Petrofac has slashed its dividend as low oil prices limit cash flow


Petrofac has struggled in the low oil price environment (Source: Getty)

Oilfield services firm Petrofac cut its dividend in the first half of the year as it works to reduce debt and strengthen its balance sheet amid weak cash flow.

The figures

The FTSE 250-listed company said net profit, excluding $88m (£68m) of exceptional items, fell four per cent to $158m in the six months to the end of June.

Petrofac's net debt sat at $1bn at the end of June compared with $600m at the end of 2016.

The firm slashed its dividend by 42 per cent to 12.7 cents per share for the six months compared with 22 cents per share in the same period last year, as it works to bolster its balance sheet and reduce debt.

Petrofac's shares were down 1.16 per cent at 423.15p at the market open.

Why it's interesting

The troubled oil and gas services company was hit by the decline in oil prices at the end of 2014, which it said has had a significant impact on capital investment in the industry.

Chief executive Ayman Asfari today said new order intake of $2.7bn so far this year is evidence of the company's continued competitiveness in challenging markets.

"Tendering activity remains high, we are well placed on a number of bids and have a healthy order backlog. This positions us well for the second half of 2017," Asfari said.

Last week, Asfari was sanctioned by Italy's market watchdog over alleged insider trading, which he refutes and plans to appeal.

Petrofac's shares took a hit in May when it said it was under investigation by the Serious Fraud Office (SFO) for suspected bribery, corruption, and money laundering. The firm today said it continues to engage with the SFO.

What Petrofac said

Asfari said:

Petrofac has made a positive start to the year, delivering solid first half results that reflect good project execution and lower revenues. 

We also remain committed to our strategy of focusing on our core business, delivering organic growth and reducing capital intensity. We are taking a range of measures to deliver a sustainable reduction in net debt to strengthen the balance sheet and a sustainable dividend policy for our shareholders. These include reducing costs, reducing capital investment, divesting non-core assets and rebasing our dividend.

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