UK Petrofac Orders Slump in 2019
UK oilfield services provider Petrofac has seen a slump in new order intake this year, but says it is still "on course" for good results.
The company said in a stock filing on December 17 it had booked $3bn in new orders this year to date, down from $5bn in 2018. It has landed $2bn in engineering and construction (E&C) contracts this year, including at gas projects in Algeria and Oman, and a Dutch offshore wind development. This was down from $4.3bn in new E&C orders secured in 2018.
Petrofac’s engineering and production services (EPS) business performed better, boosting orders to $1bn this year from $0.7mn in 2018. Contract awards and extensions were secured in the UK North Sea, Oman, the UAE, Malaysia and Azerbaijan.
The company’s order backlog came to $7.4bn at the end of November, versus $9.6bn at the end of last year.
Despite the results, Petrofac CEO Ayman Asfari said the group was “on course to report good results for 2019 in line with prior guidance,” reflecting its firm operational performance and continued progress in delivering its strategy.
Petrofac expects to earn $5.5bn in revenues this year, down from $5.83bn in 2018, when it generated $671mn in core earnings (Ebitda) and $64mn in net profits.
“We are encouraged by the improving market outlook and our busy tendering pipeline, with $39bn of bid opportunities scheduled for award by the end of 2020 in both core and growth markets,” Asfari said.
“We have seen delays in E&C bidding processes in the second half of the year, which has further impacted new order intake following the previously announced loss of awards in Saudi Arabia and Iraq in the first half,” he continued. “However, we are well-placed on several opportunities.”
He added: “This year we have made further good progress improving cost competitiveness and divesting non-core assets, whilst maintaining a strong balance sheet. Looking forward, the fundamentals of our business remain robust, with an improving market outlook, a strong competitive position and excellent customer relationships.”
“We are therefore investing in maintaining our bench strength and technical capability to position Petrofac for a recovery in new orders in 2020 and future growth.”
The company forecasts production from its upstream division to average 4.2mn barrels of oil equivalent/day in 2019, down from $6.2mn boe/day in the previous year, as a result of divestments. But earnings should be supported by a rise in its realised oil price to $66/b from $59/b.