Petrofac News 1700X397
20 December 2023

Trading update

Petrofac issues the following pre-close trading update for the year ending 31 December 2023.

Financial and strategic update

  • Second contract award under the six-project, US$14 billion, multi-year Framework Agreement with TenneT announced today. Petrofac’s portion of the second contract valued at approximately US$1.4 billion.
  • Performance guarantee secured for the first contract awarded under the Framework Agreement with TenneT. Performance guarantee terms agreed for the first ADNOC Habshan contract – expected to be issued by year end. Active discussions ongoing to secure guarantees required for other new contracts.
  • Net debt 1 expected to be modestly higher than at the interim results, with positive free cash flow generation by the business in the second half offset by an increase in collateral required for guarantees.
  • Near-term focus remains on strengthening the balance sheet with ongoing review of strategic and financial options.

Operational performance:

  • Asset Solutions and IES underlying performance in line with guidance, before a one-off bad debt provision in Asset Solutions of approximately US$12 million.
  • Expect a full year EBIT loss in E&C of approximately US$215 million, including US$110 million one-off write downs in contract settlements to protect cash flows.
  • Good progress in reaching contractual settlements in the second half, with approximately US$180 million collected year-to-date.
  • Completion of remaining legacy E&C contracts progressing in line with guidance.
  • Thai Oil Clean Fuels project progress remains on track, with negotiations ongoing to recover additional committed costs.

Backlog and outlook

  • Exceptional new order intake2 across both E&C and Asset Solutions, totalling approximately US$6.8 billion in the year-to-date, with Group backlog3 expected to be approximately US$8.0 billion at the end of the year.
  • Robust business outlook underpinned by strong backlog and a healthy Group pipeline scheduled for award in the next 18 months of US$62 billion, including the remaining projects in the TenneT multi-platform Framework Agreement.

Tareq Kawash, Petrofac’s Group Chief Executive, commented:

“Our focus on rebuilding the backlog and unwinding historic working capital has resulted in tangible progress against our organic plan to strengthen the Group’s financial position.

To further accelerate progress, my near-term priority, and that of our Board and leadership, remains on improving liquidity and materially strengthening the Group’s balance sheet, to deliver on our long-term potential.

We are completing contracts in the legacy portfolio as planned, we continue to deliver well in the initial phases of the contracts awarded in 2023, and, as a result of excellent order intake, we enter 2024 with a high-quality backlog in both traditional and renewable energy of approximately US$8 billion. This provides us with good revenue visibility and demonstrates the continued confidence customers have in Petrofac’s delivery.”

Financial and strategic update

The Group has made good progress on its near-term priorities, since its announcement on 4 December 2023. Today, we announced that the Group has secured the performance guarantee for the first contract awarded under its Framework Agreement with TenneT, which was also supplemented with the second contract award under the agreement. The Group remains in active discussion with credit providers and its clients to secure the guarantees required for other new contracts in its portfolio.

Cash flow and net debt1

The Group has continued to advance contractual settlements, collecting approximately US$180 million in the year to date. As referenced in the business update on 4 December 2023, due to the delays in securing guarantees, the Group no longer expects to collect advance payments on new contracts before the year-end.

Measures taken by management resulted in positive free cash flow in the second half, even in the absence of advance payment receipts, albeit this was offset by an increase of over US$100 million in collateral for guarantees. As a result, net debt at year-end is expected to be modestly higher than at the interim results (30 June 2023: US$584 million).

The Group has continued to maintain liquidity above its financial covenant.

Review of strategic and financial options

On 4 December 2023, the Group announced that Aidan de Brunner had joined the Company as a Non-Executive Director to drive engagement with finance providers, investors and other stakeholders in an active review of strategic and financial options with the objective of materially strengthening the Company’s balance sheet, securing bank guarantees and improving short-term liquidity. Further announcements will be made as appropriate.

Group trading

The Group continues to perform well for its clients. Management expects to report Group revenue of approximately US$2.5 billion, in line with guidance. Full-year business performance EBIT loss is expected to be approximately US$180 million. This includes approximately US$110 million one-off write-downs in contract settlements to protect cash flows and a one-off bad debt provision of approximately US$12 million for a client going into administration in the Asset Solutions business unit.

Divisional highlights

Engineering & Construction (E&C)

The financial performance in E&C reflected the low opening backlog and the maturity of its legacy contract portfolio. Full year E&C revenues are expected to be around US$1.0 billion, with a full year EBIT loss of approximately US$215 million, including approximately US$110 of one-off write-downs on legacy contracts to protect and accelerate cash flows.

Following E&C’s strongest order intake in many years, it has good visibility of future revenue and profit growth. Guidance will be provided with the Group’s annual results, as usual.

Operationally, the initial phases of the new contracts secured in 2023 are progressing well. We previously guided that five of the remaining eight legacy contracts were expected to be completed or substantially completed4 during 2023 or early 2024. Progress remains on track, with two reaching that milestone in 2023 and the remaining three expected to follow in early 2024.

With respect to the Thai Oil Clean Fuels project, good progress continues to be made on the construction phases and we are achieving our interim milestones. Negotiations are ongoing with our client and partners in relation to the reimbursement of additional committed costs. The timing of these negotiations is not wholly within the Company’s control and therefore, there is a risk to the 2023 EBIT numbers stated above. A project and commercial update will be provided with the publication of the Group’s full year results in 2024.

Year-to-date, following the second contract award under the TenneT framework agreement, E&C has secured new orders of approximately US$5.3 billion, split broadly evenly between our core markets and energy transition projects under the TenneT framework. Backlog is expected to be approximately US$5.9 billion at 31 December 2023, of which almost 90% relates to contracts secured in 2023.

Asset Solutions

Asset Solutions has had another successful year, with order intake for the year-to-date of US$1.5 billion comprising renewals and extensions in core markets and new contract awards in both core markets and new geographies.

Full year revenues are expected to be US$1.4 billion with EBIT of between US$20 million and US$25 million, following a bad debt provision approximately US$12 million relating to a customer entering administration. Excluding this one-off event, expected underlying EBIT of between US$32 million and US$37 million reflects the completion of historic high margin contracts in 2022 and a higher contribution of pass-through revenues.

Integrated Energy Services (IES)

IES has continued to deliver ahead of expectations. Net production is expected to be broadly in line with the prior year (2022: 1,261kboe). The average realised oil price (net of royalties)5 for the year to date is expected to be approximately US$90/bbl, including the impact of hedging (2022: US$110/bbl), with the full year EBITDA expected to marginally exceed the guided range of US$65 million to US$75 million.

Order backlog

The Group's backlog(3) is expected to be approximately US$8.0 billion at 31 December 2023 (30 June 2023: US$6.6 billion), reflecting the exceptional order intake in both E&C and Asset Solutions.


31 December 2023 (forecast)

30 June 2023


US$ billion

US$ billion

Engineering & Construction



Asset Solutions



Group backlog



Conference call

Tareq Kawash, Group Chief Executive and 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 Trading Update’ when prompted by the operator.


1 Net debt comprises interest-bearing loans and borrowings less cash and short-term deposits (i.e. excluding IFRS 16 lease liabilities).
2 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. 
3 Backlog consists of: the estimated revenue attributable to the uncompleted portion of Engineering & Construction division projects; and, for the Asset Solutions division, the estimated revenue attributable to the lesser of the remaining term of the contract and five years.
4 Completed and substantially completed contracts: contracts where (i) a Provisional Acceptance Certificate (PAC) has been issued by the client, (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.
5 Average net realised price is inclusive 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.