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Petrofac order book drops despite energy crisis

Sales, cash profit fall on last year but company predicts stronger second half
August 12, 2022
  • Sales and order book down, dividend yet to return
  • CEO sees “multi-year upcycle” coming for energy industry

While it might seem like energy majors and governments should be throwing cash at energy services companies like Petrofac (PFC) in a desperate rush to keep the lights on, this is not the case, with its order book actually dropping this year. But this could turn around later in the year, the company said. 

In the six months to 30 June, a weaker oil and gas project pipeline hit sales and earnings, with only decommissioning a highlight for the period. The engineering and construction division saw sales tumble 40 per cent, to $700mn (£576mn), while asset solutions only dipped 4 per cent, even coming off a strong improvement in 2021. Looking ahead, this dynamic is set to continue as the engineering and construction order book fell by a quarter during the half year, while asset solutions picked up $300mn in new contracts – a 19 per cent improvement. 

Despite the “lower levels of activity” compared with last year, Petrofac boss Sami Iskander said the energy industry looked to be at the beginning of a “multi-year upcycle”. He flagged a $200mn contract in Algeria as progress on this front. The company estimated the overall pipeline for work at $45bn, compared with $46bn at this point last year. 

Petrofac is coming off a 2021 dominated by a $104mn settlement with the Serious Fraud Office (SFO), and this turned up in the interim accounts. Its net debt climbed after paying the fine, although a $98mn asset sale helped balance this out. 

Consensus estimates forecast a lossmaking year for the company, with an adjusted loss per share of 1.54¢, before a return to the black in 2023. Petrofac is set to remain far behind its 2016-2019 profit levels, however, and the dividend remains suspended. Sell. 

Last IC View: Sell, 109p, 24 Mar 2022

PETROFAC (PFC)    
ORD PRICE:117pMARKET VALUE:£597.1m
TOUCH:117.2-117.5p12-MONTH HIGH:203pLOW: 95p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:92ȼNET DEBT:120%
Half-year to 30 JuneTurnover ($bn)Pre-tax profit ($mn)Earnings per share (ȼ)Dividend per share (ȼ)
20211.6-94-26.3nil
20221.2-19-2.7nil
% change-23-90
Ex-div:na   
Payment:na   
£1=$1.21