Oilfield services firm Petrofac posted a 4 per cent decline in profit for the first half of the year before one-off impairments as a lower oil price took a toll on business activity, but Middle East projects boosted its order book.
The UK-listed company, which designs, builds, operates and maintains oil and gas facilities made net profit of US$158 million the six months ending June 30 before a one-off impairment charge of $88 million. This compares with a profit of to $165 million in the year-earlier period before a one-time impairment of $153 million, Petrofac said in a statement.
It reported a revenue of $3.13 billion in the period, down from $3.89 billion in the comparative period in 2016.
“Petrofac has made a positive start to the year, delivering solid first half results that reflect good project execution and lower revenues,” Ayman Asfari, Petrofac’s Group chief executive said in a statement.
“The Group has secured $2.7 billion of new orders in the year to date, evidence of our continued competitiveness in challenging markets. Tendering activity remains high, we are well placed on a number of bids and have a healthy order backlog. This positions us well for the second half of 2017.”
The group’s order backlog is $12.5 billion as of June 30, excluding framework agreement with Petroleum Development Oman (PDO) in June, which will be added to backlog once the projects are sanctions. It also excludes the $1 billion Duqm refinery project awarded in August. Its 2016 order book was valued at $14.3 billion.
“We also remain committed to our strategy of focusing on our core business, delivering organic growth and reducing capital intensity. We are taking a range of measures to deliver a sustainable reduction in net debt to strengthen the balance sheet and a sustainable dividend policy for our shareholders. These include reducing costs, reducing capital investment, divesting non-core assets and rebasing our dividend,” Asfari said.
Through its Engineering and Production Services, Petrofac gained new contracts and extensions predominantly in the UK, Iraq and Kuwait worth $0.3 billion and signed a long-term agreement with PDO.
Petrofac has been divesting its non-core asset to reposition its Integrated Energy Services division. The company said this resulted in production decline of 45 per cent reflecting an exit from Ticleni and Berantai contracts, lower cost recovery in Mexico, reflecting lower capital investment, delayed entry onto the Greater Stella Area development licence as well as a decline in average realised oil price to $52 per barrel, compared to $53 per barrel in 2016.
Petrofac broke down its $88 million one-off impairment as follows: $90 million of non-cash impairments of Integrated Energy Services assets, principally a fair value impairment of the Greater Stella Area development receivable reflecting a re-assessment of production profiles and the decline in oil and gas forward prices, as well as other exceptional net gains of $2 million.
Petrofac is among the London-listed oil services companies under investigation by the UK's Serious Fraud Office for its dealings with Monaco-based Unaoil.
Italy's markets regulator has also imposed sanctions on Petrofac CEO Asfari, including a 300,000 euro ($354,000) fine, in relation to dealing in shares of an Italian company, the company had said earlier this month.