• Expect to deliver net profit growth in 2012 of at least 15%
• Operations continue to perform in line with expectations
• On the basis of awards announced to date, Group backlog(1) expected to be approximately US$11.6 billion at 31 December 2012 (31 December 2011: US$10.8 billion)
Ayman Asfari, Group Chief Executive, commented:
“We have delivered another year of good growth, with our 2012 full year net profit expected to be at least 15% higher than in 2011."
“In our Engineering, Construction, Operations & Maintenance (ECOM) division, we continue to deliver very good operational performance. Despite a number of bidding processes extending into next year, we have secured an order intake in the year to date of US$5.3 billion(2), with major project awards in Saudi Arabia, Iraq, Kuwait and the UK. We continue to experience high levels of bidding activity and we see a strong pipeline of bidding opportunities for 2013."
“We have made good progress in our Integrated Energy Services (IES) division in the year to date, securing two further production enhancement contracts in Mexico, including our first in conjunction with Schlumberger, and agreeing a strategic alliance agreement with Bowleven to develop the Etinde Permit in Cameroon. These new awards, together with the achievement of significant milestones on our other IES projects, are helping to build long-term sustainable earnings for the Group."
“Overall, we are well positioned to grow next year and beyond and we are confident of achieving our target of more than doubling our recurring 2010 Group earnings by 2015.”
Engineering, Construction, Operations & Maintenance (ECOM)
Onshore Engineering & Construction
We have made good progress across our portfolio of projects during the year to date, including on our major projects in Abu Dhabi, Turkmenistan and Algeria. Notwithstanding that we have seen some slippage in the timing of certain contract tender processes during the year and the delay in the award of some projects from 2012 to 2013, backlog has increased over the second half of the year, with year-end backlog, based on contracts signed to date, expected to be approximately US$5.0 billion (30 June 2012: US$4.6 billion; 31 December 2011: US$6.4 billion). Given our competitive positioning and a strong pipeline of bidding opportunities, particularly in the Middle East, North Africa and the Commonwealth of Independent States, we anticipate growth in our Onshore Engineering & Construction backlog during 2013.
Offshore Projects & Operations
Offshore Projects & Operations (OPO) continues to perform well on its portfolio of operations support contracts and offshore capital projects. OPO has secured a number of contract wins and extensions during the year to date, with order intake totalling US$2.1 billion. New wins during the year include onshore maintenance and offshore operations and maintenance projects in Iraq for BP and South Oil Company (SOC), respectively, a three-year contract to provide onshore engineering and both onshore and offshore construction services to all of Apache’s UK North Sea assets and the Bekok-C platform refurbishment contract for PETRONAS in Malaysia. We continue to see high levels of bidding activity on both operations support contracts and offshore capital projects in the UK/Europe, the Middle East and Africa, the CIS and the Asia Pacific regions.
Engineering & Consulting Services
We were awarded a number of front-end engineering and design (FEED) and conceptual studies for external customers during the year, which has led to increased activity levels. In December, Engineering & Consulting Services was awarded a three-year contract in Algeria, by JV Gas, a joint venture comprising Sonatrach, BP and Statoil, to provide a range of multi-discipline consultancy, design and procurement services. These activities will support JV Gas’ development programme to augment hydrocarbon production on both the In Salah and In Amenas assets.
Integrated Energy Services (IES)
In November 2012, we announced a strategic alliance agreement with Bowleven to develop the Etinde Permit in Cameroon. Subject to an agreed Field Development Plan and satisfaction of certain other conditions, including co-venturer and government approvals, the strategic alliance’s risk service arrangements envisage that Petrofac will subsequently execute the planned development through the provision of project management, engineering, procurement and construction services.
During the year, we also secured the Pánuco and Arenque production enhancement contracts in Mexico, which each run for 30 years. We are making good progress with our transition activities on the Pánuco contract area in Mexico and we expect to commence field operations, jointly with Schlumberger, in January 2013. Field operations on the Arenque offshore contract are expected to commence around the end of Q1 2013. We commenced field operations on the Magallanes and Santuario production enhancement contracts in February 2012, and we now have three drilling rigs and two workover rigs active on the blocks. The drilling programme on the Ticleni production enhancement contract for Petrom in Romania is progressing with two rigs operational in the field with additional activity focusing on sidetracks and well workovers.
In Malaysia, we achieved a key milestone on the Berantai risk service contract in October, with the commencement of processing and export of gas. On Block PM304, the upgraded West Desaru Mobile Offshore Production Unit (MOPU) (formerly the Ocean Legend) has recently sailed from the conversion yard. The West Desaru conductor support structure is presently being constructed, and the MOPU will arrive on location early in the New Year. Also on Block PM304, we have made significant progress on the second phase of Cendor, with installation of all in-field facilities and good progress made on the floating, production, storage and offloading (FPSO) vessel. In Tunisia, we have drilled two additional production wells during the year, which are expected to extend the production plateau.
Based on contracts signed to date, Group backlog is expected to be US$11.6 billion at 31 December 2012 (31 December 2011: US$10.8 billion), comprising US$8.6 billion from ECOM (31 December 2011: US$9.2 billion), which includes US$5.0 billion from Onshore Engineering & Construction (31 December 2011: US$6.4 billion) and US$3.4 billion from Offshore Projects & Operations (31 December 2011: US$2.7 billion), and US$3.0 billion from IES (31 December 2011: US$1.6 billion). Net cash balances were US$0.2 billion at 30 November 2012 (31 December 2011: US$1.5 billion), due to the unwinding of cash advances on Onshore Engineering & Construction projects and the deployment of cash on IES projects.
(1) Backlog consists of the estimated revenue attributable to the uncompleted portion of lump-sum engineering, procurement and construction contracts and variation orders plus, with regard to engineering, operations, maintenance and Integrated Energy Services contracts, the estimated revenue attributable to the lesser of the remaining term of the contract and five years. Backlog will not be booked on Integrated Energy Services contracts where the Group has entitlement to reserves. The Group uses this key performance indicator as a measure of the visibility of future revenue. Backlog is not an audited measure.
(2) Order intake comprises new contracts awarded, growth in scope of existing contracts and the rolling increment attributable to contracts which extend beyond five years. Order intake is not an audited measure.