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Petrofac's $195m loss after fraud office probe

Petrofac's $195m loss after fraud office probe

 

Oil services giant Petrofac has reported a net loss of $195 million, more than half of which included a penalty imposed by the Crown Court following a Serious Fraud Office investigation.

Results for the year ended December 31, 2021 showed margins were also hit by Covid-19 influences.

The company, which has a significant North Sea business, said its backlog decreased by 20 per cent to $4 billion. It said it has “minimal current exposure to Russia, which represented 0.6% of group backlog in December”.

Jersey-based Petrofac announced in February, just weeks before Russia invaded Ukraine, creating economic turmoil in the region, that it had just won its first new energy-focused project in Russia through a three-year consultancy framework agreement to span the early engineering phases of the first wind-to-hydrogen development on Sakhalin Island.

 The reported net loss, up from $192m the year before, included separately disclosed items and certain re-measurements, primarily the penalty imposed by the UK courts in connection with the conclusion of the SFO investigation, which was paid earlier this year and $28m of costs in relation to the group’s refinancing related costs.

The penalty was reported to be related to offences of failing to prevent bribery and came after a long-running probe into payments made in the Middle East.

The company said net profit margins were also impacted by cost increases related to the Covid-19 disruption, including the recognition of full-life losses on a small number of contracts.

It said, however, that the latter challenges "have been resolved and are not expected to have an impact in 2022".

 Petrofac said it had made significant progress on 2021 strategic objectives and reported a group order intake of $2.2bn. It also noted achieving targeted cost savings of $250m , with net debt of $144m and liquidity of $705m. It is “well-positioned with a group pipeline of $37 billion for award in 2022, of which $7bn is in new energies", it said.

 Sami Iskander, Petrofac group chief executive, said: " 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.

“Significant strategic progress made in 2021 under our plan to rebalance, reshape and rebuild Petrofac saw us resolve the SFO investigation and establish a long-term capital structure for the group.

“Furthermore, we recently achieved a significant milestone through our reinstatement to ADNOC’s bidding list, which is a major step forward as we look towards rebuilding the backlog. We are now in a stronger position, having created the right environment to pursue future growth.”

Mr Iskander also said: “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.”

 Petrofac shares closed down 5.7%, or 6.7p, at 111.6p.

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Published: 24-03-2022

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