News

14 December 2017

Trading update

Petrofac issues the following pre-close trading update ahead of the announcement of its full year results for the year ending 31 December 2017 on 1 March 2018.

  • Trading in line with expectations
  • US$5.2 billion in new order intake year to date
  • Net debt is forecast to be around US$850 million at 31 December 2017 in line with expectations

Ayman Asfari, Petrofac’s Group Chief Executive, commented:

“Overall trading remains in line with expectations, underpinned by high levels of project activity, good project execution and strong financial discipline.

“We have seen a recovery in new order intake in 2017, securing US$5.2 billion in new awards in the year to date in both existing and new markets.  Tendering activity remains high, we continue to maintain our bidding discipline in competitive markets and we have a healthy order backlog.

“Our portfolio is in good shape, and we remain focused on project delivery and maintaining our cost competitiveness through operational excellence.  This – together with measures we are taking to strengthen our balance sheet – positions us well.”

Engineering & Construction

We have delivered good progress across our portfolio of lump-sum engineering and construction projects.  On our upstream projects, we have handed over the Khazzan central processing facility in Oman.  We have also commissioned the In Salah southern fields development, introduced gas into the Reggane North Development plant and are ready for the introduction of gas into the Alrar gas plant, all in Algeria.  Several other projects are now in the pre-commissioning or commissioning phase.  On our downstream projects, the Sohar refinery in Oman is in commercial operation, the Petro Rabigh and Jazan south tank farm projects in Saudi Arabia are in the commissioning phase, and pre-commissioning activities have started on the KNPC Clean Fuels Project in Kuwait.

We have secured US$4.1 billion of new order intake in the year to date and continue to see a high level of tendering activity in our core markets.

Engineering & Production Services

Continued good performance in our international O&M contracts and EPCm projects has largely offset lower activity, utilisation and order intake in the UK North Sea.  We have secured awards and extensions worth approximately US$1.1 billion in the year to date, predominantly in the UK, Iraq and Kuwait, as well as our first project in Turkey.  We have also signed a long-term framework agreement with PDO Oman, which will add to backlog as projects are sanctioned.  

We have maintained our focus on improving operational efficiency and utilisation, while positioning ourselves for a recovery in market conditions and growth in new markets.

Integrated Energy Services (IES)

EBITDA for the full year is expected to be at the bottom end of our US$80 million to US$100 million guidance range, reflecting licence entry in September and lower production from the Greater Stella Area development.   Production on Block PM304 in Malaysia and the Chergui gas plant in Tunisia is in line with expectations.  Investment in Mexico remains low pending migration of our Production Enhancement Contracts.  The sale of our interest in the Pánuco Production Enhancement Contract to Schlumberger completed in August 2017.

Financial position

Backlog(1), excluding IES, stood at US$10.3 billion at 30 November 2017, reflecting a recovery in new order intake offset by progress on our existing portfolio of projects:

 

 

30 November 2017

31 December 2016

 

US$ billion

US$ billion

Engineering & Construction

7.5

8.2

Engineering & Production Services

2.8

3.5

Total

10.3

11.7

 

 

 

Recent UK tax law changes(2) will result in a non-recurring deferred tax charge being included within 2017 full year business performance results.  As previously disclosed, the tax charge for the period would have been US$22 million higher if the new loss relief rules had applied at 30 June 2017.

Net debt is expected to be around US$850 million at 31 December 2017, reflecting strong working capital management and financial discipline.  Group capital expenditure is expected to be lower than previous guidance at around US$175 million.

We continue to pursue a range of measures to deliver a sustainable reduction in net debt and strengthen our balance sheet.  These include a relentless focus on operational excellence, reducing capital investment, rebasing our dividend and continuing to divest non-core assets. 

Notes

  • The Group is no longer recognising backlog in respect of the IES division (previously, backlog was recognised in relation to IES service contracts i.e. projects where we did not have entitlement to reserves). Backlog at 30 November 2017 includes US$1.0 billion for Petrofac’s share of the Duqm refinery project in Oman.  The project will commence upon receipt of the full notice to proceed from the client.
  • Changes to UK carry forward tax loss relief rules were substantively enacted in October 2017, which will result in a non-recurring deferred tax charge being included within 2017 full year business performance results. As previously disclosed in the 2016 Annual Report (p144) and 30 June 2017 Half Year Report (p24), the recognised deferred tax asset at that date would have been US$22 million lower and the tax charge for the period would have been US$22 million higher if the new loss relief rules had applied at 31 December 2016 (or 30 June 2017).

Conference call

Alastair Cochran, Chief Financial Officer, will host a conference call for analysts and investors at 8am today.

Categories: Middle East Africa Europe Americas Asia Pacific India CIS

Loading articles...