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Petrofac trading in-line with expectations, Covid continuing to impact business

Stock MarketsJun 28, 2021 09:56
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© Reuters.

By Samuel Indyk

Investing.com – In a trading update ahead of announcing its full year results, Petrofac (LON:PFC) said trading overall has been in line with their expectations.

The company’s engineering and construction (E&C) business continues to be impacted by challenging market conditions. First half revenues from E&C are expected around $1.0bln, reflecting lower levels of activity, a mutually agreed rescoping of the Sakhalin contract and other disruption to project schedules caused by the pandemic.

The company’s engineering and production services (EPS) division has benefitted from robust order intake and cost discipline, with first half revenue of $0.5bln expected.

“While financial performance in our E&C business has been impacted by the ongoing Covid-19 pandemic, our EPS business has demonstrated its resilience by growing both revenue and margins,” said Petrofac Chief Executive Officer Sami Iskander.

Order backlog

The group’s order backlog was $4.0bln on 31st May 2021, down from $5.0bln on 31st December 2021, principally reflecting low new awards in E&C following the recent suspension from competing for new awards in the UAE.

Back in March, ADNOC suspended Petrofac from competing for tenders due to the ongoing investigation by the Serious Fraud Office into bribery allegations. Last week, the Guardian newspaper reported that the scope of the investigation may be wider than previously known.

“The core challenge facing the business remains unchanged,” said Hargreaves Lansdown Equity Analyst Nicholas Hyett. “The ongoing SFO investigation has locked the group out of some key oil markets and as a result new business numbers are low.”

“Even the most efficient business will struggle to make money with no projects to work on.

“Until it’s backlog turns the corner, Petrofac will struggle to thrive.”

At 09:56BST, shares in Petrofac were trading lower by 2.2% to 114.18 pence per share.

Petrofac trading in-line with expectations, Covid continuing to impact business
 

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