Petrofac Limited ( PFC) Petrofac Limited: Trading Update
16-Dec-2021 / 07:00 GMT/BST Dissemination of a Regulatory
Announcement, transmitted by EQS Group. The issuer is solely
responsible for the content of this announcement.
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PETROFAC LIMITED
TRADING UPDATE
Petrofac issues the following pre-close trading update for the
year ending 31 December 2021.
-- Continued strong performance in EPS but Covid-19 disruption
continues to impact E&C project schedules andcosts
-- Group net profit broadly in line with market expectations for
2021, supported by tax provision releasesof USUSD17 million in H1
and approximately USUSD35 million in H2
-- New order intake (1) of USUSD2.0 billion in the year to date
(increased from USUSD0.5 billion at half year)with EPS on track to
deliver a book-to-bill of 1.0x for the full year
-- Comprehensive refinancing completed following resolution of
SFO investigation
-- Year-end net debt (2) expected to be broadly flat versus Q3,
at approximately USUSD0.2 billion
-- On track to deliver cost saving target of c.USUSD250 million
by year-end (3)
-- Well positioned with a Group pipeline of USUSD40 billion for
award in 2022, of which USD7 billion is in NewEnergies
Sami Iskander, Petrofac's Group Chief Executive, commented:
"In 2021 Petrofac has taken an important step forward, closing
out the SFO investigation and embedding a strategy focused on
future growth. During this period we have continued to deliver
projects and operations safely for our clients worldwide, despite
the ongoing challenges of the Covid-19 pandemic which continue to
impact our current E&C portfolio.
"Earlier this year I set out a plan to rebalance, reshape and
rebuild Petrofac. The recent refinancing has provided a long-term,
stable capital structure for the business and largely completes the
work to rebalance the Group. Operationally, we are making good
progress in reshaping the organisation to consistently deliver to
best-in-class global standards through local execution. Our
priority is to now rebuild our order backlog. We secured USUSD1.5
billion of new awards in the second half to date and the outlook
for awards is improving in a more supportive macro environment.
Petrofac's cost competitive model and strong client relationships
mean that we are well positioned with a healthy pipeline of
opportunities scheduled for award in 2022.
"While challenges will persist in 2022, I remain confident about
the prospects for Petrofac over the medium-term as we capitalise on
our strong positions in attractive and growing markets and
accelerate our progress in New Energies, where we see significant
near and long-term growth in exciting areas such as offshore wind,
carbon capture, waste to value and hydrogen."
Group trading
The Group delivered a resilient performance in the second half
of 2021 despite the continued challenges and uncertainty related to
Covid-19. Management expects to report Group revenue of
approximately USUSD3.0 billion and full-year net profit broadly in
line with 2020 and with market expectations. The Group remains on
track to reduce gross overhead and project support costs by the
targeted USUSD250 million by the end of 2021, in order to maintain
competitiveness whilst preserving core capability (3).
Engineering & Construction (E&C)
Full year E&C revenues are expected to be approximately
USUSD1.9 billion, compared with USUSD3.1 billion in 2020, with the
reduction due to the continuing impact of Covid-19 on project
progress together with low order intake in previous years. Net
margins are expected to be below prior year due to unrecoverable
Covid-19 related cost increases, partly mitigated by management
actions to reduce costs and by tax provision releases. These tax
releases are expected to contribute USUSD25 million to USUSD30
million to net profit in the year.
Year to date, E&C has secured new orders worth USUSD1.1
billion (2020: USUSD0.7 billion), comprising EPC contracts in Oman,
Libya and Lithuania, as well as positive net variation orders. In
October, E&C signed a strategic partnership agreement with
Gazprom's INTI - Russian Institute Oil/Gas Technology Initiatives,
which positions us well to win future awards in Russia, one of the
regions where we see a healthy pipeline of long-term opportunities.
Backlog is expected to end the year above the 30 June 2021
position, and our bidding pipeline remains strong with more than
USUSD32 billion of projects scheduled for award by the end of
2022.
Engineering & Production Services (EPS)
Growth in both revenue and margins has driven a strong financial
performance in EPS. Full year revenue is expected to be
approximately USUSD1.1 billion, significantly higher than in 2020.
Revenue growth has been driven by strong performance in both
Projects and Operations as a result of strong order intake.
Net margins are expected to benefit from tax provision releases,
increasing by around two percentage points above the previous
guidance of 5-6%. Previous guidance reflected higher revenues, a
lower overhead ratio, higher contract margins on certain projects
and higher income from associates (4).
EPS has had another strong year of order intake having secured
USUSD0.9 billion of awards and extensions in the year to date (full
year 2020: USUSD0.9 billion) and remains on target to deliver a
book-to-bill of 1.0x for the full year. EPS is delivering on its
strategy to deliver growth in small to medium size EPC brownfield
projects internationally, with notable wins in Bahrain and
Malaysia. A number of new operations and maintenance contracts and
renewals were secured, including an extension of a significant
contract in Iraq.
We have seen strong momentum in New Energies with significant
growth in concept and FEED studies across hydrogen, carbon capture
and storage, waste-to-value and offshore wind, and a number of new
strategic partnerships with developers and technology providers.
Several of these opportunities are expected to convert to EPC
projects in the future.
Integrated Energy Services (IES)
Revenue and EBITDA are expected to be higher in the second half
as a result of production from the East Cendor field, which
commenced production in June 2021, together with higher oil prices.
The average realised oil price (5) year to date has increased by
92% to USUSD75/boe (2020: USUSD39/boe). Equity production is
expected to be approximately 650 thousand barrels of oil equivalent
(kboe) in 2021 (2020 PM304: 983 kboe) with an exit rate net
production of 2.9 kboe/d compared with an average of 1.8kboe/d for
the full year.
As expected, IES full year revenue in 2021 will be materially
lower than in 2020, reflecting disposal of our Mexico operations in
the second half of 2020 and the unplanned outage in the main PM304
Cendor field since December 2020. IES expects to report a small net
loss for the year.
Order backlog
Group order backlog (6) was USUSD4.0 billion on 30 November
2021:
30 November 2021 30 June 2021
USUSD billion USUSD billion
Engineering & Construction 2.4 2.1
Engineering & Production Services 1.6 1.7
Group 4.0 3.8
Looking ahead, the Group currently has USUSD2.0 billion of
secured revenue for 2022, comprising USUSD1.3billion in E&C and
USUSD0.7 billion in EPS. In addition, the Group has a pipeline of
around USUSD40 billion of bids scheduled for award by the end of
2022, comprising around USUSD32 billion of E&C opportunities
and around USUSD8 billion of EPS opportunities. Approximately
USUSD7 billion of the Group's bidding pipeline consists of New
Energies opportunities.
Financial position
In November, we successfully concluded a comprehensive
refinancing to create a long term, sustainable capital structure.
This included an equity raising of USUSD275 million, USUSD600
million of 9.75% senior secured notes due 2026 and a new USUSD180
million two-year revolving credit facility. An existing USUSD90
million bilateral term loan was repaid and replaced with a new
USUSD50 million term loan, maturing in October 2023. As part of the
refinancing, on 1 December we repaid our GBP300m Covid Corporate
Financing Facility, which was due to mature on 31 January 2022.
Net debt(2) at 31 December 2021 is expected to be broadly flat
versus Q3, at approximately USUSD0.2 billion. Liquidity at 31
December 2021 is expected to be approximately USUSD0.6 billion
(7).
Following the refinancing, Group debt facilities consist of a
USUSD600 million bond, a USUSD180 million revolving credit
facility, and two USUSD50 million bilateral term loans. At 30
November, USUSD140 million of the revolving credit facility was
undrawn.
Conference call
Afonso Reis e Sousa, Chief Financial Officer, will host a
conference call for analysts and investors at 8.30am today.
Analysts and investors can access the call on: +44 (0)330 336
9601, confirmation code: 1605431
The Group's full year results for year ended 31 December 2021
are scheduled to be announced on 15 March 2021.
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