TIDMPFC
RNS Number : 0982Z
Petrofac Limited
29 August 2018
PETROFAC LIMITED
RESULTS FOR THE SIX MONTHSED 30 JUNE 2018
-- Strong operational performance in all our businesses
-- Business performance net profit (1)(2) up 20% to US$190 million
-- Reported net loss (2) of US$17 million post impairments and
exceptional items of US$207 million
-- New order intake (3) of US$3.3 billion year to date; backlog
(4) of US$9.7 billion at 30 June 2018
-- Net debt of US$0.9 billion in line with expectations
-- Signed US$0.8 billion of divestments year to date
-- Interim dividend of 12.7 cents per share in line with dividend policy
Six months ended 30 June Six months ended 30 June
2018 2017
US$m Business Exceptional Total Business Exceptional Total
performance items and performance items and
certain certain
re-measurements re-measurements
------------- ----------------- ------ ------------- ----------------- ------
Revenue 2,785 - 2,785 3,126 - 3,126
------------- ----------------- ------ ------------- ----------------- ------
EBITDA 333 n/a n/a 323 n/a n/a
------------- ----------------- ------ ------------- ----------------- ------
Net profit/(loss)
(2) 190 (207) (17) 158 (88) 70
------------- ----------------- ------ ------------- ----------------- ------
Ayman Asfari, Petrofac's Group Chief Executive, commented:
"We have reported a good set of first half results that reflect
strong execution and excellent progress delivering our
strategy.
"We remain focused on our core and delivering organic growth as
the market recovers. The Group has secured US$3.3 billion of new
orders in both established and adjacent markets year to date, and
is well placed on several bids due for award before the end of the
year. Our focus on operational excellence is reflected in improved
margins and continued good progress across our project portfolio in
the first half. Furthermore, we are well positioned for the second
half with good revenue visibility, a strong competitive position
and healthy liquidity.
"The Group is also making significant progress reducing capital
intensity, signing agreements to sell the JSD6000 installation
vessel, our interests in the Chergui gas concession and Greater
Stella Area development, as well as a 49% interest in our Mexican
operations. These transactions will increase our focus on our core
and strengthen our balance sheet."
DIVISIONAL HIGHLIGHTS
Engineering & Construction (E&C)
Good results reflecting best-in-class delivery
-- High level of activity with 107 million manhours worked, up 2%
-- US$2.4 billion of new order intake year to date, including
awards in the GCC, India, the Netherlands, Iraq and Algeria
-- Good progress across our portfolio of lump-sum projects
o Alrar and Reggane projects in Algeria commissioned
o KNPC Clean Fuels, Lower Fars Heavy Oil, Jazan Tank Farms and
Upper Zakum Field Development scheduled to be substantially
complete around the end of 2018
-- Revenue of US$1.9 billion, down 19% largely reflecting project phasing
-- Net margin up 1.0 ppts to 7.7%, reflecting an improvement in
project mix, lower tax and lower overhead recovery
-- Net profit down 7% to US$149 million
-- Sale of the JSD6000 installation vessel announced in April 2018
Engineering & Production Services (EPS)
Good operational performance in challenging market
conditions
-- US$0.9 billion of awards year to date, predominantly in Oman, UK, Turkey and Iraq
-- Revenue of US$0.7 billion, up 9% largely driven by new awards and project phasing in EPCm
-- Net margin broadly stable at 7.6% reflecting lower overheads
offset by business mix, higher tax and higher minority
interests
-- Net profit up 6% to US$54 million
Integrated Energy Services (IES)
Return to profit driven by production mix and higher realised
prices
-- Revenue of US$136 million, up 40% (up 62% excluding asset sales)
o Equity production doubled to 1.8 mmboe (net)
o Total production down 8% to 3.1 mmboe (net) due to portfolio
mix and asset sales
o Higher average realised price (5) of US$56/boe (1H 2017:
US$52/boe)
o Lower tariff income and cost recovery in Mexico reflecting
Santuario's migration to a PSC
-- EBITDA up 97% to US$72 million (up 115% excluding asset sales)
o Equity interests' EBITDA per boe flat reflecting increase in
unit operating costs
o Higher PEC contribution largely driven by lower opex
-- Net profit up 183% to US$16 million (up 162% excluding asset sales)
-- Announced sales, which are expected to complete by Q1 2019,
of Chergui (100%), Mexican operations (49%) and Greater Stella Area
development (100%)
Exceptionals and certain re-measurements
The reported net loss of US$17 million was impacted by
exceptional items and certain re-measurements of US$207 million, of
which approximately US$188 million were non-cash items:
-- Agreed asset sales during 2018 triggered US$173 million of
non-cash impairments (post-tax) in relation to the JSD6000
installation vessel, Mexico operations and the Greater Stella Area
development; and,
-- Other exceptional net items of US$34 million (post-tax).
The carrying amount of the IES portfolio (6) at 30 June 2018 was
US$0.8 billion (31 December 2017: US$1.0 billion). Agreed
divestments is expected to reduce the net book value by
approximately US$0.4 billion on completion.
NET DEBT AND LIQUIDITY
Net debt was US$0.9 billion at 30 June 2018 (31 December 2017:
US$0.6 billion), in line with expectations. The increase in net
debt largely reflects the unwind of temporary favourable working
capital movements at the end of 2017, the phasing of tax and
dividend payments, the purchase of treasury shares and US$93
million of net divestment proceeds. Net debt is expected to
decrease during the second half of the year.
The Group retained healthy liquidity of US$1.3 billion at 30
June 2018 (31 December 2017: US$1.6 billion). In addition, the
Group secured US$300 million of additional banking facilities in
August 2018, further strengthening its liquidity position. This
financing is in line with the Company's strategy to pre-fund
expected liquidity requirements for at least the next 12 months,
including maturity of Petrofac's US$677 million 3.40% bond in
October 2018.
DIVID
In August 2017, the Board approved a sustainable dividend policy
that targets a dividend cover of between 2.0x and 3.0x business
performance net profit as the Group transitions back towards a low
capital intensity business model. This new policy also targets
paying an interim dividend each year of approximately 33% of the
prior year total dividend.
In line with this policy, the Board has declared an interim
dividend of 12.7 cents per share (2017: 12.7 cents). The interim
dividend will be paid on 19 October 2018 to eligible shareholders
on the register at 21 September 2018 (the 'record date').
Shareholders who have not elected to receive dividends in US
dollars will receive a sterling equivalent. Shareholders can elect
by close of business on the record date to change their dividend
currency election.
OUTLOOK
The Group is trading in line with expectations in its core
E&C and EPS businesses, with IES expected to continue to
benefit from the recovery in oil prices. We are well positioned for
the second half with a healthy order backlog of US$9.7 billion at
30 June 2018 (31 December 2017: US$10.2 billion) and US$3.0 billion
of secured revenue for the second half of 2018.
30 June 31 December
2018 2017
US$ billion US$ billion
Engineering & Construction 6.9 7.5
Engineering & Production Services 2.8 2.7
Group 9.7 10.2
The Group has secured US$3.3 billion of new orders in the year
to date, with awards in both established and adjacent markets. We
are well placed on several bids due for award before the end of the
year, have a healthy bidding pipeline and a strong competitive
position.
We continue to take measures to deliver a sustainable reduction
in net debt and strengthen our balance sheet. Group capital
expenditure is expected to decrease to around US$150 million in
2018 (2017: US$170 million) in line with prior guidance.
Furthermore, we remain committed to delivering operational
excellence and divesting non-core assets. In the year to date, we
have agreed the sale of assets for cash consideration of up to
US$0.8 billion.
ORGANISATIONAL CHANGES
Effective 1 August 2018, George Salibi was appointed Chief
Operating Officer, E&C, and John Pearson was appointed Chief
Operating Officer, EPS. George and John have overall accountability
for delivery of their respective business plans and report to Ayman
Asfari, Group Chief Executive.
NOTES
(1) Business performance before exceptional items & certain
re-measurements. This measurement is shown by Petrofac as a means
of measuring underlying business performance.
(2) Attributable to Petrofac Limited shareholders.
(3) New order intake comprises new contract awards and
extensions, net variation orders and the rolling increment
attributable to EPS contracts which extend beyond five years.
US$3.3 billion of new order intake year to date includes US$0.6
billion for the Tinhert project announced this morning.
(4) Backlog consists of: the estimated revenue attributable to
the uncompleted portion of Engineering & Construction division
projects; and, for the Engineering & Production Services
division, the estimated revenue attributable to the lesser of the
remaining term of the contract and five years.
(5) Average net realised price is net of royalties and hedging
gains or losses. It is based on sales volumes, which may differ
from production due to under/over-lifting in the period.
(6) Includes balances within oil & gas assets, intangible
assets, interests in associates, other financial assets and assets
held for sale (excludes working capital, tax and decommissioning
liabilities).
Click on, or paste the following link into your browser, to view
the Group's financial statements for the six months ended 30 June
2018
http://www.rns-pdf.londonstockexchange.com/rns/0982Z_1-2018-8-29.pdf
PRESENTATION
Our half year results presentation will be held at 9.30am today
and will be webcast live via:
https://webcast.merchantcantoscdn.com/webcaster/dyn/4000/7464/16532/106216/Lobby/default.htm
ENDS
Disclaimer:
This announcement contains forward-looking statements relating
to the business, financial performance and results of Petrofac and
the industry in which Petrofac operates. These statements may be
identified by words such as "expect", "believe", "estimate",
"plan", "target", or "forecast" and similar expressions, or by
their context. These statements are based on current knowledge and
assumptions and involve risks and uncertainties. Various factors
could cause actual future results, performance or events to differ
materially from those described in these statements and neither
Petrofac nor any other person accepts any responsibility for the
accuracy of the opinions expressed in this presentation or the
underlying assumptions. No obligation is assumed to update any
forward-looking statements.
For further information contact:
Petrofac Limited
+44 (0) 207 811 4900
Jonathan Low, Head of Investor Relations
jonathan.low@petrofac.com
Alison Flynn, Group Head of Communications
alison.flynn@petrofac.com
+44 (0) 207 811 4913
Tulchan Communications Group
+44 (0) 207 353 4200
petrofac@tulchangroup.com
Martin Robinson
LEI 2138004624W8CKCSJ177
NOTES TO EDITORS
Petrofac is a leading international service provider to the oil
and gas production and processing industry, with a diverse client
portfolio including many of the world's leading integrated,
independent and national oil and gas companies. Petrofac is quoted
on the London Stock Exchange (symbol: PFC).
Petrofac designs and builds oil and gas facilities; operates,
maintains and manages facilities and trains personnel; enhances
production; and, where it can leverage its service capability,
develops and co-invests in upstream and infrastructure projects.
Petrofac's range of services meets its clients' needs across the
full life cycle of oil and gas assets.
With around 12,750 employees, Petrofac operates out of seven
strategically located operational centres, in Aberdeen, Sharjah,
Abu Dhabi, Woking, Chennai, Mumbai and Kuala Lumpur and has a
further 24 offices worldwide.
For additional information, please refer to the Petrofac website
at www.petrofac.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UKSVRWBAWURR
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