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Petrofac's NOC insulation

Petrofac's full-year figures reflect a degree of resilience in the face of falling oil prices
February 25, 2015

The market responded positively to Petrofac's (PFC) full-year figures. Investors must be relieved that revenues held up despite the ongoing weakness in the oilfield services market.

IC TIP: Hold at 823p

Gross profit for 2014 was down 14 per cent to $999m (£645m) - not too shabby considering the fall-away in oil industry capital budgets. Petrofac's net profit was decimated by $463m in impairments and fair value write-downs, but strip these out and the numbers were in line with guidance. However, due to the continuing oil price weakness Petrofac has been forced to cut its net profit guidance for 2015 from $500m to $460m, which assumes an average Brent crude price of $60 a barrel for the remainder of the year.

The good news for shareholders is that Petrofac bumped up its order backlog by a quarter to a record $18.9bn by the end of 2014. The outlook also provides grounds for optimism, with "an attractive pipeline of bidding opportunities in the year ahead", according to Petrofac chief executive Ayman Asfari.

It could be argued that Petrofac's apparent resilience in the face of a market downturn reflects the high proportion of its contracts struck with national oil companies, which theoretically provide more predictable revenue streams. The group also announced a five-year tie-up with McDermott International to pursue subsea projects - another area of oilfield services that is strengthening even as the oil price falters.

Broker JPMorgan Cazenove has initiated coverage with a sum-of-the-parts valuation of 895p a share.

PETROFAC (PFC)
ORD PRICE:886pMARKET VALUE:£3.1bn
TOUCH:885-886p12-MONTH HIGH:1,483pLOW: 594p
DIVIDEND YIELD:4.8%PE RATIO:39
NET ASSET VALUE:538¢*NET DEBT:37%

Year to 31 DecTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20104.4668.0165.043.8
20115.8681.0159.054.6
20126.2765.0186.064.0
20136.3789.0190.965.8
20146.2171.035.165.8
% change-1-78-82-

Ex-div: 16 Apr

Payment: 22 May

£1=$1.55 *Includes intangible assets of $301m, or 87¢ a share