Petrofac (LON: PFC) has said it is in position to benefit from a “multi-year upcycle” ahead for the oil and gas industry, but headwinds continue to hit its E&C division.
The engineering giant also expects “significant new orders” for engineering and construction (E&C) underpinned by the UAE and offshore wind.
It comes after the firm won its way back into tenders for the UAE’s Adnoc this year after it paid a fine following a Serious Fraud Office investigation into bribery.
Petrofac has released a pre-close trading update for the first half of the year, reporting a “healthy group pipeline” of bids due to be awarded over the next 18 months.
However the firm noted the Engineering and Construction (E&C) division continues to be hit be the lingering impacts of Covid, and “unfavourable” commercial settlements with clients, as previously reported.
The division is expected to make a first-half EBIT loss of $35-45 million.
Laura Hoy, equity analyst at Hargreaves Lansdown, said: “With the Serious Fraud Office investigation finally in the rearview, this year was meant to be one of rebuilding for Petrofac.
“But lingering supply chain issues from the pandemic and inflationary headwinds have put somewhat of a damper on the group’s Engineering & Construction business.
“The good news is that other parts of the business are picking up some of the slack—with higher oil prices and strong demand for onshore and offshore asset management keeping a floor under profits.”
The London-listed firm’s share price is down 14% over the last month to £1.26.
‘Opportunities in the UAE and offshore wind’
Going forward, it is bidding on $53bn of work over the next year-and-a-half, with $14bn to be awarded this year and the remaining $39bn to be awarded in 2023.
Asset solutions has received “significant awards” in regions including the UK, India, Australia and Gulf of Mexico, with $800m in awards and extensions in H1.
© ShellElsewhere, the Integrated Energy Services is expecting EBITDA of $80-90m if the Brent oil price remains at around $100 average for the rest of 2022.
The whole group’s backlog is expected to drop from $4bn to $3.8bn at June 30, reflecting progress on work.
Petrofac Group debt was $345m at June 23, with liquidity of $507m.
CEO Sami Iskander said: “We have made good progress in the first half of the year to position the business strategically to capitalise on the expected multi-year upcycle ahead, supported by a strong energy price environment and ambitious growth plans from clients in our core markets. Bidding activity in E&C is high and Asset Solutions has secured a strong order intake in the year to date. IES has delivered a significant increase in production and is benefitting from high oil prices. As previously reported, first half financial performance has been adversely impacted by delays and cost-overruns in our small and mature existing E&C portfolio.
“Looking forward, we expect Asset Solutions and IES to continue to deliver strong performance. Notwithstanding the short-term challenges in the existing E&C portfolio, we continue to expect the second half of 2022 to mark an inflection point for a sustained period of growth in backlog. We have a healthy 18 month Group bidding pipeline and we expect to grow the E&C backlog in 2022 and to secure significant new orders in 2023, underpinned by opportunities in the UAE and offshore wind.”
Recommended for you
