Petrofac News 1700X397
20 December 2022

Petrofac Limited trading update

Petrofac issues the following pre-close trading update for the year ending 31 December 2022.

  • Continued strong performance in Asset Solutions and IES offset by challenges in E&C
  • Expect a full year EBIT loss in E&C of approximately US$190 million for 2022, yielding a total Group EBIT loss of approximately US$100 million
    • Reflecting adverse commercial settlements, further unrecovered cost overruns in the legacy portfolio and cost increases on the Thai Oil Clean Fuel joint venture contract
    • We will seek, working closely with our Thai Oil joint venture partners, to mitigate those increases over the remainder of that contract in addition to seeking to realise other portfolio upsides
  • Six legacy E&C lump-sum contracts were completed or substantially completed (1) in the second half
  • Asset Solutions on track to deliver full year EBIT margin of 5-6%
  • Robust IES performance driven by high production, operational performance and oil prices
  • Positive outlook for the recovery in E&C and continued growth in Asset Solutions, with a healthy total Group pipeline of US$68 billion scheduled for award in the next 18 months
  • Pipeline includes bids submitted of US$5.5 billion, and a further US$1.5 billion where we are at preferred bidder stage
  • Net debt was US$396 million (2) at 15 December 2022, with cash management partly offsetting the delays in E&C contract awards and the unrecovered cost overruns in the E&C legacy portfolio during the second half

 Sami Iskander, Petrofac’s Group Chief Executive, commented:

“We have maintained strong momentum in Asset Solutions and IES, however Group performance for 2022 has been impacted by further cost recovery challenges in E&C. Good progress has been made in the second half where we have completed or substantially completed (1) six lump-sum contracts, with five of the remaining eight active lump-sum contracts scheduled to complete in 2023. This will largely close-out the mature E&C portfolio that was heavily impacted by pandemic delays. On the Thai Oil Clean Fuel contract, we are working closely with our joint venture partners to pursue the recovery of costs over the remaining course of the contract.
“Looking forward, whilst E&C awards were slower than expected in 2022, the market outlook remains positive and we are well positioned on a number of near-term prospects, with US$1.5 billion of E&C opportunities where we are at preferred bidder stage, and a further US$3.5 billion of bids submitted in E&C. We expect these opportunities to provide backlog growth in 2023 and lay the foundations for a return to profitability, positive free cash flow and continued recovery thereafter.
“In 2023, we will continue to close out the legacy E&C portfolio and associated commercial settlements. We retain our focus on cost discipline, unwinding working capital and ensuring Petrofac has sufficient liquidity to support our growth ambitions.”

Group trading

The Group’s performance in 2022 will reflect continued strong performance in Asset Solutions and IES, offset by the challenges in the E&C portfolio. Management expects to report Group revenue of approximately US$2.5 billion and a full-year business performance EBIT loss of approximately US$100 million for 2022.


Divisional highlights

Engineering & Construction (E&C)

Second half performance in E&C was further adversely impacted by the mature, Covid-affected legacy contracts. The additional costs incurred on these contracts due to extended schedules have not been fully recovered from our customers, resulting in net cost overruns. Six of the active lump-sum contracts were completed or substantially completed (1) in the second half and five of the remaining eight are scheduled to complete in 2023.

In addition, we have recognised cost increases on the Thai Oil Clean Fuel contract – where the partners are jointly liable for the performance of the contract – driven by a reassessment, with the partners, of the forecast costs to complete this highly complex project. This is a loss-making contract and the expected full-life loss has therefore been recognised immediately. There is no cash outflow associated with these cost increases in 2022, as the cash impact will be spread over the remaining life of the contract. Petrofac will continue to work closely with its partners to pursue the recovery of costs over the course of the contract and, in addition, seek to realise other portfolio upsides.

Full year revenues in 2022 are expected to be around US$1.3 billion reflecting the lower levels of activity compared with the prior year. The combined impact of the cost overruns described above mean that E&C is expected to report a full year EBIT loss of approximately US$190 million.

Year to date, E&C has secured new order intake (3) of US$0.5 billion and signed a collaboration with Hitachi to provide joint grid integration and associated infrastructure to support the rapidly growing offshore wind market. The addressable pipeline for E&C remains healthy, although clients have been slower to award contracts in the second half than expected. These awards are now expected to be made in 2023, and this is reflected in the healthy E&C pipeline of US$54 billion scheduled for award in the next 18 months.  This includes bids submitted of approximately US$3.5 billion and a further US$1.5 billion where we are at preferred bidder stage. As a result, the business remains well placed to deliver a sustained period of growth in backlog in the near and medium term.

Asset Solutions (AS)

Asset Solutions has continued to deliver robust performance, with strong order intake in the year to date and a healthy margin.

Full year revenue is expected to be approximately US$1.1 billion, and EBIT margins are expected to be between 5% and 6%, in line with guidance. This includes the impact of lower margins in the second half due to the roll-off of certain historic high-margin contracts, as noted at the half-year.

Year to date order intake (3), comprising new contract awards and extensions, is US$1.4 billion, including material awards in Well Engineering and Decommissioning in Australia and the Gulf of Mexico. Asset Operations and Asset Developments secured awards across the UK, MENA and India.

In New Energy Services, the momentum gained over the last two years continues. The market remains active and we have secured a series of early-stage awards and strategic alliances with technology providers. This leaves us well positioned over the medium-term to secure EPC and other execution phase project work, as projects reach final investment decision. 

Integrated Energy Services (IES)

IES’ financial performance during the year has been robust, with a significant increase in production and the benefit of high oil prices. Net production is expected to be between 3.0-3.5 kbbl/d for the year, reflecting a full year’s production from the East Cendor development, which commenced in June 2021, and the reinstatement of the main Cendor field production.

The average realised oil price (net of royalties) (4) for the year to date is expected to be approximately US$110/bbl (2021: US$75/bbl), including the impact of hedging, with the full year EBITDA expected to marginally exceed the guided range of US$90 million to US$100 million. 

Order backlog

The Group's backlog (5) is expected to be approximately US$3.3 billion at 31 December 2022 (30 June 2022: US$3.7 billion), reflecting industry delays to awards, partially offset by continued new order intake success in AS in the second half. 


Expected Backlog

31 December 2022

30 June 2022


US$ billion

US$ billion

Engineering & Construction



Asset Solutions



Group backlog




Cash flow, net debt and liquidity

Net debt (2) was US$396 million at 15 December 2022 (30 June 2022: US$341 million). Liquidity (6) was US$451 million on the same date (30 June 2022: US$511 million). This reflects a delay in the expected receipt of certain 2022 settlements and milestone collections to early 2023, the delay in new awards and the unrecovered cost overruns in the E&C legacy portfolio, partly mitigated through active cash flow management.

We have engaged with our lenders to extend the revolving credit facility and a bilateral loan – totalling US$230 million – which are scheduled to mature in October 2023.

Outlook for 2023

The outlook for new awards in E&C remains robust, supported by high energy demand and increased focus on energy security and energy transition. E&C is well positioned on a number of near-term prospects, with US$1.5 billion of opportunities where we are at preferred bidder stage, and a further US$3.5 billion of bids submitted. Bidding activity remains high, with an 18-month pipeline, including bids submitted, of approximately US$54 billion, of which US$33 billion is scheduled for award in 2023.

E&C has secured revenue of US$0.9 billion for 2023, approximately a third of which from contracts with no future margin contribution. Coupled with the adverse operating leverage due to the small portfolio of active contracts, we expect a small EBIT loss in E&C in 2023. Our healthy pipeline and projected order intake in 2023 mean that we remain confident of delivering a return to profitability and positive cash flow in 2024 and significant growth in the E&C business over the medium term.

Asset Solutions has US$2 billion of bids submitted as part of a US$14 billion 18-month pipeline of opportunities, with US$11 billion scheduled for award in 2023.

Asset Solutions has secured revenue of US$0.8 billion for 2023. The business is expected to continue to perform well, with revenue growth driven by focused geographic expansion and new order intake in Well Engineering & Decommissioning in 2022. We expect EBIT in 2023 to be lower than 2022 reflecting the roll-off of certain high-margin contracts in the first half of 2022 and a larger portion of pass-through revenue in Well Engineering & Decommissioning contracts.

IES is expected to deliver another robust production performance in 2023, in line with 2022. At US$85/bbl oil price, EBITDA is expected to be in the range US$70 million to US$80 million, taking into account hedging.

At Group level, we expect broadly neutral cash flow in 2023 as a result of new awards and the partial unwinding of working capital balances, offset by capex of US$25-35 million, tax payments of US$70-80 million (relating to the closure of prior periods’ assessments) and interest costs of US$80 million.

Conference call

Afonso Reis e Sousa, Chief Financial Officer, will host a conference call for analysts and investors at 8.30am today.

Analysts and investors can access the call on: +44(0)330 551 0200. Password: Quote ‘Petrofac’ when prompted by the operator 


  1. Completed and substantially completed contracts: contracts where (i) a Provisional Acceptance Certificate (PAC) has been issued by the client, or (ii) transfer of care and custody (TCC) to the client has taken place, or (iii) PAC or TCC are imminent and no substantive work remains to be performed by Petrofac.
  2. Net debt comprises interest-bearing loans and borrowings less cash and short-term deposits (i.e. excludes IFRS 16 lease liabilities).
  3. New order intake is defined as new contract awards and extensions, net variation orders and the rolling increment attributable to Asset Solutions contracts which extend beyond five years.
  4. Average net realised price is net of royalties and hedging gains or losses. It is based on sales volumes, which may differ from production due to under/over-lifting in the period.
  5. Backlog consists of: the estimated revenue attributable to the uncompleted portion of Engineering & Construction division contracts; and, for the Asset Solutions division, the estimated revenue attributable to the lesser of the remaining term of the contract and five years.
  6. Liquidity consists of gross cash and undrawn committed facilities. Gross cash includes balances held in certain countries whose exchange controls significantly restrict or delay the remittance of these amounts to foreign jurisdictions. It also includes balances in joint operation bank accounts which are generally available to meet the working capital requirements of those joint operations, but which can only be made available to the Group for its general corporate use with the agreement of the joint operation partners.