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Petrofac boosted by higher oil prices and production volumes

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Petrofac boosted as higher oil prices and production levels result in energy services firm upholding outlook

  • Petrofac expects to supply over 500,000 barrels per day of oil in the primary half
  • This compares to only 210,000 day by day barrels within the equivalent period in 2021
  • CEO Sami Iskander: ‘We’ve made good progress in the primary half of the yr’

Energy services group Petrofac has revealed that trading and forecasts remain in keeping with projections following a robust rebound in the worth and production of oil.

The London-listed company expects to generate greater than 500,000 barrels per day of petroleum in the primary half of 2022, because of higher output from two oilfields situated off the Malaysian coast.

This compares to only 210,000 day by day barrels within the equivalent period last yr when Covid-related lockdown rules discouraged travel and caused factory activity to dwindle, sending oil demand plummeting.

Forecast: Petrofac expects to generate over 500,000 barrels per day of oil in the primary half of 2022, because of higher output from two oilfields situated off the Malaysian coast

Petrofac predicts production will proceed rising within the latter half of 2022, helping full-year underlying earnings in its integrated energy services division to rise to $80million-$90million, assuming average oil prices remain at around $100 per barrel.

The business also anticipates revenues in its asset solutions arm will further increase over the subsequent six months, having already made an estimated $500million thus far this yr on the back of latest or prolonged contracts.

Amongst deals recently won by the firm regarding operations within the North Sea include one from i3 Energy to administer wells and a two-year extension from Spirit Energy to offer maintenance support for its York platform.

Outside the UK, Petrofac has gained contracts to decommission three offshore fields within the Gulf of Mexico and one within the Timor Sea from the Australian Government.

Yet although the division has attracted a strong order intake, it forecasts a slight decrease in second-half profit margins due to the combination of contracts.

In contrast, the corporate expects its engineering and construction segment to rebound to a ‘marginal profit’ in the approaching six months from a lack of about $35million-$45million within the opening half of the yr.

Deals: Outside the UK, Petrofac has gained contracts to decommission three offshore fields in the Gulf of Mexico and one in the Timor Sea from the Australian Government

Deals: Outside the UK, Petrofac has gained contracts to decommission three offshore fields within the Gulf of Mexico and one within the Timor Sea from the Australian Government

Petrofac admitted that such an final result will probably be depending on certain industrial settlements, a few of which it has described as ‘relatively unfavourable.’

However it is optimistic that the division will proceed to prosper resulting from steep energy prices, an enhanced deal with energy security and a huge pipeline of potential recent contracts.

Chief executive Sami Iskander said: ‘We’ve made good progress in the primary half of the yr to position the business strategically to capitalise on the expected multi-year upcycle ahead, supported by a robust energy price environment and impressive growth plans from clients in our core markets.’

The firm moreover anticipates cutting net debts after seeing them double to $345million between January and late June resulting from paying a $104million nice to the Serious Fraud Office and receiving slower payments from clients.

Last yr, Petrofac pleaded guilty to seven charges of failing to forestall bribery that helped it secure projects across Iraq, the United Arab Emirates and Saudi Arabia from 2012 to 2015. Chairman René Medori called the episode a ‘deeply regrettable period of Petrofac’s history.’

Laura Hoy, an equity analyst at Hargreaves Lansdown, said: ‘With the Serious Fraud Office investigation finally within the rearview, this yr was meant to be one in every of rebuilding for Petrofac.

‘But lingering supply chain issues from the pandemic and inflationary headwinds have put somewhat of a damper on the group’s engineering & construction business.

‘The excellent news is that other parts of the business are picking up among the slack – with higher oil prices and powerful demand for onshore and offshore asset management keeping a floor under profits.’

Petrofac shares closed trading 2.7 per cent up at 122.2p on Tuesday, although their value has declined by over a fifth up to now month.

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