Petrofac's shares jumped today on increased bidding activity in its core Middle Eastern markets, as oil prices continued to recover.
For the year to the end of December, oil and gas service provider Petrofac posted a net profit of $1m (£802,439) compared with a loss of $349m the previous year.
Reported profit was hit by $319m of exceptional items and certain readjustments. Petrofac's underlying net profit before losses on its troubled Laggan-Tormore project, which has now been completed, was $421m compared with $440m in 2015. Revenue increased to $7.87bn, from $6.84bn in 2015.
The company reported a 125.6 per cent rise in its core earnings to $704m as record production in the Middle East drove up contract awards.
The firm reported a new order intake of $1.9bn and a backlog of $14.3bn, giving positive visibility for 2017.
Net debt was down 10 per cent to $617m, reflecting the company's strong cash generation.
Shares in the FTSE 250-listed company rose as much as 4.5 per cent in morning trading.
Why it's interesting
Petrofac performed better than expected in 2016 due to recovering oil prices, which helped improve bidding activity for services contracts.
"There is no doubt that over the last few months bidding activity has increased... we are seeing a number of projects deferred in 2016 coming back in 2017," chief financial officer Alastair Cochran told Reuters. That has given the business solid revenue visibility for the year ahead.
The order book backlog of Petrofac's core engineering and constructions unit stood at $8.2bn at the end of the year, out of the company's total of $14.3bn.
The firm's "relentless" focus on cost saving measures has also helped - it has now reduced its staff by 29 per cent to around 13,500 employees, delivering $120m of annualised savings.
What Petrofac said
Ayman Asfari, Petrofac's chief executive, said:
"Petrofac has delivered positive results for 2016, driven by record revenues, significant cost reduction and strong cash generation.
"While the market remains competitive, bidding activity has increased in recent months. We have right-sized our business, have a good pipeline of opportunities across our core markets and remain cost competitive, as evidenced by recent bidding success.
"Petrofac remains firmly focused on its core strengths, committed to reducing capital intensity and maintaining a strong balance sheet. Operational excellence and excellent revenue visibility position us well in 2017 and for a recovery in our core markets."