REG-Petrofac Limited Petrofac Limited: Trading Update

PetrofacAnnouncement

27/06/2023 07:15

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   Petrofac Limited ( PFC)
   Petrofac Limited: Trading Update

   27-Jun-2023 / 07:00 GMT/BST

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                                PETROFAC LIMITED

                                 TRADING UPDATE

   Petrofac issues the following pre-close trading update for the six  months
   ending 30 June 2023.

    

     • Significant increase in Group backlog to US$5.6 billion at 30 June
       2023 (31 December 2022: US$3.4 billion) with strong order intake in
       both E&C and Asset Solutions
     • Asset Solutions and IES performance in line with expectations
     • E&C expecting an EBIT loss of approximately 20% on revenues of US$0.5
       billion, which includes write-downs of over US$50 million on
       receivables from historical contracts to protect full year cash flows
     • Well positioned to continue backlog growth in both E&C and Asset
       Solutions, with a healthy Group pipeline scheduled for award in the
       next 18 months of US$73 billion
     • Free cash flow negative in the first half, continue to target broadly
       neutral free cash flow for the full year

    

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

    

   "In the first six months  of the year we have  announced over three and  a
   half billion dollars in new work  across E&C and Asset Solutions, in  both
   the traditional and new  energy sectors, and continue  to pursue a  strong
   pipeline  of  future  opportunities   in  core  geographies.  By   further
   progressing our plans to strengthen the financial position of the Group by
   unlocking the working capital built up through the pandemic, and  building
   on the momentum of the  significant awards won in  the first half, we  are
   focused on delivering Petrofac’s potential. We have an exceptional EPC and
   Operations capability  that  is well  positioned  to deliver  and  support
   critical energy infrastructure for the world’s leading resource holders.”

    

   DIVISIONAL HIGHLIGHTS

   Engineering & Construction (E&C)

   Order intake(1)  in the first half is expected to be approximately  US$2.5
   billion, resulting in more than a doubling of E&C backlog. Awards comprise
   the first platform contract under  the framework agreement with TenneT  to
   deliver  2GW  offshore  wind  transmission  systems  in  partnership  with
   Hitachi, a major  petrochemical project  for Sonatrach in  Algeria, and  a
   follow-on EPC contract with ORLEN Lietuva on the existing project site  in
   Lithuania. Of  the US$1.5  billion of  opportunities at  preferred  bidder
   stage at  the end  of 2022,  approximately US$1.2  billion have  now  been
   awarded.
    

   First half revenues are  expected to be  around US$0.5 billion  reflecting
   the lower levels of  activity due to lower  opening backlog compared  with
   the prior  year. E&C  is expected  to report  a first  half EBIT  loss  of
   approximately 20%, comprising an operating loss and one-off write-downs of
   more than  US$50  million  in receivables  from  historical  contracts  to
   protect full year cash flows. E&C  results continue to reflect the  impact
   of onerous  contracts with  no margin  recognition and  adverse  operating
   leverage due to low levels of activity.

    

   We remain  focused on  closing  out legacy  contracts,  with five  of  the
   remaining eight contracts  expected to be  completed(2) during the  second
   half of the year or early in  2024. On the Thai Oil Clean Fuels  contract,
   good progress is being made on the construction phases of the project. The
   execution plan remains in line with the update provided with the FY22 year
   end results and discussions with the client in relation to cost recoveries
   are ongoing.

    

   Bidding activity remains high with a total pipeline scheduled for award by
   December 2024 of approximately  US$57 billion, of  which US$14 billion  is
   scheduled for award in 2023.

    

   Asset Solutions

   Order intake(1) in the first half  is expected to be approximately  US$1.0
   billion, with a  book-to-bill of approximately  1.4x, comprising both  new
   contract awards and extensions in both the Asset Operations and Wells  and
   Decommissioning service lines.

    

   Asset Solutions continued to deliver robust performance in the first half,
   with revenue expected to be approximately US$0.7 billion.

    

   The EBIT margin  in the first  half is  expected to be  between 2%-3%.  We
   expect EBIT to be weighted to the second half of the year, with full  year
   EBIT in line with guidance.

    

   Asset Solutions has a strong pipeline of opportunities with US$16  billion
   scheduled for award by December 2024,  of which US$7 billion is  scheduled
   for award in 2023.

    

   In New Energies, we  have continued to  secure further early-stage  awards
   and strategic  alliances  with technology  providers  in the  first  half,
   including an  exclusive  partnership  with OCI  Global  to  deliver  their
   gasification-based green methanol projects. We remain well positioned over
   the medium-term  to  secure  engineering,  procurement,  and  construction
   scopes of work, as well as other execution phase project work, as projects
   reach final investment decision.

    

   Integrated Energy Services (IES)

   IES’ financial performance in the first half of the year is expected to be
   in line  with the  guidance  provided in  April  2023. Net  production  is
   expected to be 0.6 million barrels of oil (mboe) for the first half of the
   year (H1 2022: 0.6 mboe).

    

   ORDER BACKLOG

   The  Group's  backlog(3)   is  expected  to   significantly  increase   to
   approximately US$5.6 billion  at 30  June 2023 (31  December 2022:  US$3.4
   billion), reflecting strong order intake in both E&C and Asset Solutions.
    

                              30 June 2023 31 December 2022
                               US$ billion      US$ billion
   Engineering & Construction          3.5              1.6
   Asset Solutions                     2.1              1.8
   Group backlog                       5.6              3.4

    

    

   CASH FLOW AND NET DEBT

   We continue to target a broadly neutral free cash flow for the full  year,
   with a  reduction in  working  capital weighted  to  the second  half.  We
   therefore expect free cashflow to be negative in the first half, reversing
   in the second half. As a consequence, net debt is expected to increase  at
   30 June 2023, and to reduce by year end.

    

    

   Conference call

   Afonso Reis e Sousa, Chief Financial Officer, will host a conference call
   for analysts and investors at 8.30am today.

    

   Analysts and investors can access the call on: +44 (0) 330 551 0200.
   Password: Quote ‘Petrofac Trading Update’ when prompted by the operator.

    

    

    

   NOTES

    1. New order intake is defined as new contract awards and extensions, net
       variation orders  and  the  rolling increment  attributable  to  Asset
       Solutions contracts which extend beyond five years.
    2. Completed and substantially completed contracts: contracts where (i) a
       Provisional Acceptance  Certificate  (PAC)  has  been  issued  by  the
       client, or (ii) transfer of care  and custody (TCC) to the client  has
       taken place, or (iii) PAC or TCC are imminent, and no substantive work
       remains to be performed by Petrofac.
    3. 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) 20 7811 4900

    

   James Boothroyd, Head of Investor Relations

    1 James.boothroyd@petrofac.com

    

   Sophie Reid, Group Head of Communications

    2 Sophie.reid@petrofac.com

    

   Teneo (for Petrofac)

   +44 (0) 20 7353 4200

   petrofac@teneo.com

   Martin Robinson

    

    

    

   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 7,950  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
   petrofac.com

    

    

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   ISIN:           GB00B0H2K534
   Category Code:  TST
   TIDM:           PFC
   LEI Code:       2138004624W8CKCSJ177
   OAM Categories: 3.1. Additional regulated information required to be
                   disclosed under the laws of a Member State
   Sequence No.:   253515
   EQS News ID:    1665999


    
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References

   Visible links
   1. mailto:James.boothroyd@petrofac.com
   2. mailto:Sophie.reid@petrofac.com


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