North Sea energy services firm Petrofac has entered into a binding agreement with key financial creditors on the terms of a comprehensive financial restructuring plan.
Petrofac (LON:PFC) has been battling financial difficulties since its share price collapsed in December last year.
The company said the “lock-up agreement” with creditors formalises an in-principle agreement announced in September.
The same month, the London-headquartered firm reported a net loss of $162m in its half-yearly results.
The restructure includes $325 million (£259m) in new funding and the conversion of around $772m (£614m) in debt into equity.
Petrofac chief executive Tareq Kawash said the agreement will provide a “sustainable financial structure” that will allow the group to “move forward with confidence”.
“Bolstered by our current backlog and pipeline of opportunities, the business is well positioned as a leading provider of critical energy infrastructure,” Kawash said.”
“We have made good progress in closing out our legacy portfolio of contracts, our new projects are progressing well, we have a refreshed strategy focused on our strengths, with enhanced bidding discipline and project governance.”
In addition, after overseeing the restructure Petrofac chairman René Médori is set to leave the position in 2025.
Petrofac woes
Announcing the agreement, the company said challenges with its “legacy portfolio” had impacted its financial performance.
“In particular, the group’s activities were exposed to adverse and significantly delayed contractual outcomes and settlements and were negatively affected by the impacts of the COVID-19 pandemic, leading to losses on a number of contracts,” Petrofac said.
This included significant cost overruns on its Thai Oil Clean Fuels joint venture contract, which Petrofac said had driven losses in its engineering and construction (E&C) division and at group level in recent years.
“Here, the impact of the pandemic, together with the scale and unique complexity of the project and its location, meant that significant additional work and costs were necessary to recover lost time and complete the project,” the company said.
As part of the restructure, Petrofac will seek terms to continue its participation on a “defined and limited basis”.
If it cannot reach an agreement, Petrofac said it will exit the Thai Oil contract with “associated potential claims and contingent liabilities expected”.
