Petrofac News 1700X397
27 June 2017

Trading update

Petrofac issues the following pre-close trading update ahead of the announcement of its half year results for the six months ending 30 June 2017 on 30 August 2017.

  • Underlying net profit(1) for the first half of 2017 is expected to be US$135 million to US$145 million; full year net profit is expected to be weighted to the second half of the year
  • New order intake of US$1.7 billion in the year to date
  • Backlog of US$13.0 billion at 31 May 2017
  • Net debt is forecast to be around US$1.1 billion at 30 June 2017 in line with expectations

Ayman Asfari, Petrofac’s Group Chief Executive, commented:
“We have made a positive start to the year, driven by good project execution and financial discipline.

“Our core business continues to trade in line with expectations and we remain competitive, securing new contract awards in both our E&C and EPS divisions throughout the last six months. The high level of tendering activity is evidence of greater confidence in our core markets and we continue to have a very good pipeline of bidding opportunities. In IES, performance in the first half of 2017 has been impacted by lower realised oil prices, lower capital investment in Mexico and our delayed entry onto the Greater Stella Area development licence.

“Our clear strategy - focused on best in class execution, maintaining our cost-competitiveness to secure new awards and reducing capital intensity - positions us well for the remainder of the year.”

Rijnhard van Tets, Petrofac’s Chairman, commented:
“Everyone within Petrofac is completely focused on delivering operational excellence for our clients and winning new contracts. In addition, we are committed to maintaining our strong balance sheet and reducing net debt. The Board has great confidence in Petrofac’s ability to continue to deliver, and is fully supportive of the work being done to serve our clients and deliver our strategy.

“An independent committee of the Board will continue to engage with the SFO and its investigation.”

Engineering & Construction
We have delivered good progress on our portfolio of lump-sum engineering and construction projects during the first half of the year, including substantially completing the Sohar Refinery Improvement Project and Khazzan central processing facility in Oman. Petrofac has secured new project awards since bidding activity picked up in late 2016, including the GC-32 project in Kuwait for US$1.3 billion in March. We continue to see a high level of tendering activity in our core markets.

Engineering & Production Services
Our reimbursable business continues to perform in line with expectations. We have secured awards and extensions with new and existing clients worth approximately US$0.3 billion year to date predominantly in the UK, Iraq and Kuwait. In addition, we recently secured a 10-year framework agreement with Petroleum Development Oman for the provision of Engineering, Procurement and Construction Management (EPCm) support services for major oil and gas projects, which will further increase backlog as projects are sanctioned.

Integrated Energy Services (IES)
The Greater Stella Area (GSA) development commenced production in February, although the ramp-up in production and our formal entry onto the licence has been slower than expected. The Chergui gas plant in Tunisia has recently recommenced production after an extensive shut-in due to civil unrest. Lower investment in our Mexican Production Enhancement Contracts (PECs) has also impacted underlying performance. Production in Malaysia (PM304) has been in line with expectations.

Looking forward, IES’ full year EBITDA is now expected to be in the range c.US$80 million to US$100 million, principally reflecting lower current forward curve oil prices(2), a lower contribution from GSA and lower investment in Mexico. Migration of the first of our Mexican PECs to a production sharing contract is expected in the second half of the year.

Financial position
Group backlog stood at US$13.0 billion at 31 May 2017:


31 May 2017

31 December 2016


US$ billion

US$ billion

Engineering & Construction



Engineering & Production Services



Integrated Energy Services






Net debt is expected to be around US$1.1 billion at 30 June 2017, reflecting working capital movements and payment of the 2016 final dividend. Net debt is expected to reduce during the second half of the year.

(1) Underlying business performance profit for the year attributable to Petrofac Limited shareholders before exceptional items and certain re-measurements.
(2) IES full year EBITDA guidance of US$140 million to US$160 million on 22 February 2017 was based on the then prevailing forward curve, which averaged US$56, with a US$1 increase/decrease in the price of oil decreasing/increasing IES’ EBITDA by approximately US$4 million.

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