Energy services giant Petrofac (LON: PFC) said “discussions are progressing” which it hopes will free up cash flow and stem the collapse of its share price.
The London-listed firm, which employs 8,500 people worldwide, has seen a collapse in its stock price of nearly 70% over the last six months, and down more than 25% since its last trading update in December.
Despite a run of contract awards, which have masked the issues to a degree, investor concerns have emerged around cash flow and profitability as debt and delayed collections on legacy contracts weigh it down.
In December, Petrofac said it would take a $110m write-down for 2023 on contract agreement issues.
CEO Tareq Kawash said Tuesday that progress is being made on a review announced in December to tackle the problem, aimed at “materially strengthening” the balance sheet and improving short-term liquidity.
Selling off “non-core assets” in the business is part of that, which Petrofac said it is “making progress in exploring”.
Other discussions are ongoing with lending groups and other capital providers with the aim of managing payment obligations and delivery of guarantees in contracts – the latter being something banks have had reduced appetite to do.
“Taken together, these actions are being undertaken with the aim of managing the Group’s payment obligations, supporting the provision of guarantees and ensuring that Petrofac has the appropriate capital structure and liquidity to support the strength of its backlog and future business prospects,” Petrofac said.
Ashley Kelty, of investment bank Panmure Gordon said: “Overall, tone is bullish, but the paucity of actual detail will frustrate investors at the lack of concrete progress from this review and will do little to alleviate concerns about the poor performance of late.
CEO points to order book
Mr Kawash pointed to the firm’s order book, which now stands at more than $8bn, though analysts have said cash flow will be crucial in ensuring that is deliverable.
The CEO said: “Petrofac continues to deliver well for our clients, evidenced by the growth in our backlog, on which very good progress is being made.
“Our significant order book, which now stands at over US$8 billion, demonstrates the strength of our proposition to customers and Petrofac’s long-term potential. To deliver on this opportunity and position Petrofac for the future, we are focused on plans to materially strengthen the financial position of the Group. This work continues apace and I am grateful for the continued efforts of our people, and the support of our clients and other stakeholders.”
Petrofac is due to disclose its full year 2023 results in April.
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