Oil service group Petrofac was among the sharpest fallers on the FTSE 100 Index today, slumping more than 7% to £16.15 as the wider market slipped 16.1 points to 6,323.1.
Petrofac’s shares suffered after larger rival Saipem, Europe’s largest oil services company, slashed its forecast for operating margins at its engineering and construction division.
Saipem’s profits warning, citing pricing pressure and order delays in the Middle East and North Africa, shocked the buoyant energy service sector and drew investor ire as billions of pounds were wiped off the Italian company’s market value.
David Barclay, a divisional director at wealth manager and financial-planning specialist Brewin Dolphin in Aberdeen, said: “These are also very important operating areas for Petrofac and the market has de-rated the stock as a result.
“Petrofac has a high exposure to large engineering and construction projects, and on certain metrics is also priced at a premium to the sector – making it more vulnerable than most to this type of sentiment driven sell-off.
“However, Petrofac is also an evolving story based around the growth in the integrated energy services division and an increasingly predictable earnings stream.”
He added: “We think that most of the profits warning at Saipem is specific to the company, rather than the sector as a whole.
“Petrofac reports full-year results on February 27 and the shares could potentially be volatile in the intervening period.”
The recent rally on the London market was brought to a halt after figures revealed a shock contraction in the US economy at the end of last year.
Material technology firm Johnson Matthey, off £1.02 at £23.06, was also among the bigger fallers amid disappointment over its third quarter results.
Cigarette-maker Imperial Tobacco was also in the red, down £1.05 to £23.61, after warning over first half profits as its sales suffer from illicit trade.
There was a further drop for Scottish temporary power supply firm Aggreko, which fell another 89p to £16.12.
BT Group was among the risers, 3.8p higher at £2.50, as it recovered from a 2% fall on Tuesday.
There was a rise of 0.25p to 475.9p for oil giant BP in advance of results next week.
Brewin’s Carrie Keenan noted Cairn Energy adding 0.66% at 288.25p and Weir Group 0.6% higher at £20.24, with FirstGroup off 3.5% at 192.5p and A.G. Barr 2.95% lower at £5.27.