Petrofac confirmed mounting costs from its Laggan-Tormore project will see its profits “significantly weighted” towards the second half of the year.
The firm detailed an additional £30million of costs it has incurred with the flagship gas development in the Shetland Islands, bringing their total loss in the year to date to £140million.
A company spokesman said: “Construction activities on the Laggan-Tormore gas plant project are substantially complete, with planned welding activities more than 99% complete and more than 99% of electrical, instrumentation and telecommunications (EIT) cabling laid.
“However, direct construction manhours are higher than previously expected due to additional completion and pre-commissioning-related activities. The costs of the additional direct construction manhours, along with the associated indirect, subcontractor and material costs, are expected to result in incremental costs to complete of approximately £30 million.
“Together with the incremental costs announced in April 2015 of around £130million, and the recognition of a deferred tax asset in respect of tax losses on the project of approximately £20million, this brings the loss in the year to date to around £140million.”
Total France contracted Petrofac to build the facility with an expected completion date in the second half of 2014. However, strike action and harsh weather conditions have continued to push back project deadlines. Unions bosses previously blamed Petrofac for the project’s 15 month delay.
Energy Voice, previously reported both GMB and Unite unions saying Petrofac had “grossly underestimated” the complexity of the work and had to employ many more people than was originally thought.
The company has also been forced to weather multiple financial hits as result of lagging deadlines, including seeing nearly £350million wiped off its market value.
First gas from the facility, is now expected in the third quarter of this year.
Elsewhere, Petrofac secured contract extensions totalling £253million over the next three years, including contracts with CNR International across its North Sea assets. The two will work together on three platforms in the Ninian complex, Murchison and Tiffany for the next five years.
The company added: “In light of the current low oil price environment, we continue to work with our clients to address the cost pressures being experienced in the UK North Sea and generate value for them while protecting our margins.”
Petrofac also confirmed timings around its Greater Stella Area development in the UK North Sea. First production is on track for the beginning of next year.
Ayman Asfari, Petrofac’s group chief executive, added: “We have had a good start to the year in ECOM, securing more than $4.7billion of order intake and, putting the challenges we have faced on Laggan-Tormore to one side, the rest of our portfolio continues to perform well. The Group’s backlog stands at record levels, giving us excellent revenue visibility for the rest of this year and beyond. Our pipeline of bidding opportunities remains attractive, and ongoing investment by our clients in large strategic projects in our core markets, together with our strong competitive position, should see us secure a number of further awards over the second half of the year.
“In Integrated Energy Services, our focus remains on generating value from the existing project portfolio and reducing the capital intensity of this business.”
Recommended for you
