26 June, 2012
Petrofac, the international oil & gas service provider, issues the following pre-close trading update ahead of the announcement of its interim results for the six months ending 30 June 2012, expected to be on 13 August 2012.
· Good operational performance across our portfolio of ECOM and IES projects in the year to date; we remain on course to deliver net profit growth in 2012 of at least 15%
· ECOM order intake in the year to date is US$1.3 billion; in addition, we have secured approximately US$1.1 billion of awards which are pending contract signature and are not currently included in Group backlog
· IES secured a production enhancement contract for the Pánuco Contract Area in Mexico, which will add US$0.4 billion to backlog after formal signing in August 2012
· Based on contracts signed to date, Group backlog is expected to be US$9.1 billion at 30 June 2012 (31 December 2011: US$10.8 billion)
· Net cash balances are expected to be US$0.7 billion at 30 June 2012 (31 December 2011: US$1.5 billion)
Ayman Asfari, Group Chief Executive, commented:
“It is a year since we rolled out our IES strategy and we are making excellent progress in building the business. We were selected as preferred bidder for our third production enhancement contract in Mexico, which we are delighted to be delivering in partnership with Schlumberger.
“We see strong industry demand for commercially innovative, integrated oilfield service developments, which, together with our strong ECOM prospects, continue to give us confidence of achieving our target of more than doubling our recurring 2010 Group earnings by 2015.”
Engineering, Construction, Operations & Maintenance (ECOM)
Onshore Engineering & Construction
We have made good progress across our portfolio of projects during the first half of the year, including on our major projects in Abu Dhabi, Algeria and Turkmenistan. In the year to date, we have been awarded the Badra project in Iraq for Gazprom worth US$330 million and have secured further awards worth approximately US$500 million, which are pending contract signature. Notwithstanding some slippage in the timing of certain contract tender processes, we continue to see a good pipeline of bidding opportunities in our core markets in the Middle East, North Africa and the Commonwealth of Independent States (CIS).
Offshore Projects & Operations (OPO)
Earlier in June, we were delighted to announce the appointment of Yves Inbona as Managing Director of our Offshore Capital Projects business. The establishment of a separate service line will enable us to focus on the growth and development of the engineering, procurement, installation and commissioning (EPIC) market, while at the same time continuing to grow the rest of the OPO business.
In May, we secured a US$220 million contract to undertake the refurbishment of the Bekok-C platform, offshore Malaysia, on an engineering, procurement, construction, installation and commissioning (EPCIC) basis. In addition, we have secured approximately US$600 million of awards which are pending contract signature, and we are continuing our high levels of bidding activity on both operations support contracts and offshore capital projects in the UK/Europe, the Middle East and North Africa, the CIS and the Asia Pacific regions.
Engineering & Consulting Services
In Engineering & Consulting Services we have secured 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.
Integrated Energy Services (IES)
We recently secured our first joint production enhancement contract with Schlumberger on the Pánuco Contract Area in Mexico. The Pánuco Contract Area represents the largest resource of the recent awards by PEMEX, and includes four mature onshore fields, which were discovered in the early 1900s, with original oil in place of approximately 6.8 billion barrels. The Pánuco Contract Area has a recovery factor of around 10% to date. We believe that the complementary skill sets of Petrofac and Schlumberger and our proven execution capability will maximise the potential of these fields for PEMEX. The contract, which runs for 30 years, is expected to be signed in August 2012 and field operations are expected to start around the beginning of 2013. Elsewhere in Mexico, we have made a good start on the Magallanes and Santuario production enhancement contracts with two drilling rigs and one work over rig active on the blocks. On the Ticleni production enhancement contract for Petrom in Romania, as well as progressing other key work items, we expect to commence a two rig drilling programme early in the second half of the year.
On Block PM304 in Malaysia, we are progressing the development of the West Desaru fault block, with first oil expected later in the year. On the Berantai Risk Service Contract for PETRONAS in Malaysia, the drilling programme is progressing well and we expect to achieve first gas from the field during the third quarter of the year.
Supporting the training and development of local workforces remains a core part of our strategy and we are looking to build upon and extend our key relationships with both International Oil Companies and National Oil Companies over the next few months.
At our Capital Markets Day in June 2011, we gave guidance that IES could generate net income in 2015 of US$200 million from current projects, with the potential to grow this by at least 50% from new projects. An IES data pack outlining net income drivers for the years 2013, 2014 and 2015 is now available on our website:
Based on contracts signed to date, the Group’s backlog is expected to be approximately US$9.1 billion at 30 June 2012 (31 December 2011: US$10.8 billion), comprising US$7.5 billion from ECOM (31 December 2011: US$9.2 billion) and US$1.6 billion from IES (31 December 2011: US$1.6 billion). Net cash balances are expected to be lower at the end of June 2012 at US$0.7 billion (31 December 2011: US$1.5 billion), due to the unwinding of cash advances on Onshore Engineering & Construction projects and the deployment of cash on IES projects.