Delay to publication of 2023 results, update on restructuring and trading update

Petrofac today announces a delay to its audited full year 2023 results which it now expects to publish by 31 May 2024. The Company also reports the progress made with creditors on its financial restructuring and issues a trading update.

Delay of full year 2023 results and temporary suspension of shares

The Company expects a short delay in issuing its audited full year 2023 results, which it now expects to publish by 31 May 2024. Although the audit is substantially progressed, the Company and its auditor require additional time to complete the annual report.

As a result, in accordance with the Financial Conduct Authority’s (FCA) Disclosure and Transparency Rules and Listing Rules for the publication of audited financial statements, the Company has engaged with the FCA, and trading in the Company’s shares will be temporarily suspended from 7.30 a.m. on 1 May 2024 until its full year 2023 results are published.

Update on Strategic and Financial Options

As part of the Group’s ongoing financial restructuring, an ad-hoc group of senior secured noteholders have made a proposal to provide further credit to the business of up to US$300 million, comprising US$200 million of new funds and US$100 million of credit support to help secure performance guarantees for certain of its existing contracts. This non-binding proposal is dependent upon, amongst other things, the Company securing these performance guarantees, and would require the conversion of a significant proportion of the Group’s existing debt to equity.

The Company is in active discussions with credit providers to obtain the required guarantees, which would also release over US$200 million of collateral and retentions, and will provide an update on the outcome of those discussions as appropriate.

This development comes as the Company continues to manage its payment obligations to preserve liquidity whilst progressing the other components of the restructuring with other stakeholders.

The Group’s upcoming payment obligations include amortisation payments due on the Company’s bank facilities and the coupon payment due on its senior secured notes on 15 May 2024.

The Company’s lending banks have agreed to a number of rolling short term deferrals of contractual amortisation payments while the Company progresses the financial restructuring. The Company continues to engage with its lending banks on extending these deferrals as required.

The Company does not expect to make the payment of the bond coupon on the due date of 15 May. The payment has a 30-day grace period. The ad-hoc group of noteholders, representing approximately 41% of the outstanding notes, has entered into a forbearance agreement with the Company, which provides an assurance that those noteholders will not take any action in respect of the non-payment of the coupon until at least 30 June 2024, in order to provide time for the Group’s financial restructuring to be progressed. The Company will seek to engage with other noteholders in the coming weeks.

Managing these payment obligations is of critical importance to the Company’s ability to maintain sufficient liquidity in the short-term while it is working to implement the financial restructuring.

Good progress is also being made with non-core asset disposals, with non-binding offers received for the Group’s share in the PM304 Production Sharing Contract (PSC) in Malaysia, the process for which could be completed in Q3 2024. Offers are in line with the value of anticipated cash flows (subject to oil price and oil premium assumptions) over the remaining term of the PSC which expires in September 2026.

Trading Update

In its Trading Update of 20 December 2023, the Company highlighted a risk in relation to the timing of the negotiations on the Thai Oil Clean Fuels project. Petrofac and its joint venture partners remain engaged with its client in relation to the reimbursement of additional project costs. At the time of reporting the full year 2023 results, management does not expect to have progressed discussions sufficiently to recognise the expected outcome of the negotiations in its accounts. As a result, the Company expects to recognise an incremental loss in its E&C division of approximately US$130 million for 2023.

Net debt at 31 December 2023 was US$583 million, which was lower than guided on 20 December 2023 and in line with the interim results, reflecting the continued efforts of the Group to manage its payment obligations.

Asset Solutions has incurred additional costs on one of its Engineering, Procurement, Construction, and Commissioning (EPCC) contracts, and expects to report an EBIT for 2023 which could be up to US$15 million to US$20 million lower than previously guided, pending the outcome of negotiations.

The Group’s financial performance for the year ended 31 December 2023 is otherwise expected to be broadly in line with the Trading Update of 20 December 2023.

René Médori, Chairman, said:

“The Board and management are focused on arriving at a comprehensive refinancing solution as quickly as possible. We are encouraged by the engagement with the ad-hoc group of noteholders, which we hope demonstrates momentum in this complex process. We remain grateful to all our stakeholders for their patience and continued support of Petrofac.”

Tareq Kawash, Group Chief Executive, said:

“Operational activity continues as expected and our teams are delivering well in the initial phases of the contracts awarded in 2023. On the Thai Oil Clean Fuels contract, we are working closely with our client and partners to accelerate delivery of this complex project and conclude negotiations on the reimbursement of costs. While the commercial negotiations will only conclude after our full year reporting cycle, we are making progress.

“Petrofac has a large order book of high-quality projects, strong market positions and compelling future opportunities which are evident from the recently announced awards. We are working to put the performance guarantees and the right capital structure in place, in order to deliver on this potential.”