Petrofac: update on 2014 expectations and 2015 outlook

2014 performance in-line with guidance range

• On track to deliver full year 2014 net profit towards the lower end of the US$ 580 million to US$ 600 million range provided in previous guidance.
• Strong order intake of US$ 10 billion in the year to date and backlog at a record level of approximately US$ 21 billion.

Outlook and guidance for 2015

• Lower oil price environment and expectations of delivery on certain IES projects, coupled with anticipated outcome on Laggan-Tormore is likely to result in net profit in 2015 of around US$ 500 million.
• Our guidance for 2015 reflects:
• current 2015 forward curve for oil price expected to reduce IES net profit by around US$ 45 million compared with previous guidance and current market expectations.
• Our latest view of cost and the timing of first oil in respect of the Greater Stella Area project in the UK North Sea.
• Rephasing of certain field development activities under our existing Mexico PECs pending conclusion of the potential contract migration process.
• Managing our field investment on the Ticleni PEC in Romania as we continue to work towards a revised Field Development Plan.
• An expected final commercial settlement in respect of the Laggan-Tormore project in Shetland resulting in no profit or loss being recognised in 2015 on the project.

Ayman Asfari, Petrofac’s Group Chief Executive, commented: “This has been a difficult period for Petrofac and the industry. The Board has analysed the potential impact of a lower oil price environment on our IES business and also made a critical assessment of our expectations for project delivery in 2015. In the main our project portfolio is in good shape, but it is clear that on a small number of projects our execution has fallen short of the high standards we set for ourselves. We have faced these difficulties and have taken robust action to address them and believe this leaves us on a surer footing for the future.

“The foundations of the business remain strong. Our ECOM division is in very good shape, with good progress made on the resolution of a number of ECOM commercial settlements, a record level of backlog and an attractive pipeline of bidding opportunities. We are implementing clear and robust plans to improve project delivery and drive value from the IES contract portfolio.

“I am confident that Petrofac will meet the challenges presented by certain projects in our portfolio and the medium-term growth prospects for our business remain strong.”

The full update can be reached here.

Adapted from a press release by David Bizley

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