Petrofac swings to profit on the back of revenue growth

However, revenues in 2020 likely to decrease due to lower order intake

Oil services firm Petrofac was awarded a new contract by the state-owned Sharjah National Oil Corporation. Petrofac via Bloomberg News
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Petrofac, the London-listed oilfield services firm with offices in Sharjah, swung to profit in the first half of 2019 on the back of strong revenues and lower finance expenses.

Net profit attributable to shareholders for the six-month period ending June 30 reached $139 million (Dh510 m) compared to a loss of $17m for the same period last year, the company said in a statement to the London Stock Exchange, where its shares trade.

Revenue increased 1 per cent in the first half to $2.82 billion from the same period a year earlier, while finance expenses were lower at $30m.

“Petrofac has delivered good results that reflect solid operational performance across the business,” said Ayman Asfari, Petrofac’s group chief executive.

“New order intake year-to-date has been impacted by recent challenges in Saudi Arabia and Iraq. Looking forward, the group has a busy tendering pipeline with around $13bn of bid opportunities due for award in the second half of the year.”

Mr Asfari also said the company is committed to enhancing returns for its shareholders by reducing costs, driving digitalisation, improving cash conversion and divesting non-core assets.

“These ongoing initiatives will improve our competitiveness in core and growth markets, as well as best position the business for a return to growth in the medium-term.”

On the outlook for the remainder of the year, the company said it is well positioned with backlog of $8.6bn at June 30, 2019 and $2.6bn of secured revenue for the second half of 2019.

Revenues are expected to decrease in 2020 due to low order intake in recent years, it said. Group capital expenditure is expected to be around $125 m in 2019.

Regarding an investigation by Britain’s Serious Fraud Office (SFO), the company said no charges have been brought against Petrofac, or any officers or current employees.

“Petrofac continues to engage with the SFO and will respond to any further developments as appropriate. We are focused on bringing this matter to closure as quickly as possible and believe this is in the best interests of all stakeholders.”

The SFO in February announced that Petrofac’s former global head of sales, David Lufkin, a British national, had pleaded guilty to 11 counts of bribery related to making “corrupt offers” to influence the award of contracts to Petrofac worth in excess of $730m in Iraq and in excess of $3.5bn in Saudi Arabia.