared to £144.2m at the same time last year.

Petrofac said new order intake in the year had been impacted by “recent challenges” in Saudi Arabia and Iraq.

The company gave no new details on the Serious Fraud Office (SFO) investigation into it, but said that no charges have been brought against the firm, any officers or current employees, adding that the case is “ongoing”.

The investigation was launched in 2017 by the SFO into suspected bribery, corruption, and/or money laundering.

In February this year, a former Petrofac employee admitted offences contrary to the Bribery Act 2010.

Petrofac recognised £12.2m  for “exceptional items” which relate to reorganisation and redundancy costs, disposal of its JFD6000 construction vessel and SFO legal fees, which compares to £169.4m in the first half of 2018.

Going forward, the group’s overall profitability is expected to be weighted to the first half, reflecting a decline in EPS margins and lower oil prices in the second half.

Moving into 2020, the company said revenues are expected to decrease, reflecting low new order intake in recent years.

Meanwhile the Petrofac said it is “reviewing options” around the future of its non-core assets. This follows a deal last year to sell its interest in the Greater Stella Area in the North Sea to Ithaca Energy.

CEO Ayman Asfari said: “Petrofac has delivered good results that reflect solid operational performance across the business.

“New order intake year to date has been impacted by recent challenges in Saudi Arabia and Iraq.  Looking forward, the Group has a busy tendering pipeline with around US$13 billion of bid opportunities due for award in the second half of the year.

“We remain committed to our strategy of delivering best-in-class execution for our clients and enhancing returns for our shareholders by reducing costs, driving digitalisation, increasing local content, improving cash conversion and divesting non-core assets.  These ongoing initiatives will improve our competitiveness in core and growth markets, as well as best position the business for a return to growth in the medium-term.”

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