Energy services giant Petrofac (LON: PFC) is tempering expectations ahead of the publication of its full year results for 2022, slated for April 25.
It follows a “thorough” management review of the group’s “portfolio of contracts, associated outstanding contractual and commercial issues, and opportunities to improve liquidity by accelerating working capital inflows”.
In a trading update, Petrofac says that, following the analysis, its ebit – earnings before interest and tax – will be between $140 million and $160m lower than first though.
That comprises both incremental project costs and a “cautious view of the quantum and timing of recognition of certain revenue claims” that would have partly offset those costs.
As a consequence, Petrofac now expects to report a full year group EBIT loss of about $150m to $170m for 2022.
That includes an EBIT loss of approximately $240m to $260m in engineering and construction, previously flagged by analysts as an issue for the London-listed group.
Petrofac expects around 50% of these additional costs to be paid over the remainder of 2023, with the balance spread over 2024 and 2025.
Additional costs relate to final completion activities in the company’s legacy portfolio, primarily on projects that are now substantially completed.
Petrofac isn’t the first energy services group to endure financial hardship in recent times, with inflation and supply crunches causing headaches for many.
Despite the challenges, the group says it remains focused on ensuring it has sufficient liquidity to support its strategy.
This announcement comes around a week after Tareq Kawash formally took over as chief executive of the company, replacing Sami Iskander.
Mr Kawash said: “Petrofac’s focus is on completing legacy contracts as quickly, efficiently and safely as possible. We are taking steps to ensure the financial strength of the business by unlocking working capital and, where appropriate, balancing long-term value against near-term liquidity.
“Although we are disappointed to announce additional costs on these legacy contracts, in particular the Thai Oil Clean Fuels project, ongoing collaboration with clients and partners will de-risk future delivery.
“I joined Petrofac because the business has a significant opportunity to deploy its leading capabilities to help clients deliver much needed energy infrastructure. This was demonstrated in the recent significant award of a long-term agreement to support critical European offshore wind infrastructure. Alongside converting a healthy pipeline of future opportunities – with a number of awards at preferred bidder stage – we are working to draw a line under the projects of the past, putting Petrofac in a strong position to deliver future growth.”
Recommended for you
