Debt-laden Petrofac (LON: PFC) has reported a $505 million net loss in its delayed full-year financial results for 2023, with the company looking to sell some of its non-core assets to provide fresh capital.
According to its results, the group is continuing to pursue non-core asset sales. In particular, it is moving forward with divesting its share in the PM304 Production Sharing Contract in Malaysia, with non-binding offers received. This process could be completed in by the third quarter of 2024.
In addition to its net loss, Petrofac’s year-end net debt reached US$583mn against a gross liquidity of US$201mn. The results show a widening of the $310mn net loss seen in the group’s 2022 results.
Despite securing major contracts and increasing its headcount last year, Petrofac has been struggling as delays on older contracts eroded revenues.
Petrofac managed to largely hold steady on its revenues in 2023, coming in at $2.5 billion compared to 2022’s $2.6bn.
As it looks for fresh capital, Petrofac said it is seeking a financial restructure to improve liquidity and secure bank guarantees to support current and future contracts.
An ad-hoc group of senior secured noteholders made a proposal to provide further credit to the business of up to US$300mn. This is made up of $200mn of new funds and $100mn of credit support to help secure performance guarantees for certain of its existing contracts.
The company also said that it did not make the payment of the bond coupon due on 15 May 2024, noting that it continues to rely on deferrals of payments from its lending banks.
However, issuing more shares to gather fresh capital would be unpopular among shareholders as it dilutes their holding in the company.
Delays in releasing its full-year financial results caused the company to suspend trading in its shares last month.
Thai Oil Clean Fuels
Petrofac group chief executive Tareq Kawash commented: “2023 was a challenging year for Petrofac. Our financial results reflect additional losses on the legacy contract portfolio, in particular the Thai Oil Clean Fuels contract where we are in negotiations to seek reimbursement of a proportion of the additional costs.”
Petrofac noted that progress has been made on the construction stages of the Thai Oil Clean Fuels project. With the estimated costs to complete increased during the year, the project resulted in an incremental loss of around US$190mn for the company.
“In addition, the challenges in obtaining guarantees for our new EPC contracts, and the impact on liquidity, resulted in the business seeking to deliver a critical financial restructure, which is ongoing and has the full focus of the board,” Kawesh noted.
Order book
Petrofac has pointed to its growing order book as a sign of future revenues for the company. Its results showed that the group’s backlog more than doubled to $8.1bn as of 31 December 2023, compared to US$3.4bn at the end of 2022.
Overall, the group’s order intake for the 2023 was $7.1bn, well above the $1.9bn in 2022.
“2023 was also one of the strongest years in the group’s recent history with respect to new contract awards, demonstrating Petrofac’s capability, strong customer relationships, differentiated delivery model, and competitiveness,” Kawash said.
“We are focused on the restructuring with the aim of materially strengthening the group’s financial position and enabling Petrofac to deliver on its future opportunities. I am grateful to our employees and our stakeholders for their continued support as we work to deliver a positive future for Petrofac.”
With the publication of its full-year results, share trading is set to resume.
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