Petrofac issues the following pre-close trading update ahead of the announcement of its results for the six months ending 30 June 2019 on 28 August 2019.
- Trading in line with prior guidance
- New order intake (1) of US$1.7 billion in the year to date
- Net debt (2) expected to be around US$0.1 billion at 30 June 2019
Ayman Asfari, Petrofac’s Group Chief Executive, commented:
“We are trading in line with our prior guidance reflecting solid operational performance across the business.
“We continue to maintain excellent client relationships in all of our markets, although new order intake in the year to date reflects our recent challenges in Saudi Arabia and Iraq. Looking forward, the Group has a busy tendering pipeline in other markets with around US$15 billion of bid opportunities due for award in the second half of the year.
“We are making good progress delivering our strategic objectives. We continue to target best-in-class delivery for our clients and are improving our competitiveness by reducing costs, driving digitalisation, increasing local content and investing in talent. Furthermore, we are well positioned in the second half with good revenue visibility, a strong balance sheet and high levels of tendering activity.”
Engineering & Construction (E&C)
Overall, Engineering & Construction results are forecast to be in line with management guidance, with revenues for the full year expected to be around US$4.5 billion and net margins at the low end of guidance.
We have continued to make steady progress delivering our portfolio of projects. In Malaysia, the RAPID project is substantially complete with all units ready for the introduction of gas. On the Upper Zakum Field Development in the UAE, commissioning work at the central and west islands is at an advanced stage. In Saudi Arabia, the Jazan South tank farm is mechanically complete, whilst the Jazan North tank farm and Fadhili projects are nearing mechanical completion. In Kuwait, we are focused on the delivery of priority units on the KNPC Clean Fuels project and water has been introduced into the Lower Fars Heavy Oil plant. We are also preparing for the introduction of power at the BorWin 3 offshore grid connection project in the North Sea. Meanwhile, our engineering, procurement and construction management (EPCm) projects are progressing well: the Al Taweelah Alumina Refinery recently started up, and both Yibal Khuff and the Rabab Harweel Integrated Project are nearing completion.
We have secured new orders worth US$1.6 billion in E&C in the year to date (1H 2018: US$1.6 billion(3)), including a lump-sum engineering, procurement and construction (EPC) contract for the Ain Tsila Development Project in Algeria and the Mabrouk Project in Oman.
Engineering & Production Services (EPS)
Engineering & Production Services is performing in line with expectations, with growth in Projects offsetting lower activity from Operations.
We have secured US$0.1 billion of awards and extensions in the year to date (1H 2018: US$0.5 billion(3)), including new awards and contract extensions in the UK North Sea, Oman, UAE and Iraq.
Integrated Energy Services (IES)
Net production is expected to be approximately 2.1 million barrels of oil equivalent (mmboe) for the first half of the year (1H 2018: 3.1 mmboe), in line with expectations and reflecting divestments in the second half of 2018. The average realised oil price (net of royalties) for the first half is expected to be approximately US$69 per barrel of oil equivalent (1H 2018: US$56/boe), reflecting higher realised prices and production mix.
Group backlog stood at US$8.9 billion at 31 May 2019:
31 May 2019
31 December 2018 (3)
Engineering & Construction
Engineering & Production Services
Net debt (2) is expected to be around US$0.1 billion at 30 June 2019 (31 December 2018: US$90 million net cash), reflecting the reversal of temporary favourable working capital movements at the end of 2018, the phasing of tax and dividend payments as well as the purchase of treasury shares. We continue to review options for our remaining non-core assets, consistent with our strategy to enhance returns.
Alastair Cochran, Chief Financial Officer, will host a conference call for analysts and investors at 8am today.
(1) New order intake comprises new contract awards and extensions, net variation orders and the rolling increment attributable to EPS contracts which extend beyond five years.
(2) Net debt comprises interest-bearing loans and borrowings less cash and short-term deposits (i.e. excludes IFRS 16 lease liabilities).
(3) On 1 January 2019, the EPCm business was reclassified from the EPS division to the E&C division. The EPCm business is presented within the E&C division in prior period comparative figures.