30 June, 2011
Petrofac, the international oil & gas facilities service provider, issues the following pre-close trading update ahead of the announcement of its interim results for the six months ending 30 June 2011, expected to be on 22 August 2011.
• Operations performing in-line with expectations with good progress to date on the second phase of the South Yoloten project in Turkmenistan
• Order intake in 1H 2011 of US$2.1 billion, including the award of our second contract in Iraq, for maintenance services on BP’s Rumaila oilfield
• Pre-investment in two FPSOs to support delivery of Integrated Energy Services’(1) strategy
• Group backlog approximately US$11.4 billion at 30 June 2011 (31 December 2010: US$11.7 billion) continues to give outstanding revenue visibility
• Gross cash balances US$1.7 billion at 30 June 2011 (31 December 2010: US$1.1 billion)
Ayman Asfari, Group Chief Executive, commented:
“We have had a successful first half of 2011. We have secured orders in the year to date of US$2.1 billion, including new awards in Algeria, Malaysia and Iraq, where we have recently secured our second award, to provide maintenance services for BP on the Rumaila oilfield. We continue to deliver good operational performance across our portfolio of projects, including on the South Yoloten project in Turkmenistan, and we are well on course to deliver like-for-like(2) net profit growth in 2011 of at least 15%, in line with our previous guidance.
“We formally rolled out our IES strategy earlier this month and have made progress on the delivery of that strategy with the recent acquisition of two FPSOs. Pre-investing in field infrastructure is an important part of our strategy to deliver fast-track development solutions. We believe the provision of integrated services to resource holders meets an increasing strategic need and will help us to deliver additional value for our customers and shareholders.”
Engineering & Construction
We have continued our good operational performance across our portfolio of projects. In Turkmenistan, we are making good progress on the South Yoloten development, having substantially completed construction of the temporary facilities and early works and placed the majority of orders for procurement items. Elsewhere, we are progressing well with our recent awards, for Shell on the Majnoon field in Iraq and for In Salah Gas on the development of their southern fields in Algeria.
Offshore Engineering & Operations
We have secured a number of new contract awards in recent months, including, more recently, a contract to provide maintenance services on the Rumaila oilfield in Iraq and an operations contract for the Jasmine Venture floating production, storage and offloading (FPSO) vessel in Thailand (see Energy Developments section below). We are experiencing high activity levels, including significant activity on the Sepat project and the East Fortune FPSO (to be deployed on the Berantai field) in Malaysia (both projects are being undertaken jointly with our Engineering & Construction business) and we expect to report substantial growth in revenues and profits in 2011. As the contribution from our UK Duty Holder contracts reduces as a proportion of the business, we expect there to be a more even split of profits across the first and second halves. We continue to see a strong bidding pipeline, both in the UK and internationally.
Engineering, Training Services & Production Solutions
In Engineering Services, we have recently opened a third Indian office, in Delhi. We expect the Delhi office to grow to around 100 by the end of the year, which would take the total complement of our Indian engineering offices to around 1,800. In Training Services, year to date delegate numbers have grown strongly compared to the same period in 2010. Following on from the recent opening of our training facility at Hassi Messaoud in Algeria, we are looking to establish training centres and to develop strategic partnerships with resource holders in many of our key markets. In Production Solutions, while we do not anticipate recognising profit from the Ticleni Production Enhancement Contract until next year, we have made good progress to date, not only arresting the decline, but improving production through optimising pump settings, working over wells and, more recently, bringing back on-stream the first of many shut-in wells. We have recently commenced the pilot water flood programme, the results of which are expected around the end of the year. In Nigeria, we continue to assist Seven Energy with development of their oil & gas assets and we recently agreed to increase our interest in the company up to 24.5%(3).
As anticipated, production from the first phase of Cendor, offshore Peninsular Malaysia, was lower in the first half of the year due to natural field decline. We intend to install gas lift facilities during the second half to stabilise production levels. The cutting of steel for the topside jackets for the second phase of Cendor is now underway and work has started on a new conversion FPSO for the development. Normal production from the Chergui gas plant has been strong, offsetting the impact of several short shut-ins following the political changes in Tunisia earlier in the year. The Ohanet Risk Service Contract (RSC), which is due to finish in October this year, continues to perform in line with expectations.
Pre-investing in field infrastructure in readiness for future developments is part of our strategy to deliver fast-track development solutions for resource holders. Earlier in June, we acquired a high specification FPSO (previously known as Cossack Pioneer) from Chevron, following its recent release from the Woodside-operated Cossack Wanaea fields in Australia. This unit has substantial oil & gas processing capability and we are reviewing deployment opportunities with resource holders that require a combination of fast-track field development and floating production capability. Also in June, we acquired the Jasmine Venture from field operator Pearl Energy. The Jasmine Venture is currently deployed on the Jasmine field in the Gulf of Thailand, and will be leased to Pearl Energy, a subsidiary of Mubadala Energy, for a minimum term of three years, with options to extend for a further three years. The transaction reflects our strong ongoing relationship with Mubadala, our partner in Petrofac Emirates. Petrofac will also provide operations and maintenance services for the Jasmine Venture through its Offshore Engineering & Operations business. As both owner of the FPSO and its service provider Petrofac can support Pearl’s current requirements, while working with them to identify potential areas for further support on this and future projects in the Gulf of Thailand. The combined cost of these two vessels was approximately US$70 million.
The group’s backlog was approximately US$11.4 billion at 30 June 2011 (31 December 2010: US$11.7 billion), comprising US$8.6 billion from the Engineering & Construction reporting segment (31 December 2010: US$9.0 billion) and US$2.8 billion across the other reporting segments (31 December 2010: US$2.7 billion). We expect backlog to remain relatively stable over the full year. Gross cash balances increased over the first half of the year (to US$1.7 billion at 30 June 2011 from US$1.1 billion at 31 December 2010), following receipt of a large advance payment on the South Yoloten project in January 2011. We expect gross cash balances to end the year lower as the South Yoloten advance payment substantially unwinds and we increase our rate of capital deployment on Energy Developments’ projects.
(1) From 1 January 2012, Training Services, Production Solutions and Energy Developments will report as Integrated Energy Services (IES).
(2) Like-for-like net profit growth excludes the gain of US$124.9 million on the EnQuest demerger and the trading net profit from Energy Developments’ demerged assets of US$2.1 million for the year ending 31 December 2010.
(3) On a fully diluted basis assuming the full conversion of all convertible securities and exercise of all outstanding warrants and options.