Energy Services giant Petrofac (LON:PFC) is buoyant about the outlook for the rest of 2022 after trimming losses.
For the first half of the year, the company reported a pre-tax deficit of $19 million, an advance on the same period in 2021, when it posted losses of $94m.
Revenue for H1 totalled $1.2bn, down from $1.6bn last year, while Petrofac’s backlog at the end of the June totalled $3.7bn.
Challenging market conditions continued to impact the firm’s engineering and construction (E&C) operating segment in the first half of the year.
The residual effect of Covid resulted in cost increases and “some relatively unfavourable commercial settlements”, the company said.
Nevertheless, Petrofac says the market outlook for E&C continues to improve, and its confident that the opportunities being bid on will materialise in the second half of the year.
Overall, the company is “optimistic about the outlook for the second half” of 2022, with improved group performance and the start of a sustained period of backlog growth.
And Petrofac plans to reinstate a dividend policy in “due course”, once the company’s performance has improved.
Sami Iskander, Petrofac’s group chief executive, commented: “Our performance in the first half continues to reflect the COVID-19 related industry challenges, as we work towards completion on many of the projects in the legacy E&C portfolio. Moving into the second half of 2022, a significant increase in bidding activity has put us firmly on the path to grow backlog over the full year. Supported by a strong commodity price environment and an increasing focus on energy security, the outlook for the industry is robust and the work we have done over the past 18 months means that Petrofac enters this important period in a strong competitive position.
“We made good progress on our new energies strategy having entered into a collaboration with Hitachi Energy, a leading player in HVDC and HVAC technology, to provide joint grid integration and associated infrastructure for the rapidly growing offshore wind market. This collaboration strengthens our market position and the large pipeline of opportunities supports our US$1 billion revenue ambition from new energies in the medium term.
“Our priorities in the second half of the year are clear. First, we will continue to safely deliver the existing backlog for our clients, while maintaining cost discipline. Second, we will focus on closing out the delayed commercial settlements, to unwind working capital and return to positive free cash flow from 2023. Lastly, we will make progress in securing awards in E&C to deliver growth in full year backlog. Our recent US$200 million provisional award in Algeria, while small, is evidence of our competitiveness and marks the beginning of a multi-year upcycle.”
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