13 August, 2012
Petrofac Limited (Petrofac, the group or the Company), the international oil & gas service provider, today announces its interim results for the six months ended 30 June 2012.
· Revenue up 20% to US$3.2 billion (2011: US$2.7 billion)
· Net profit(1) up 32% to US$325.3 million (2011: US$246.3 million)
· Earnings per share (diluted) up 32% to 94.82 cents (2011: 71.84 cents)
· Interim dividend up 21% to 21.00 cents (13.45 pence(2)) per share (2011: 17.40 cents)
· Backlog(3) at 30 June 2012 of US$8.9 billion (31 December 2011: US$10.8 billion; 30 June 2011: US$11.4 billion); in addition we secured US$1.5 billion of awards that were pending contract signature at 30 June 2012 and were not included in backlog(4)
· Net cash balances at 30 June 2012 of US$0.8 billion (31 December 2011: US$1.5 billion)
Ayman Asfari, Petrofac’s Group Chief Executive commented on the interim results:
“We have delivered good operational and financial performance in the first half of the year and remain on course to deliver net profit growth in 2012 of at least 15%.
“Our strategy for future growth is based on three key drivers: geographical expansion; broadening our offshore engineering, procurement and construction capability; and implementing our Integrated Energy Services strategy. As previously indicated, over the past few months we have seen delays in certain contract tender processes with a number of anticipated awards moving from 2012 into 2013. Whilst these delays impact the expected level of 2012 new orders for Onshore Engineering & Construction, we continue to expect our strategy to deliver earnings growth in 2013 and beyond.
“As a result, we remain confident of achieving our target of more than doubling our recurring Group 2010 earnings by 2015.”
ENGINEERING, CONSTRUCTION, OPERATIONS & MAINTENANCE (ECOM)
Onshore Engineering & Construction
· Good progress on our portfolio of projects during the first half of the year
· First oil from the El Merk project in Algeria expected during the second half of the year and the South Yoloten gas plant in Turkmenistan and the Asab oil field development in Abu Dhabi are both on schedule for completion during 2013
· Introduced hydrocarbons at the Kauther gas compression project in Oman and substantially completed the Karan utilities and cogeneration project in Saudi Arabia
· Awarded the US$330 million Badra project in Iraq and two packages for the Petro Rabigh Phase II project in Saudi Arabia(4)
Offshore Projects & Operations
· Awarded a US$220 million contract to undertake refurbishment of the Bekok-C platform, offshore Malaysia
· Secured a US$465 million award to provide onshore engineering and both onshore and offshore construction services to all of Apache’s North Sea assets(4)
· Secured further awards worth approximately US$0.2 billion which were pending contract signature at 30 June 2012(4)
Engineering & Consulting Services
· Awarded a number of conceptual studies and front end engineering and design (FEED) studies in Africa and the CIS, which may lead to interesting follow-on opportunities
· Acquired KW Limited, a high-end subsea pipeline consulting and engineering services business which will enable us to strengthen our leading engineering proposition offshore
INTEGRATED ENERGY SERVICES (IES)
· Signed a co-operation agreement with Schlumberger in early 2012, which will allow us to pursue larger Production Enhancement Contracts (PECs) and develop at a faster pace
· Secured our first joint PEC with Schlumberger on the Pánuco Contract Area in Mexico, which will add US$0.4 billion to backlog after formal signing expected later this month(4)
· Made a good start on the Magallanes and Santuario PECs in Mexico with three drilling rigs and one work over rig active on the blocks
· FPSO Berantai now on location on the Berantai field in Malaysia, with commissioning in progress
· On Block PM304 in Malaysia, progressing the development of the West Desaru fault block, with first oil expected before the end of 2012
· Field Development Programme approved for the Greater Stella Area development and a profit of US$36 million recognised on the sale of 75% of the FPF1 floating production facility
Based on our good performance in the year to date, we continue to expect to deliver full year net profit growth in 2012 of at least 15%. Year-on-year growth in net profit in the second half of 2012 will be lower than in the first half of the year given the phasing of the profit from the FPF1 transaction and the initial profit recognition in respect of the South Yoloten project included in the second half results for 2011.
In our ECOM division, we see a significant number of bidding opportunities in our core markets in the Middle East, Africa, the Commonwealth of Independent States, Europe and Asia Pacific. However, we have seen delays in the award of onshore engineering and construction projects from 2012 into 2013. We therefore expect Onshore Engineering & Construction backlog to remain broadly flat across the remainder of 2012. Looking ahead, based on underlying growth in industry spend and project awards delayed from 2012, we anticipate a larger addressable market for Onshore Engineering & Construction in 2013. Given our competitive positioning and proven track record in project execution we expect to capitalise on the greater level of market opportunities and anticipate growth in our Onshore Engineering & Construction backlog during 2013.
In Offshore Projects & Operations, we have good revenue visibility following a strong run of recent awards and we are continuing our high levels of bidding activity on both long-term operations support contracts and offshore capital projects.
In Integrated Energy Services, we are focused on building upon our execution track record, with important delivery milestones throughout 2012 and 2013 on our existing projects. We expect to deliver strong earnings growth in IES in 2012 driven by: initial profit recognition on the Berantai Risk Service Contract; the sale of 75% of the FPF1 floating production facility as part of the Greater Stella Area transaction; commencement of the Magallanes and Santuario Production Enhancement Contracts; and growing production on the Ticleni Production Enhancement Contract in Romania. Our existing projects substantially underpin our medium-term growth plans of generating net profit from IES of at least US$300 million in 2015(5) and we are engaged in ongoing discussions with a number of resource holders in respect of potential additional projects.
Overall, we remain confident of achieving our target of more than doubling our recurring 2010 Group earnings by 2015.
(1) Net profit for the period attributable to Petrofac Limited shareholders.
(2) The Group reports its financial results in US dollars and, accordingly, will declare any dividends in US dollars together with a sterling equivalent. Unless shareholders have made valid elections to the contrary, they will receive any dividends payable in sterling. Conversion of the 2012 interim dividend from US dollars into sterling is based upon an exchange rate of US$1.5609:£1, being the Bank of England Sterling spot rate as at midday on 10 August 2012. The Group aims to distribute 35% of full year post tax profits, which will be paid approximately one-third as an interim dividend and two-thirds as a final dividend.
(3) Backlog consists of the estimated revenue attributable to the uncompleted portion of lump-sum engineering, procurement and construction contracts and variation orders plus, with regard to engineering, operations, maintenance and Integrated Energy Services contracts, the estimated revenue attributable to the lesser of the remaining term of the contract and five years. Backlog will not be booked on Integrated Energy Services contracts where the Group has entitlement to reserves. The Group uses this key performance indicator as a measure of the visibility of future revenue. Backlog is not an audited measure.
(4) Backlog at 30 June 2012 excluded awards of US$0.5 billion for Onshore Engineering & Construction and US$0.6 billion for Offshore Projects & Operations, which were secured, but not signed, as at 30 June 2012. These included the Petro Rabigh Phase II project in Saudi Arabia and the Apache engineering and construction services contract. In addition, we were declared the selected bidder for the Pánuco Contract Area Production Enhancement Contract in Mexico on 19 June 2012, which will add approximately US$0.4 billion to backlog after contract signature.
(5) See our IES data pack for more details: http://www.petrofac.com/index.asp?pageid=466.