The oil and gas services company Petrofac caught investors' attention yesterday after saying its order backlog this year would surpass last year's record. The UK firm also projected a 20 per cent increase in net profit this year, posted strong first-half results and increased its interim dividend. That sent Petrofac's share price to a record 1,428 pence in London yesterday, after the company confirmed an earlier report that it had received its first contract in Iraq.
But analysts think Petrofac's stock may have peaked for the year. "It is difficult to see where the positive surprises will come from next," said Keith Morris of Evolution Securities, as the firm cut its recommendation to "neutral" from "add". The brokerage firm Panmure Gordon went further, slapping a "sell" rating on Petrofac's stock. "After the dramatic ramp-up in the order book over the last few years ? we believe that the company will now concentrate on execution rather than growth," it said yesterday.
Petrofac's management does not share that view. Yesterday, the company said it expected a larger Iraqi contract award later this year. "This is the early stages of a very exciting, large market in Iraq," said Keith Roberts, the chief financial officer at Petrofac. "We're confident we'll end the year with a higher backlog than we started." Petrofac has also won contracts in Kuwait and Romania this month.
Yesterday, it said it would move to the second and larger phase of a project in Turkmenistan to help develop the country's biggest gasfield. The Turkmen government awarded the US$2.4 billion South Yolotan contract in December to Petrofac Emirates, the joint venture between Petrofac and Mubadala Oil and Gas, which is owned by the Abu Dhabi Government. Failure to win a second Iraqi contract or a setback in Turkmenistan are big risks. Moreover, the company noted "weak" engineering services activity.