Petrofac (LON: PFC) has shared that it “remains in discussions” with its lenders to restructure its debt with options to exchange equity in the business.
Petrofac shared in an update: “The Company has engaged and remains in discussions with its lenders to restructure its debt which would result in a significant proportion of the debt being exchanged for equity in the business.”
The business is also said to be continuing discussions with “prospective investors and certain major shareholders” regarding further investment into the company.
The energy services giant added: “Discussions with lenders and other stakeholders continue at pace and further announcements will be made as appropriate.”
Petrofac explained that it remains in negotiations with “prospective purchasers regarding the sale of non-core assets.”
The firm has said that “all options remain under consideration.”
Petrfoac added that although it “continues to face challenges in securing new performance guarantees” it is progressing discussions with credit providers and clients to find solutions for the guarantees required for its recent contract awards.
However, director research analyst for oil and gas at Panmure Gordon Ashley Kelty has said that this does not provide any new information for concerned stakeholders.
He said: “This doesn’t advance investors understanding of how close (or not) they are to getting a restructuring deal in place as they’ve been saying this for months.
“However, it is the first time they’ve admitted that a large debt for equity swap is in the offing, and we would not be surprised if the significant dilution that this would entail will set current holders running for the hills.”
Mr Kelty’s analysis that shareholders will be “running for the hills” has been reflected in Petrofac’s share price as it dropped by 26.71% this morning (at the time of writing 09:26).
Continuing discussions with $8bn backlog
Currently, Petrofac has a “US$8 billion backlog” and the firm’s aim is to manage payment obligations to ensure that it delivers this work.
When addressing its financial issues in the past Petrofac has also pointed to its backlog of work as a positive.
However, analysts have said cash flow will be crucial in ensuring that is deliverable.
The London-listed firm, which employs 8,500 people worldwide, saw a collapse in its stock price of nearly 70% over the last few months.
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.
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