Click here to view the Petrofac Group financial statements for the six months ended 30 June 2014.
- Most successful year for new awards, with ECOM order intake of US$7.2 billion in 1H 2014; backlog(1) up 35% to stand at record levels of US$20.3 billion at 30 June 2014 (31 December 2013: US$15.0 billion), giving very good revenue visibility for the rest of this year and beyond
- ECOM continues to perform in line with expectations; IES making good progress on addressing project performance issues
- As previously guided, our revenue and net profit for 2014 is significantly weighted towards the second half of the year, reflecting the phasing of project delivery:
- Revenue of US$2.5 billion (2013: US$2.8 billion)
- EBITDA of US$340 million (2013: US$405 million)
- Net profit(2) of US$136 million (2013: US$243 million)
- Earnings per share (diluted) of 39.80 cents (2013: 70.72 cents)
- On track to deliver net profit in the range US$580 million to US$600 million for the full year 2014, in line with previous guidance
- Interim dividend maintained at 22.00 cents per share (2013: 22.00 cents)
- Net debt of US$1.3bn at 30 June 2014 (December 2013: US$0.7bn); subsequently reduced by US$0.4bn following completion of Petrofac FPSO Holding Limited transaction in August 2014
Ayman Asfari, Petrofac’s Group Chief Executive commented on the interim results:
“In ECOM, we have already had our most successful year for new awards, bid at margins consistent with our medium-term guidance, reflecting ongoing high levels of investment by our customers in our core geographic markets and our strong competitive position. Our pipeline of bidding opportunities remains attractive and we are confident of securing a number of further awards and contract extensions during the second half of the year.
“In IES, we are making good progress on addressing project performance issues and the delivery of key operational milestones. Looking further ahead, we have re-focused our IES business development plans and our innovative venture with First Reserve reinforces the role of IES as an enabler for the Petrofac group, allowing us to concentrate our resources on our core strengths and underlining our commitment to capital discipline.”
ENGINEERING, CONSTRUCTION, OPERATIONS & MAINTENANCE (ECOM)
Onshore Engineering & Construction
- Achieved order intake in 1H 2014 of US$4.5 billion, securing major new awards in Kuwait, Oman and Algeria
- Agreed capacity enhancements on the Upper Zakum field development in Abu Dhabi and making good progress on the project
- Fully remobilised on the In Salah southern fields development in Algeria
Offshore Projects & Operations
- Secured a number of extensions during the first half of the year for services provided in the UK North Sea, including for TOTAL and EnQuest
- 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
- Construction of Petrofac JSD6000 going to plan and early pipeline of bidding opportunities established
Engineering & Consulting Services
- Awarded largest ECS project to date: a US$1 billion engineering and procurement contract for Petroleum Development Oman to provide services for the Rabab Harweel Integrated Project facility
- Undertaken a wide range of conceptual studies and FEED studies during the first half of the year, including a FEED study for the Thamama production zone for ADCO
INTEGRATED ENERGY SERVICES (IES)
- Start-up of FPSO in progress for Cendor phase 2 production on Block PM304 in Malaysia; original Cendor MOPU currently being decommissioned
- Good progress implementing changes to expedite completion of remaining works on FPF1; sailaway scheduled for spring 2015 and first production on Greater Stella Area in mid-2015
- In process of agreeing a revised Field Development Plan for the Ticleni field in Romania
- Continue to make good progress on our production enhancement contracts in Mexico, including early appraisal success on Santuario
- Reached a mutually acceptable agreement with Bowleven to terminate our Strategic Alliance Agreement in respect of the Etinde Permit in Cameroon
OUTLOOK AND DIVIDENDS
In ECOM, we have already had our most successful year for new awards, with order intake in the year to date of US$8.4 billion. Our backlog stands at record levels and gives us very good revenue visibility for the second half of the year and beyond. Activity levels, revenue and net income are expected to increase substantially in the second half of the year as we move into the execution phase on a number of major projects. Our pipeline of bidding opportunities remains attractive and, given our strong competitive position in our core markets, we are confident of securing a number of further awards and contract extensions during the second half of the year. Our disciplined approach to business development, with bid margins, on a country-by-country basis, in line with the last few years, and our relentless focus on project execution give us confidence that we will maintain sector-leading net margins in Onshore Engineering & Construction.
In IES, we are making good progress on addressing project performance issues and the delivery of key operational milestones. Looking further ahead, we continue to see good demand for the provision of integrated services and we are prioritising those opportunities which make the best use of our existing core areas of strength, offer clear synergies with ECOM, and deliver attractive returns on capital employed.
Work in progress increased during the first half of the year, with the largest increase in relation to the Laggan-Tormore project in Shetland, UK, following a step-up in activity levels in recent months to address the impact of exceptionally poor winter weather. The management of working capital and the resolution of commercial settlements remains a high priority. We have made positive progress during the second half of the year to date, with reductions expected in respect of a number of the most significant working capital positions over the next few months.
The Board has declared an interim dividend of 22.00 cents per share, in line with the 2013 interim dividend, and, notwithstanding the year-on-year reduction in net profit expected in 2014, intends to pay a full year dividend in line with the 2013 full year dividend.
We remain on track to deliver net profit in the range US$580 million to US$600 million for the full year 2014, in line with previous guidance.
(1) 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.
(2) Net profit for the period attributable to Petrofac Limited shareholders.
(3) The interim dividend will be paid on 17 October 2014 to eligible shareholders on the register at 19 September 2014. Shareholders who have not elected to receive dividends in US dollars will receive a sterling equivalent, based on the exchange rate on the record date. Shareholders have the opportunity to elect by close of business on the record date to change their dividend currency election.
Download the Petrofac 2014 Interim Results presentation
A replay of the event will be available online for a number of months. Should you have any difficulty accessing the online broadcast or replay, an audio broadcast and replay is available:
UK & International Number: +44 (0) 20 3003 2666
Audio playback (available for 7 days)
UK & International Number: +44 (0) 20 8196 1998
Audio playback PIN 3277217#
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.