Petrofac issues the following pre-close trading update ahead of the announcement of its interim results for the six months ending 30 June 2016 on 30 August 2016.
• Expect to deliver net profit in 2016 in line with our previous guidance(1)
• Net profit(2) is expected to be broadly evenly split between the first and second half of the year
• Group backlog stood at US$18.9 billion at 31 May 2016 (31 December 2015: US$20.7 billion), giving excellent revenue visibility
• Order intake of approximately US$0.8 billion in the year to date, mainly in Engineering & Production Services; strong bidding pipeline for 2H 2016 and 2017
• Net debt is expected to increase to around US$1.1 billion at 30 June 2016 (31 December 2015: US$0.7 billion), reflecting payment of the 2015 final dividend and capital expenditure on owner furnished equipment for the JSD6000 and on the Greater Stella Area development
Ayman Asfari, Petrofac’s Group Chief Executive, commented:
“We are well-positioned in what is a challenging environment for the industry and we remain focused on our core proposition: strong project execution, a clear geographic focus, a disciplined approach to bidding and continued emphasis on cost management to maintain a sustainable, cost-effective structure.
“Our backlog gives us excellent revenue visibility for this year and beyond, and we are very active bidding on a strong pipeline of new opportunities as our clients continue to invest in our core markets.
“In IES, we remain committed to reducing the capital intensity of the portfolio and we expect to demonstrate significant progress over the remainder of the year.”
Engineering & Construction (E&C)
We made good progress on our portfolio of lump-sum engineering and construction projects during the first half of the year, including the commencement of production from the central processing facility for the In Salah southern fields development in Algeria, mechanical completion of the third train on the Badra project in Iraq and reaching around 90% completion on the SARB3 project, offshore Abu Dhabi. The Laggan-Tormore gas plant on Shetland was inaugurated in May, and has been operating successfully and exporting gas since February.
As expected, there has been a lower level of project awards during the first half of the year, however, we see continuing investment from our clients in our core markets of the Middle East and North Africa, in both key upstream and downstream projects. In addition to a number of submitted bids where the outcome is pending, we are currently actively bidding on a large number of projects where award is expected in the second half of the year or early 2017.
We have an unrivalled track record in our core markets and a very cost-competitive delivery capability. This, coupled with the quality and size of our backlog, enables us to remain focused on maintaining our bidding discipline and continuing to deliver sector leading margins.
Engineering & Production Services (E&PS)
We have made a good start to the year in our reimbursable business, securing a number of new contracts and extensions, and continuing to deliver good progress across the portfolio, including on our engineering, procurement and construction management (EPCm) projects in Oman and Abu Dhabi.
We have secured new awards and extensions totalling more than US$0.4 billion in the year to date, including a new five-year US$250 million Duty Holder contract in the North Sea for Anasuria Operating Company Limited, a UK joint venture formed between Hibiscus Petroleum Berhad and Ping Petroleum Limited. We were also awarded a Duty Holder contract from BP to support the late life management of the Miller platform, located in the Central North Sea, in preparation for the next phase of its planned decommissioning programme, and an enhanced US$100 million three-year contract extension on the Alwyn and Dunbar platforms in the Northern North Sea for Total E&P UK.
Integrated Energy Services (IES)
Equity Upstream Investments
The FPF1 floating production facility is expected to be ready for sailaway to the Greater Stella Area development by the end of this month. First production from the development remains scheduled for summer 2016. On Block PM304 in Malaysia, the uptime of the facilities remains high and production levels are in line with expectations. Production from the Chergui gas concession in Tunisia is expected to recommence shortly after several months of shutdowns due to civil unrest.
Production Enhancement Contracts
As part of the ongoing energy reforms in Mexico, we continue to work towards migration of our Production Enhancement Contracts (PECs) to Production Sharing Contracts (PSCs). We now expect formally to exit the Ticleni PEC in Q3 2016.
Risk Service Contracts
On the Berantai risk service contract, production is ahead of target with high uptime during the year to date.
Group backlog stood at US$18.9 billion at 31 May 2016 (31 December 2015: US$20.7 billion), giving excellent revenue visibility:
31 May 2016
31 December 2015
Engineering & Construction
Engineering & Production Services
Integrated Energy Services
Tim Weller, Chief Financial Officer, will host a conference call for analysts and investors at 7.45am today. The participant details are as follows:
UK and international: +44 203 139 4830