13 May 2010
Interim Management and AGM Statement
Petrofac Limited (Petrofac, the group or the Company), a leading international provider of facilities solutions to the oil & gas production and processing industry, is publishing its Interim Management Statement for the period from 1 January 2010 to 13 May 2010, as required by the UK Listing Authority’s Disclosure and Transparency Rules, ahead of its Annual General Meeting today.
- Continuing operations performing in-line with expectations
- Strong group backlog of US$7.3 billion at end of April 2010 (31 Dec 2009: US$8.1 billion)
- Gross cash balances of US$1.2 billion at end of April 2010 (31 Dec 2009: US$1.4 billion)
Ayman Asfari, Group Chief Executive, commented: “I am pleased to report that we have made a good start to 2010 and we are confident that this will be another year of strong growth.
“Following our record order intake in 2009, the business is delivering on our broader portfolio of existing contracts and our backlog gives us outstanding revenue visibility for the current year and beyond. We continue to invest in our people and our business infrastructure, prioritising sustained excellence in our project execution. Our differentiated offering, focus on major hydrocarbon regions where significant expenditures are expected and strong bidding pipeline gives me confidence in the group’s opportunities for continued growth."
Engineering & Construction
Following the significant level of contract awards in 2009, our Engineering & Construction reporting segment is working on ten large EPC (engineering, procurement and construction) projects in seven countries, including in Syria, where we achieved mechanical completion on the Ebla gas plant in February 2010, two months ahead of schedule. The US$100 million initial phase of the South Yoloten field in Turkmenistan is progressing well and we expect to make the decision whether to convert into the much larger lump-sum EPC phase of the contract in the second half of the year. In March 2010, we announced the award of an EPC contract for more than US$600 million for gas sweetening facilities for Qatar Petroleum and we continue to bid actively in both our existing core markets and selectively into new but adjacent markets such as Iraq.
Offshore Engineering & Operations
We are seeing an improving market in Offshore Engineering & Operations and we have now commenced work on the two major contracts awarded in the second half of 2009 with Apache and BP. In the year to date we have secured contract extensions with Britannia (worth approximately £35 million over five years) and with BHP Billiton and tendering activity remains at high levels.
Engineering, Training Services & Production Solutions
Notwithstanding a continuing flow of enquiries, our Engineering Services business continues to experience subdued activity levels. In Training Services, we have seen improving delegate numbers and we have made a significant investment in our business development teams both in the UK and internationally, as we focus our efforts on higher value projects. In Production Solutions, we have agreed with Dubai Petroleum to transition from the current facilities management agreement for Dubai’s offshore oil & gas assets towards a technical services agreement, under which we will provide a range of services including integrity and safety audits and technical support to Dubai’s Department of Petroleum Affairs. The move to a technical services agreement, which is expected to commence in October 2010, will not have a material impact on the group’s financial results. The general environment for our consultancy and technology businesses is gradually improving.
On 6 April 2010, we completed the sale of Energy Developments’ Don assets and the subsequent demerger of EnQuest PLC, an independent company listed on the London and Stockholm stock exchanges. We anticipate that the Don assets will contribute a trading profit for the period from 1 January 2010 up to the demerger of approximately US$2 million in addition to a capital gain in excess of US$100 million. Our investment in the Don project generated an Internal Rate of Return from inception to demerger of approximately 35 per cent, and we will continue to seek further opportunities to co-invest in projects and replicate our proven “build and harvest” strategy. As regards our other assets, we are in the latter stages of preparing a Field Development Programme for the second phase of the Cendor development, offshore Malaysia, which we expect to commence in the second half of 2010 and we are reviewing options for the deployment of the FPF1 floating production facility both in the UK and internationally.
The group’s backlog at the end of April stood at approximately US$7.3 billion (31 December 2009: US$8.1 billion), comprising approximately US$5.8 billion from the Engineering & Construction reporting segment (31 December 2009: US$6.2 billion) and approximately US$1.5 billion across the other reporting segments (31 December 2009: US$1.9 billion). Gross cash balances were US$1.2 billion at the end of April 2010 (31 December 2009: US$1.4 billion).