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Oilfield services firm Petrofac's bottom line hammered by higher costs and lower contract levels - but energy prices are set to lift its performance

Oilfield services firm Petrofac's bottom line hammered by higher costs and lower contract levels - but energy prices are set to lift its performance

 

Petrofac saw annual profits halve over the past year and the oilfield services provider has warned it expects to secure fewer contracts in the short-term.

Amid higher costs and lower deal numbers, core profit fell to $104million in the year ending 31 December, down from $211million a year ago, the London-listed company said.

The group reported a net loss of $195million, post impairments and separately disclosed items.

While anticipating fewer deals to crop up in the short-term, the group said it expects higher energy prices to bolster contract levels in the latter months of 2022.

It added: 'Net profit margins were impacted by cost increases related to the Covid-19 disruption, including the recognition of full-life losses on a small number of contracts. The challenges on these mature projects have been resolved and are not expected to have an impact in 2022.

'Margins were further reduced by the write down announced on 11 March, as a result of the progress made in closing out claims in relation to two historical projects.'

On orders over the past year, it said: 'New order intake in the year was $1.2billion (2020: $0.7 billion), comprising EPC contracts in Oman, Libya and Lithuania and other net variation orders.

'As the year progressed, the market showed signs of recovery and over 90 per cent of order intake was secured in the second half of the year.'

The company put behind it a major overhang last year when it reached a deal with the UK's Serious Fraud Office, following a four-year investigation that temporarily hindered its ability to secure contracts in Middle Eastern markets.

United Arab Emirates-backed oil firm ADNOC last week lifted a year-long suspension on Petrofac that had barred it from competing for new contracts in the Gulf country.

Over the last few weeks, crude oil prices have surpassed the $100 per barrel mark after Western nations imposed sanctions on Russia.

Petrofac said its order book at the end of 2021 stood at $4billion, with Russia accounting for 0.6 per cent of that backlog.

Sami Iskander, Petrofac's chief executive, said: 'Our 2021 results demonstrate a resilient performance thanks to the hard work and perseverance of our people and a renewed focus on service quality, bringing us closer to our clients.

'We continued to manage the challenges of Covid-19 while delivering our significant cost reduction targets to enhance our competitiveness. Our relatively mature portfolio has shielded us from the current inflationary environment.'

He added: 'Looking forward, we are focused on securing the backlog that will deliver profitable growth whilst retaining a strict approach to bidding discipline.

'While clients continue to prioritise cash preservation over new investments, we expect the increasingly supportive energy price environment to improve the outlook for awards as the year progresses.

'Market fundamentals are strong in our traditional markets, particularly in the MENA region where Petrofac has a leading position, and in New Energies, underpinning the medium-term performance objectives that we are confident will drive significant shareholder value over the coming years.'

The group said it expects to start dishing out dividends to investors again 'in due course, once the company's performance has improved.'

Petrofac shares fell sharply in early morning trading and were down 3.97 per cent or 4.70p to 113.60p. A year ago the group's share price was 82.24p, and it has risen over 38 per cent in the past year.

Read the latest issue of the OGV Energy magazine HERE

Published: 23-03-2022

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