Tuesday 17 December 2019 4:30 pm

Petrofac shares drop as order book shrinks

Petrofac shares fell over six and a half per cent today after the oilfield services company’s order book continued to shrink.

New orders to date for the firm total $3bn (£2.3bn), down from nearly $5bn at the same time last year.

Read more: Petrofac warns revenues will shrink after SFO prove hinders new work

The firm reported that trading would be in line with previous guidance, with revenue falling year on year from $5.8bn to $5.5bn.

The company’s backlog of orders also fell to $7.4bn as of the end of November, compared to $9.6bn last year.

Petrofac’s engineering and construction division, which is the firm’s largest sector, saw a fall of 26.2 per cent, due to a reduction in new orders from delays in bidding processes.

The company said: “We have seen delays in E&C bidding processes in the second half of the year, which has further impacted new order intake following the previously announced loss of awards in Saudi Arabia and Iraq in the first half.

“However, we are well-placed on several opportunities.”

Nicholas Hyett, equity analyst at Hargreaves Lansdown:

“It’s only a very brief trading update, but investors’ eyes will be drawn to the still shrinking order backlog. A smaller order book is expected to feed through to weaker revenues next year, with margins and the balance sheet struggling too.

“The lack of contracts to work on is starting to bite, and Petrofac’s impressive cost control efforts can only do so much to offset the headwind.

Read more: Petrofac loses out on $10bn in contratcs amid SFO probe

“The good news is that the new business pipeline looks a lot healthier than this time last year. If Petrofac can deliver a reasonable hit rate on contract wins, then the improving market conditions could make 2020 a far more positive year than 2019. Only time will tell though.”

Petrofac has been under scrutiny due to an ongoing probe into its oil deals in Iraq and Saudi Arabia, which have led to a former senior executive pleading guilty to 11 counts of bribery.