REG-Petrofac Limited PETROFAC LIMITED: RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024

PetrofacAnnouncement

30/09/2024 07:15

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Petrofac Limited ( PFC)
PETROFAC LIMITED: RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024

30-Sep-2024 / 07:00 GMT/BST

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    PETROFAC LIMITED

                           RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024

Petrofac today issues its financial results for the six months ended 30 June 2024.

 

                              OPERATIONAL AND FINANCIAL PERFORMANCE:

  • Group business performance first half EBIT loss of US$(106) million
  • First half free cash outflow of US$36 million,  net debt of US$622 million and gross  liquidity
    of US$164 million
  • Group backlog US$8.0 billion, with strong order intake in Asset Solutions of US$0.9 billion  in
    the first half of the year
  • In-principle agreement  with certain  key stakeholders  on the  framework for  a  comprehensive
    Financial Restructure

 

 

                   Six months ended 30 June 2024        Six months ended 30 June 2023 (restated)(3)
US$m           Business        Separately      Reported     Business         Separately    Reported
            performance(1)   disclosed items             performance(1)   disclosed items
Revenue         1,240               -           1,240         1,231              -          1,231
EBITDA           (66)             (46)          (112)         (30)              (7)          (37)
EBIT            (106)             (46)          (152)         (72)              (7)          (79)
Net loss(2)     (162)             (46)          (208)         (136)             (5)         (141)

 

Tareq Kawash, Petrofac’s Group Chief Executive, commented:

 

“The first half of 2024 was another challenging period for Petrofac, set against the backdrop of  a
restructuring process which aims to put the business in a stronger financial position.  While  this
has impacted the Group’s performance during the  first half, our new projects are performing  well,
and we continue to make progress in closing our legacy contracts in E&C. The markets we operate  in
remain robust and we have secured a good level of new order intake in Asset Solutions.

As announced last week, we are moving forward with a financial restructuring that will enable us to
look to the future. The Board  is grateful for the support  of our stakeholders during this  period
and remains focused  on delivering the  best possible outcome  for Petrofac and  capitalise on  the
opportunities ahead of us. I  am particularly proud of the  continued dedication and commitment  of
our people and thank them for their ongoing and relentless focus on our customers at this important
time.”

                                  FINANCIAL AND STRATEGIC UPDATE

As announced on 27 September 2024, Petrofac has reached an in-principle agreement with certain  key
stakeholders on the framework for a  comprehensive Financial Restructure to strengthen the  Group’s
financial position and better position it to deliver on its strategy.

The Board and management continue to work constructively with the Company’s creditors, key  clients
and other stakeholders to agree and finalise terms and conditions of the Financial Restructure  and
to secure the necessary funding and the remaining required performance security.

 

The Group continues to closely manage its financial and commercial payment obligations, and to rely
on forbearance granted by its creditors, as previously communicated.

The success and  timing of  the implementation  of the  Financial Restructure  depends on  reaching
agreements with,  and  obtaining approvals  from,  third parties.  Details  of the  judgements  and
assumptions made by the Directors  in respect of the risks  associated with the Group’s ability  to
maintain liquidity and implement  the restructure can  be found in the  going concern statement  in
note 2.4 to the interim condensed consolidated financial statements.

 

                                       DIVISIONAL HIGHLIGHTS

Engineering & Construction (E&C)

Operational performance in  the first half  of the year  reflected the continued  impact of  legacy
contracts, the challenges in  securing performance guarantees and  adverse operating leverage.  The
initial phases of the new contracts secured in 2023 are progressing well.

Revenue in the first  half of the year  increased 13% to US$0.6  billion (2023 restated(3):  US$0.5
billion), reflecting the initial phases  of the new contracts secured  in 2023. E&C had a  business
performance EBIT loss of US$103million (2022  restated(3): US$98 million) reflecting the impact  of
onerous contracts with no margin  recognition and adverse operating leverage  due to low levels  of
activity.

With respect to the Thai Oil Clean Fuels project, progress continues to be made on the construction
phases. Alongside our Joint Venture partners, we  continue to seek the reimbursement of  additional
costs with the aim of reversing some of the previous losses recorded on this contract.

We are  progressing well  on the  first two  TenneT  contracts that  were awarded  as part  of  the
six-contract Framework Agreement. With  the support of  our clients, the  Group has secured  either
performance guarantees  or  agreed  temporary alternative  arrangements  for  approximately  US$4.4
billion of the US$5.5 billion E&C contracts awarded during 2023.

 

Asset Solutions

Asset Solutions continued to leverage its UK centre of excellence and expanded its operations  with
new awards in both new and existing geographies, delivering a strong order intake of US$0.9 billion
(2023: US$0.9 billion) in the first half of the year.

Revenue during the period was  US$0.6 billion (2023: US$0.7  billion), reflecting the contract  mix
across the  service lines.  Business performance  EBIT was  US$(8) million  (2023: US$14  million),
reflecting contract mix and the timing of old contracts completing and new awards being mobilised.

 

Integrated Energy Services (IES)

IES continued to deliver  in line with expectations.  Net production during the  first half of  the
year decreased to 525 thousand barrels of oil  equivalent (kboe) (2023: 640 kboe). Revenue for  the
six months ended 30 June 2024 was US$49 million (2023: US$63 million), reflecting the lower  levels
of production. Business  performance EBITDA  was US$31 million  (2023: US$48 million),  principally
reflecting the lower revenue.

 

                                 CASH FLOW, NET DEBT AND LIQUIDITY

Free cash outflow for the six  months ended 30 June 2024  was US$36 million (2023: US$225  million)
primarily reflecting the  reduced operating cash  flows, lower interest  payments, and the  working
capital management measures taken by management.

 

Net debt, excluding  net finance  leases, was US$622  million at  30 June 2024  (31 December  2023:
US$583 million),  reflecting  the  free  cash  outflow. The  Group  had  US$164  million  of  gross
liquidity(4) available at 30 June 2024 (31 December 2023: US$201 million).

 

                                           ORDER BACKLOG

The Group's backlog(5) at 30 June 2024 was US$8.0 billion (31 December 2023: US$8.1 billion). Asset
Solutions delivered a strong order intake of US$0.9 billion during the first half of the year.

                           30 June 2024 31 December 2023
                            US$ billion      US$ billion
Engineering & Construction          5.7              6.1
Asset Solutions                     2.3              2.0
Group backlog                       8.0              8.1

 

                                              OUTLOOK

The outlook  for the  business is  predicated on  the Group  maintaining sufficient  liquidity  and
successfully implementing a financial restructuring  which strengthens its balance sheet,  improves
liquidity and enables the Group to access future guarantees on normal commercial terms.

 

Notwithstanding these  challenges,  the Group  has  an order  backlog  of US$8.0  billion,  largely
comprising contracts in core markets, with 87% of  the E&C backlog being the new contracts  secured
in 2023. It has a substantial pipeline of US$53 billion scheduled for award in the next  18-months.
Within this, E&C’s addressable pipeline is US$44 billion, of which 47% is in the Group’s core  MENA
markets and  23%  in energy  transition  sectors. Asset  Solutions’  addressable pipeline  is  US$9
billion, of which 62% is in target expansion geographies outside the UK & Europe.

 

Operating activity in E&C in 2024  is expected to be higher than  in 2023, but still sub-scale,  as
the portfolio transitions from  legacy to new contracts.  Following a successful implementation  of
the Financial Restructure,  supported by  the strong  pipeline of  opportunities including  further
contracts under the TenneT Framework Agreement, the Group targets backlog to grow, translating into
continued revenue growth in the medium-term.  As new contracts reach margin recognition  thresholds
and onerous contracts are completed, and with  the benefit of improved operating leverage,  margins
in the E&C business unit are expected to improve over the same period.

 

In Asset  Solutions, the  business is  expected to  maintain or  grow its  activity levels  in  the
medium-term,  driven  by  its   focus  on  late  life   asset  operations,  well  engineering   and
decommissioning, including further geographical  expansion. These new  geographies are expected  to
contribute to margin improvement. These ambitions are supported by a backlog of US$2.3 billion  and
over US$1.0 billion of contracts awarded in 2024 to date.

 

                                       FINANCIAL STATEMENTS

Click on, or paste the following link into your web browser, to view the Group interim condensed
consolidated financial statements for the six months ended 30 June 2024:

 1 https://www.petrofac.com/media/tugg3x3m/petrofac-half-year-2024-results-financial-statements.pdf

 

                                          CONFERENCE CALL

Our half year results conference call will be held at 11:00am today, and will be webcast live via:

https://stream.brrmedia.co.uk/broadcast/66f6bc2982620abb95890399

                                                  

                                               NOTES

 1. Business performance before separately disclosed items.  This measurement is shown by  Petrofac
    as a means of measuring  underlying business performance (see note  4 to the interim  condensed
    consolidated financial statements).
 2. Attributable to Petrofac Limited shareholders.
 3. The prior  year  numbers  are restated  as  detailed  in  note 2.6  to  the  interim  condensed
    consolidated financial statements.
 4. Gross liquidity of  US$164 million  on 30 June  2024 consisted  of gross cash  with no  undrawn
    committed facilities.  Gross  cash included  US$10  million  held in  certain  countries  whose
    exchange controls significantly restrict  or delay the remittance  of these amounts to  foreign
    jurisdictions. It  also included  US$33 million  in  joint operation  bank accounts  which  are
    generally available to  meet the working  capital requirements of  those joint operations,  but
    which can only be made available to the Group for its general corporate use with the  agreement
    of the joint operation partners.
 5. Backlog consists  of:  the  estimated  revenue  attributable  to  the  uncompleted  portion  of
    Engineering &  Construction division  projects;  and, for  the  Asset Solutions  division,  the
    estimated revenue attributable to  the lesser of  the remaining term of  the contract and  five
    years.

 

ENDS

 

Disclaimer:

This announcement  contains  forward-looking  statements   relating  to  the  business,   financial
performance and results of Petrofac and the  industry in which Petrofac operates. These  statements
may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast"
and similar expressions, or  by their context. These  statements are made on  the basis of  current
knowledge and assumptions and involve risks  and uncertainties. Various factors could cause  actual
future results, performance or events to differ materially from those expressed in these statements
and neither Petrofac  nor any  other person  accepts any  responsibility for  the accuracy  of  the
opinions expressed in this presentation or the underlying assumptions. No obligation is assumed  to
update any forward-looking statements.

 

 

For further information contact:

Petrofac Limited

+44 (0) 207 811 4900

 

James Boothroyd, Head of Investor Relations

 2 James.boothroyd@petrofac.com

 

Sophie Reid, Group Director of Communications

 3 Sophie.reid@petrofac.com

 

Teneo (for Petrofac)

+44 (0) 207 353 4200

petrofac@teneo.com

 

 

 

NOTES TO EDITORS

 

Petrofac

 

Petrofac is a leading international service provider to the energy industry, with a diverse  client
portfolio including many of the world's leading energy companies.

 

Petrofac designs, builds, manages  and maintains oil, gas,  refining, petrochemicals and  renewable
energy infrastructure. Our purpose  is to enable  our clients to meet  the world's evolving  energy
needs. Our four values - driven, agile, respectful and open - are at the heart of everything we do.

 

Petrofac's core markets are in the Middle East and North Africa (MENA) region and the UK North Sea,
where we have built a long and successful track record of safe, reliable and innovative  execution,
underpinned by a cost effective and local delivery  model with a strong focus on in-country  value.
We operate in several other  significant markets, including India, South  East Asia and the  United
States. We have 8,600 employees based across 31 offices globally.

 

Petrofac is quoted on the London Stock Exchange (symbol: PFC).

 

For additional information, please refer to the Petrofac website at www.petrofac.com

 

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Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.

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   ISIN:          GB00B0H2K534
   Category Code: IR
   TIDM:          PFC
   LEI Code:      2138004624W8CKCSJ177
   Sequence No.:  349711
   EQS News ID:   1997887


    
   End of Announcement EQS News Service

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References

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   2. mailto:James.boothroyd@petrofac.com
   3. mailto:Sophie.reid@petrofac.com


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