Petrofac says profits will be weighted to second half of the year as it announces "positive start" to 2017

Rebecca Smith
Petrofac's share price was drilled down last month
Petrofac's share price was drilled down last month (Source: Getty)

Petrofac has said core business is trading in line with expectations, and announced full-year profits are likely to be "weighted to the second half of the year", in today's update.

The figures

The oil and gas services company forecast that underlying net profit in the first half of the year is likely to be $135m-$145m (£106m-£114m).

It said lower realised oil prices and lower capital investment in Mexico, as well as its delayed entry into the Greater Stella Area, impacted first-half performance.

Last year, the company generated an underlying net profit of $421m.

It reported a new order intake of $1.7bn in the year to date and net debt is forecast to be around $1.1bn at 30 June 2017, in line with expectations.

The firm said it had made a "positive start to the year" and its core business continues to trade in line with expectations.

Why it's interesting

Last month, the Serious Fraud Office announced it had launched an investigation into suspected bribery, corruption, and money laundering, and Petrofac suspended its chief operating officer.

The company's share price took a tumble in the wake of the news and Bentham Ventures said it was contemplating funding legal action against Petrofac on behalf of shareholders, after shares dropped "in excess of 50 per cent" over May.

The SFO probe ties into its wider investigation into Unaoil.

The FTSE 250 group received a boost last month when it said its lenders had agreed to extend $1bn of a $1.2bn revolving credit facility by a year, to 2021. And its share price has been edging back up.

Its share price dropped 1.55 per cent at the time of writing to 419.40p.

What the company said

Rijnhard van Tets, Petrofac's chairman, said:

Everyone within Petrofac is completely focused on delivering operational excellence for our clients and winning new contracts. In addition, we are committed to maintaining our strong balance sheet and reducing net debt. The board has great confidence in Petrofac's ability to continue to deliver, and is fully supportive of the work being done to serve our clients and deliver our strategy.

An independent committee of the board will continue to engage with the SFO and its investigation.

The analyst's take

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said:

The Serious Fraud Office investigation will continue to drive Petrofac shares in the near term, but our bigger worry is the state of the group’s order book.

Oil prices may have stabilised, but exploration and production companies were too badly scarred by the crash to start splashing large sums on new projects straight away.

If new contracts remain in the doldrums, Petrofac's huge order book will drain away. Even the group's impressive cost cutting can't offset a lack of projects to work on.

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