22 October 2009
Interim Management Statement
Petrofac, the international oil & gas facilities service provider, issues the following Interim Management Statement for the period 1 July 2009 to 22 October 2009.
General market conditions have remained in line with those reported at the time of our interim results announcement on 24 August notwithstanding that the oil price during the period from 1 July has been significantly higher than in the first half of the year¹. We have continued to win business during the period with contracts secured in both our Engineering & Construction and Offshore Engineering & Operations segments and bidding activity continues at good levels. As the year progresses we are increasingly confident that the group will deliver earnings growth for the full year of at least 20 per cent.
In Engineering & Construction, we have made good progress on engineering and procurement activities and on the placement of construction subcontracts on the awards secured in the first half of the year. This underpins our confidence in the estimates on which the bids were based. Selective bidding activity is continuing and, during the period, we secured a second award in Abu Dhabi to build the fourth natural gas liquids (NGL) train at the Ruwais complex.
In Offshore Engineering & Operations, our bid pipeline remains strong both in the UKCS and in international markets, as customers look to obtain cost efficiencies by putting contracts out to competitive bids on their scheduled expiry. Whilst this has resulted in some contracts where we are the contract holder being re-tendered, we view the re-tendering of contracts as an opportunity for growth and, in July, we were successful in securing a three year contract to provide engineering and offshore construction services on the Forties Field for Apache.
As previously reported, Engineering Services and Training Services activity levels continue to be somewhat depressed, although business development activity has improved over recent weeks and there are early signs that the improved oil price environment is beginning to encourage our customers to resume some of their more discretionary expenditure. Our Production Solutions business unit is performing well, largely as a consequence of good operational performance on our contract with Dubai Petroleum.
In Energy Developments, water injection has now commenced on the West Don field, Don Southwest water injection is due to come onstream before the end of the year and gas lift facilities have been commissioned and are currently being optimised. Intervention work on the completion blockage on one of the two production wells on the Don Southwest field will commence shortly, and while the outcome of this work will impact the level of production for the year, we expect total 2009 production to be within the 3 million to 5 million barrel range previously guided, albeit towards the lower end. Energy Developments’ other assets continue to perform in line with expectations. Options for the deployment of the floating production facility acquired in July (now renamed the FPF1) are under active review, as are a number of upstream and energy infrastructure opportunities.
The group’s backlog at the end of September was approximately US$8.5 billion (30 June 2009: US$8.4 billion), comprising approximately US$7.0 billion in Engineering & Construction (30 June 2009: US$6.9 billion) and approximately US$1.5 billion across the other business units (30 June 2009: US$1.5 billion). The group’s gross cash balances at the end of September stood at approximately US$1.3 billion (30 June 2009: US$0.9 billion) with most of the advance payments due on awards secured in the first half of the year now received.
(1) Brent, a benchmark crude has traded in the range of US$60 to US$80 per barrel since 1 July compared with an average price of US$52 per barrel in the first half of the year.