Tell it like it is

Mr Asfari owns 18.5 per cent of Petrofac's shares. That gives him wealth in excess of £500m, which may permit a level of confidence and candidacy that would not be afforded to the average boss of a FTSE 250 company. Indeed, he warmed to his theme, telling City analysts: "Put simply, the challenges of 2014 can be traced to a failure to appreciate fully the risks that we faced as we worked in unfamiliar geographies, with untested partners and in areas where we strayed outside our core competence."

Most misery is focused on three contracts that Petrofac signed in 2010 and 2011. Most costly - each coming in at a loss of around $200m - were the Laggan-Tormore field west of the Shetland Isles, where Petrofac has built onshore gas plant for France's Total (Euronext: FP), and the Greater Stella gas project, also in the North Sea, where Petrofac has been contracted to deploy a floating production plant in a deal with Canada's Ithaca Energy (IAE), which is traded on London's Aim index. Then there was a $134m write-down as Petrofac sought to exit a deal to operate the Ticleni field, an ageing oil field in Romania.

True, the drop in the oil price has hardly helped; even so, these gaffs have played a key role in halving Petrofac's share price in the past two years to about 900p. That prompts the question: now that the worst has been realised, is there an opportunity for income investors since - assuming a maintained dividend at 65.8¢ - the shares offer a 4.7 per cent yield? It helps that Mr Asfari stresses that the board realises the importance of dividends to shareholders and - given his holding - that might actually be a bit of an understatement.

Recall, also, from last week's column that this is a comparative exercise. I set myself the task of choosing between Petrofac and UK coal supplier Hargreaves Services (HSP).

It's an interesting but odd comparison. Clearly the price of shares in both companies dances with the oil price. With Petrofac, however, the relationship is looser and more volatile. Even though Petrofac's activities front onto the oil industry, whereas Hargreaves' are tangential, that volatility implies company-specific factors have a big influence Petrofac. Then again, it may simply be because in the years 2009-12, as Petrofac almost doubled its revenues and profits, investors projected a growth rate onto the share price that - surprise - proved unsustainable.

With hindsight, it's clear that the bosses of both companies expected growth that won't now materialise. This led to a chequered recent past that is best illustrated in the way that the conversion of operating profit into cash has been all over the place (see table). The figure for the cash-conversion rate is the average of the past five years, a period when Petrofac - largely as a consequence of its dash for growth - saw cumulative free-cash losses of £250m.

Hargreaves did not do exactly brilliantly but, chiefly as a function of its badly depressed share price, its average free cash is enough to produce a yield of over 8 per cent. In future, if the slimmed-down Hargreaves could generate cash at the same sort of rate as the recent past - though with less volatility - then there could easily be 30 per cent upside in the share price.

Meanwhile, at Petrofac the image is of a company struggling badly with its recent growth. As the company pours work into new contracts so it pours in corresponding amounts of working capital. In the past five years, receivables - what Petrofac is owed - sucked up almost £2bn of working capital, of which over £1bn was in the past two years alone. Consequently, Petrofac uses its capital less efficiently than in the past. Despite that, its net profits averaged over the past five years are still enough to generate a 23 per cent return on equity. Couple that with a strong balance sheet and an order book roughly equal to three years' worth of turnover and Petrofac hardly looks threatened. So its share price should recover, even if it's unclear when.

If either company faces existential threats, that would be Hargreaves (the UK coal industry is not a nice place to play). Correspondingly, its share price looks the more depressed. Hence its shares offer greater - though less likely - recovery potential.

So which share should you choose? Neither? Both? Mostly it depends on your appetite for risk. My inclination would be for Petrofac. Then again, I like bosses who tell it like it is.