25 June 2013
Petrofac issues the following pre-close trading update ahead of the announcement of its interim results for the six months ending 30 June 2013 on 27 August 2013.
• Good operational performance; active project portfolio remains in excellent shape
• Group backlog(1) stood at US$11.9 billion at 31 May 2013 (31 December 2012: US$11.8 billion)
• Modest growth in net profit expected in 2013; remain on track to meet our 2015 earnings target(2)
• 2013 net profit expected to be significantly weighted towards H2 2013, reflecting the phasing of OEC and IES project delivery over the course of the year.
Ayman Asfari, Petrofac Group Chief Executive, commented:
“We have made good progress in the year to date, achieving a number of key milestones. We have secured US$2.6 billion of order intake and our portfolio of active projects is in excellent shape. We continue to see strong demand for our services, which, together with our competitive positioning, should see us grow our Onshore Engineering & Construction backlog over the course of the year.
“We are actively progressing our strategy for delivering long-term sustainable growth, which is based on three key drivers: geographic expansion, developing our leading EPC offering offshore and delivering on our plans for Integrated Energy Services. In 2013 we expect to achieve modest net profit growth and, looking further ahead, remain on track to more than double our 2010 Group earnings by 2015(2).”
Engineering, Construction, Operations & Maintenance (ECOM)
Onshore Engineering & Construction
We have made a good start to the year across our portfolio of active projects. The El Merk gas processing facility in Algeria and the Asab oil field development in Abu Dhabi are being commissioned and we are in the process of handing over the key utilities on the South Yoloten project in Turkmenistan. As previously noted, following the terrorist attack which took place in January 2013 at the In Amenas natural gas site in Algeria, at the request of our client, we evacuated our staff on a temporary basis from the In Salah southern fields development in that country. We expect to recommence full site operations during the second half of 2013.
Backlog was US$5.7 billion at 31 May 2013 (31 December 2012: US$5.1 billion), reflecting Petrofac’s share of the Upper Zakum field development in Abu Dhabi, which was augmented by US$0.4 billion in June with the award of the Bab Compression and Bab Habshan projects in Abu Dhabi. We continue to see a strong pipeline of bidding opportunities for onshore engineering and construction projects, particularly in the Middle East, Africa and the Commonwealth of Independent States, and, given our competitive positioning, we anticipate growth in our Onshore Engineering & Construction backlog over the course of 2013.
Given the scheduling of recent awards and the rephasing of the In Salah southern fields development, we expect revenues and profits for the year to be significantly weighted towards the second half of the year.
Offshore Projects & Operations
Our Offshore Projects & Operations’ portfolio of operations support contracts and offshore capital projects continues to perform well. Backlog was US$3.0 billion at 31 May 2013 (31 December 2012: US$3.5 billion), including the award of the US$515 million engineering, procurement, installation and commissioning (EPIC) contract by Abu Dhabi Marine Operating Company for package 3 of the Satah Al Razboot (SARB) project, offshore Abu Dhabi. In addition, we were awarded a US$50 million three-year operations and maintenance contract in June for Oman Oil Company Exploration and Production LLC.
Engineering & Consulting Services
Engineering & Consulting Services has made a good start to the year, with the award, in partnership with Doris Engineering, of a project management contract by Petróleos Mexicanos (PEMEX) for the Lakach project, their first major deepwater development.
Integrated Energy Services (IES)
Integrated Energy Services continues to establish its execution track record across its portfolio of existing projects, which is building long-term sustainable earnings for the Group. An updated IES data pack outlining net income drivers for the years 2014 and 2015 is now available on our website: www.petrofac.com/IES_datapack_June_2013
In Mexico, we took over field operations on the Pánuco contract area in late March 2013 and we are making good progress on our transition activities on the Arenque contract area, where we expect to commence field operations early in the second half of the year.
In Malaysia, we have brought all thirteen wells online on the first phase of the Berantai risk service contract and first production from West Desaru, in Block PM304, is expected to commence early in the second half of the year.
Bowleven completed the appraisal drilling on the IM5 well on the Etinde permit in Cameroon during the first half of the year, with encouraging results, and on the Greater Stella Area, where Petrofac will acquire a 20% interest upon first production, development drilling operations have commenced on the Stella field, with the first well on the field having been spudded.
Group backlog stood at US$11.9 billion at 31 May 2013 (31 December 2012: US$11.8 billion), comprising US$9.0 billion from ECOM (31 December 2012: US$8.8 billion) and US$2.9 billion from IES (31 December 2012: US$3.0 billion).
Our net debt was US$0.3 billion at 31 May 2013 (31 December 2012: net cash US$0.3 billion), with the cash outflow being predominantly due to investment in IES projects and the unwinding of cash advances on Onshore Engineering & Construction projects. We expect to remain in a net debt position throughout the remainder of the year driven by the ongoing deployment of cash on IES projects and initial investment in our offshore strategy, albeit we expect to see continued volatility in working capital reflecting the size and timing of cash advances on new Onshore Engineering & Construction projects and the phasing of receipts and payments in respect of our existing project portfolio.
(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) Our Group earnings target is net profit after tax of more than US$862 million in 2015, a doubling of 2010 recurring earnings.