Petrofac optimistic for 2017 as bidding activity increases

Petrofac, the oilfield services company that focuses on the Middle East, has sounded a more optimistic note over 2017, saying bidding activity has increased in recent months.
The group was affected last year by national oil companies in the Middle East delaying or cancelling contract competitions.

But it said on Wednesday that it was well positioned for a recovery in its core markets in 2017, helped by $120m of cost cuts, including reducing its staff numbers by 29 per cent to 13,500 employees.

Petrofac returned to the black in 2016 but its profits were held back by losses on a large Scottish contract it undertook for Total of France and a writedown in the value of its investment in a Nigerian production company.

The Laggan-Tormore gas plant in the Shetland Islands finally opened in May last year after lengthy delays and cost overruns.

Petrofac has booked $318m of exceptional items, before tax, for the year to December 31, which also include a writedown in the value of its 15 per cent stake in Lagos-based Seven Energy.

After exceptionals, it made a pre-tax profit of $100m, which was a significant turnround from a $335m loss in 2015. Revenue improved 15 per cent to $7.9bn.

Ayman Asfari, Petrofac’s chief executive said: “Whilst the market remains competitive, bidding activity has increased in recent months. We have right-sized our business, have a good pipeline of opportunities across our core markets and remain cost competitive, as evidenced by recent bidding success.”

Petrofac has guided that its integrated energy services division – the poorest performer in 2016 – is expected to generate earnings before interest, tax, depreciation and amortisation of $140m-$160m this year based on current expectations for the oil price. The division generated earnings of $99m last year, a 40 per cent drop from the previous year.