Sharecast - Berenberg said Petrofac (LON:PFC)'s equity was down by nearly 70% year-to-date and its bonds trade at a deep discount to par. The analysts noted that concerns were centred on liquidity, with financing facilities of roughly $250.0m due to mature in October 2024, and whether bond covenants have been met.
"We expect the company's trading statement on 20 December to address some of these concerns, but whether liquidity has materially improved remains highly uncertain," said Berenberg.
The German bank also highlighted that the company may struggle to obtain the performance bonds required by clients for new awards, and clients may reduce future awards until these issues can be resolved.
"In a worst-case scenario, Petrofac may be forced to renegotiate its financing agreements, potentially leaving shareholders significantly diluted. Alternatively, if the company is able to overcome this liquidity crisis, we believe the outlook could be brighter and valuation would increase significantly," said the analysts.
Berenberg stated Petrofac's backlog was growing, core Middle Eastern markets were seeing high activity levels and margins should rebuild as legacy projects are finalised. However, given what it called "the inherent uncertainty about the outcome", it had opted to place Petrofac under review and remove its price target and rating on the stock.
Reporting by Iain Gilbert at Sharecast.com