Shares in Petrofac, a London-listed oil services company with operations in Abu Dhabi and Sharjah, rose sharply yesterday after a bullish trading statement said its order backlog was higher despite the weaker oil price this year.
In late afternoon UAE time, the shares were up 50 pence – 5 per cent – at 919.5 pence, although they had been as high as 964.50p during the day.
The company said its order backlog was at a record US$20.5 billion, which included the award this month of a $900 million contract from Petroleum Development Oman to provide engineering, procurement and construction management (EPCM) services for its Yibal Khuff project in southern Oman.
The Oman project was the biggest so far this year out of total new orders for its main EPCM division totalling $4.7bn, the company said.
Yibal Khuff is an oilfield located approximately 350 kilometres south-west of Muscat in the Oman, and the order builds on Petrofac’s award last year of a $1bn contract for the nearby Rabab Harweel oilfield development.
The company also said yesterday that it had made progress on its troubled Laggan-Tormore project in the British sector of the North Sea, although that project has cost it hundreds of millions of dollars and led to two profit warnings this year.
“Putting the challenges we have faced on Laggan-Tormore to one side, the rest of our portfolio continues to perform well,” said Ayman Asfari, Petrofac’s chief executive.
“We have had a good start to the year … Our pipeline of bidding opportunities remains attractive, and ongoing investment by our clients in large strategic projects in our core markets, together with our strong competitive position, should see us secure a number of further awards over the second half of the year.”
Indeed, the company said that its net profit should be “significantly weighted” towards the second half of the year.
Yesterday’s statement is an update to the market ahead of the firm’s first-half results, which are expected to be released on August 25.
Petrofac’s net profit last year fell 10.6 per cent to $581m on revenue down 1.6 per cent to $6.2bn. This year, Petrofac warned the market that it expected net profit of US$460m because of the fall in prices.
That was lower than the previous November forecast of $500m, when oil prices were expected to average $82 per barrel this year.
However, benchmark North Sea Brent oil prices have since bounced back from their lowest levels in January and February, when they were about $45 per barrel, to be trading between US$60 and US$65 per barrel since April.
While the company has been successful at securing new orders, its profitability has been hurt by problems with Laggan-Tormore, a gas plant project on the Shetland Islands, off the UK’s northernmost coast, because of weather delays and other factors.
In April, Petrofac said it would take an additional pre-tax loss of $194.4m on Laggan-Tormore on top of the $230m loss it revealed in February.
In yesterday’s trading statement, Petrofac said it expects further “incremental pre-tax costs” for the project to be £30m, with first gas expected in the third quarter of this year.
It said, however, that it has yet to recognise a £20m (Dh115.6m) write-off for its losses against taxes on the project.
Some analysts see Petrofac as still vulnerable to further setbacks because of the nature of projects it is exposed to.
Although recognising that Petrofac’s shares have done better than the sector in general, Catharina Hillenbrand-Saponar, an energy analyst at Montpellier Analysis, said: “There is a chance of reversal of performance … [because] it has a good share of risky projects.”
amcauley@thenational.ae
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