Download the Final Results and Group financial statements of Petrofac Limited for the year ended 31 December 2014 in PDF format.
- Revenue of US$6.2 billion (2013: US$6.3 billion)
- EBITDA(1)(3) of US$935 million (2013: US$1,031 million)
- Net profit(2)(3) of US$581 million (2013: US$650 million), consistent with our previous guidance
- Earnings per share (diluted)(3) of 168.99 cents (2013: 189.10 cents)
- Full year dividend maintained at 65.80 cents per share (2013: 65.80 cents); final dividend of 43.80 cents per share (2013: 43.80 cents)
- Backlog(4) up 26% to record year-end levels of US$18.9 billion at 31 December 2014 (2013: US$15.0 billion), which together with US$3.5 billion of order intake in the year to date, gives us excellent revenue visibility for 2015 and beyond
- Net debt position of US$0.7 billion at 31 December 2014 (2013: US$0.7 billion) reflecting success in closing a number of commercial settlements
- Delivered overhead and operating cost savings across the Group of US$170 million in 2014 and targeting further cost savings in 2015 to help us maintain our competitive position
- Exceptional items and certain re-measurements in relation to IES portfolio of US$461 million, predominantly due to Ticleni, Greater Stella Area, and the lower oil price environment; net book value of IES project portfolio stands at US$1.8 billion(5)
Ayman Asfari, Petrofac’s Group Chief Executive commented on the final results:
“Having taken robust action to address the challenges we have faced on the Ticleni, Greater Stella Area and Laggan-Tormore projects, Petrofac enters 2015 in a much stronger position.
“Engineering, Construction, Operations & Maintenance (ECOM) has achieved a record backlog and Petrofac remains a leader in this market with a strong track record, longstanding client relationships and a competitive cost structure. Notwithstanding the current lower oil price environment, we continue to see an attractive pipeline of bidding opportunities in the year ahead, reflecting Petrofac’s core geographies and client base.
“Integrated Energy Services (IES) has a renewed focus on the core competencies of the Group. Our priority is to generate value from the existing project portfolio and we have made a clear commitment to reduce the capital intensity of this business.
“We are committed to delivering value for our clients and our shareholders and we are well positioned to meet the challenges presented by the lower oil price. We remain on course to deliver net profit in 2015 in line with our previous guidance(6).”
ENGINEERING, CONSTRUCTION, OPERATIONS & MAINTENANCE (ECOM)
Onshore Engineering & Construction
- Achieved order intake in 2014 of US$6.3 billion, securing major new awards in Kuwait, Oman, Algeria and Malaysia
- Agreed capacity enhancements on the Upper Zakum field development in Abu Dhabi and fully remobilised on the In Salah southern fields development in Algeria in early 2014
- Recognised a cumulative loss of around US$180(7) million on the Laggan-Tormore project and agreed a commercial settlement which should see us recognise no further profit or loss
- Reached final agreement on a number of other longstanding commercial settlements with our clients, in line with our expectations
Offshore Projects & Operations
Secured a number of extensions and new awards for services provided in the UK North Sea, including for BP, Total, GDF SUEZ, Maersk, Centrica, EnQuest and Chevron
- Secured a second contract extension with South Oil Company in Iraq and awarded a three-year general construction management services contract by BP Iraq for the Rumaila field
- Awarded our largest offshore EPCI project to date with the award of a contract from TenneT, for the BorWin3 offshore wind farm grid connection in the North Sea
- We are marketing the Petrofac JSD6000 which will be available from mid-2017 but we retain flexibility to delay the delivery of the vessel further dependent on project awards
- Agreed a strategic marketing alliance with McDermott to address the deepwater SURF market
Engineering & Consulting Services
- Awarded largest project to date: an engineering and procurement contract to provide services for Rabab Harweel Integrated Project facility in Oman worth more than US$1 billion
- Undertaken a wide range of studies during the year, including a FEED study for the Thamama production zone for ADCO and a development study to work with the Government of Nova Scotia to help it identify the best way forward to exploit its ultra-deepwater oil potential
INTEGRATED ENERGY SERVICES (IES)
- Commenced production from Cendor phase 2 on Block PM304 with production expected to continue to increase over the near-term as facilities are fully commissioned
- First production from the Greater Stella Area now expected by mid-2016
- Continue to make good progress on our Production Enhancement Contracts in Mexico while engaging in contract migration discussions as part of Mexico’s energy reforms
- On Ticleni, impaired full carrying value and will be discussing exit options with OMV Petrom
- Reached a mutually acceptable agreement with Bowleven to terminate our Strategic Alliance Agreement in respect of the Etinde Permit in Cameroon
While the operating environment remains uncertain, with the industry adjusting to a lower oil price environment, we are well positioned and will maintain our bidding discipline and focus on our areas of core strength. We enter 2015 with a very cost-effective structure and we are continuing to drive cost savings to maintain our strong competitive position.
At this stage, clients in our core onshore markets in the Middle East and North Africa are continuing to commit to ongoing investment in large strategic projects. Operations and maintenance activity remains robust and we see opportunities to continue to grow internationally. While the market for deepwater offshore projects is softer than when we announced the strategy two years ago, the long-term fundamentals remain attractive and we are committed to our strategy but are responding to the market changes. Our ECOM backlog stands at record levels, giving us excellent revenue visibility for 2015 and beyond, and our overall portfolio is in good shape, with built in margins consistent with guidance.
We have re-focused the IES strategy to improve synergies with ECOM, lower capital-intensity and will manage the portfolio to maximise value. Our balance sheet remains strong and we are focused on managing working capital and improving capital returns.
The Petrofac Board is recommending that shareholders approve the appointment of Matthias Bichsel at its 2015 Annual General Meeting. If approved by shareholders, Matthias, who has over 30 years’ relevant experience, most recently as Director of Projects & Technology at Royal Dutch Shell plc, will join the Board as an independent Non-executive Director on 14 May 2015. Matthias brings an extensive understanding of the oil and gas industry and the Board looks forward to working with him. In addition, Roxanne Decyk has notified the Board of her intention to step down as a Non-executive Director at the conclusion of the Annual General Meeting. The consequential changes to Board Committee memberships following these changes will be reviewed in due course.
(1) EBITDA means earnings before interest, tax, depreciation and amortisation and is calculated as profit before tax, net finance costs, exceptional items and certain re-measurements, but after our share of results of associates (as per the consolidated income statement), adjusted to add back charges for depreciation and amortisation (as per note 3 to the consolidated financial statements).
(2) Net profit for the year attributable to Petrofac Limited shareholders.
(3) Before exceptional items and certain re-measurements.
(4) 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.
(5) Includes the long-term receivable on the Berantai Risk Service Contract, our investment in Seven Energy and receivables in respect of our portfolio of Mexican Production Enhancement Contracts, and excludes oil and gas facilities held under finance leases.
(6) On 24 November 2014, we guided to net profit in 2015 of around US$500 million based on the then prevailing average 2015 forward oil price of around US$82 per barrel and stated that a further increase/decrease of US$1 in the price of oil would impact net earnings by around US$2 million. Based on the current average 2015 forward oil price of around US$60 per barrel, we therefore currently expect net earnings to be around US$460 million. Other than the movement in the oil price the Group continues to perform in line with management expectations at the time of the November announcement. According to Company compiled consensus of 17 analysts who have published forecasts since our market update on 24 November 2014, consensus net profit for 2015 is US$470 million, based on an average oil price assumption of US$66 per barrel.
(7) In line with our latest assessment of the schedule and cost-to-complete, and the final commercial settlement agreed with our client, we recognised a loss on the project in 2014 in Onshore Engineering & Construction of around US$200 million. A further loss of around US$30 million was recognised in Offshore Projects & Operations in 2014 on their scope of the project and around US$50 million of profits have been recognised in previous years across the Group. Overall, the Group has recorded a cumulative loss on Laggan-Tormore of around US$180 million.
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This announcement contains forward-looking statements relating to the business, financial performance and results of Petrofac and the industry in which Petrofac operates. These statements may be identified by words such as “expect”, “believe”, “estimate”, “plan”, “target”, or “forecast” and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither Petrofac nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.
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Jonathan Low, Head of Investor Relations
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