20 October 2011
Interim Management Statement
Petrofac, the international oil & gas facilities service provider, issues the following Interim Management Statement.
- Operations continue to perform in line with expectations
- Backlog of US$10.8 billion at 30 September 2011 (30 June 2011: US$11.4 billion), subsequently augmented by US$1.2 billion from the Mexico Production Enhancement Contracts and the upgrade and Duty Holder contracts for the FPF1
- Gross cash balances of US$1.8 billion at 30 September 2011 (30 June 2011: US$1.8 billion)
Ayman Asfari, Group Chief Executive, commented:
“We have delivered good operational performance across our portfolio of assets in the year to date and we expect to deliver like-for-like(1) net profit growth for the full year of at least 15% and in line with current market expectations(2).
“We have made good early progress with our Integrated Energy Services strategy, including the recent award of two Production Enhancement Contracts in Mexico and deployment of the FPF1 floating production facility. We are encouraged by the number of Integrated Energy Services opportunities that we have identified and are pursuing, which combined with our existing backlog and a continued positive outlook for our Engineering & Construction and Offshore Engineering & Operations businesses, gives us confidence in achieving our target of more than doubling our recurring 2010 group earnings by 2015.”
Engineering & Construction
We continue to make good progress across our portfolio of projects, including the South Yoloten project in Turkmenistan, where we have made substantial progress on the engineering and procurement, and early progress on construction activities. We remain on track to reach the progress threshold for recognising profit by the end of the year. We are currently bidding on a number of projects in our core markets, including Iraq, and, as we move into 2012, we see a strong pipeline of bidding opportunities.
Offshore Engineering & Operations
Offshore Engineering & Operations activity remains at record levels for both long-term operations support contracts and offshore capital projects, such as the SEPAT development and the FPSO Berantai upgrade, both offshore Peninsular Malaysia. We are pursuing a number of new operations support contracts and offshore capital projects over the coming months, including support of Integrated Energy Services’ projects, as we progress our strategy of taking our EPC capability offshore. As announced separately today (see Energy Developments below), Offshore Engineering & Operations will undertake modification and upgrade works to the FPF1 floating production facility ahead of its deployment on the Greater Stella Area (GSA) development and will subsequently provide Duty Holder services to the FPF1 on a life of field contract.
Engineering, Training Services & Production Solutions
In Engineering Services, we recently entered a strategic joint venture with China Petroleum Engineering & Construction Corporation, the engineering and construction subsidiary of China National Petroleum Company, to provide project management and engineering services on projects for Chinese oil & gas companies in China and internationally. In Production Solutions, following our selection as the preferred bidder in August, we have recently signed two 25-year Production Enhancement Contracts with Petróleos Mexicanos (‘PEMEX’) to develop the Magallanes and Santuario blocks in Tabasco State, central Mexico. We anticipate taking responsibility for field operations around 1 February 2012 and we have made good progress in mobilising our operations team. In Romania, we are close to completing the drilling of the first of two new water injection wells as part of the water flood pilot. In Nigeria, we are making good progress in our strategic relationship with Seven Energy, and 80% of our warrants have vested to date after reaching agreed milestones.
As announced today, we have agreed to sell 80% of the share capital in the company holding the FPF1 floating production facility to Ithaca Energy Inc. and Dyas BV for deployment on the GSA development in the North Sea. Subject to relevant consents, Petrofac will receive a consideration consisting of a 20% interest in the three licenses operated by Ithaca in the GSA development, covering the Stella, Harrier, Hurricane and Helios discoveries. The equity position will be established through an earn-in type arrangement which is effected at first oil, expected in the second half of 2013. We have recently installed gas lift facilities, which are expected to commence operation before the end of the year, on the Cendor field in Block PM304, offshore Peninsular Malaysia. We continue to make good progress on the second phase of the Cendor field and we expect to agree a Field Development Programme for the West Desaru fault block before the end of the year. Year to date production at the Chergui gas plant in Tunisia is ahead of target following strong production levels in recent weeks. In Algeria, our Risk Service Contract for the Ohanet gas plant finishes this month, as expected. We have made substantial progress on the FPSO for the Berantai development for PETRONAS in Malaysia and the first wellhead platform has left the yard and has arrived on location.
The group’s backlog at the end of September stood at approximately US$10.8 billion (30 June 2011: US$11.4 billion), comprising approximately US$7.7 billion from the Engineering & Construction reporting segment (30 June 2011: US$8.7 billion) and approximately US$3.1 billion across the other reporting segments (30 June 2011: US$2.7 billion). Gross cash balances were US$1.8 billion at the end of September 2011 (30 June 2011: US$1.8 billion), but are expected to end the year broadly in line with the position as at the beginning of the year (31 December 2010: US$1.0 billion) as we increase our spending on Integrated Energy Services projects and customer advances on Engineering & Construction projects unwind.
(1) Like-for-like net profit growth excludes the gain of US$124.9 million on the EnQuest demerger and the trading net profit from Energy Developments’ demerged assets of US$2.1 million for the year ended 31 December 2010.
(2) The current market expectations for Petrofac’s net profit for the year ending 31 December 2011 are based on forecasts published by 20 equity analysts since publication of the group’s 2010 Final Results in March 2011. The average of those forecasts is US$518 million.