Petrofac posts $73m profit as one-off charges bite
Oilfield services giant Petrofac posted a $73m (£56.4m) profit last year as a number of exceptional charges limited the firm’s growth in 2019.
Shares in the firm rose 1.1 per cent as marketts opened.
The figures
Reported profit was roughly 10 per cent higher year-on-year, increasing from $64m in 2018 to $73m last year.
Net profit was $276m, but Petrofac incurred $203m worth of impairments due to charges related to the firm’s operations in Mexico and Malaysia.
Revenue hit $5.5bn, down from last year’s $5.8bn but in line with November’s estimates.
Earnings also fell off a little to $559m from $671m in 2018.
The company’s backlog of orders also fell to $7.4bn as predicted in November, compared to $9.6bn last year.
The company proposed a final dividend of 25.3 cents per share.
Why it’s interesting
Considering that the firm lost out on $10bn worth of contracts last year due to a probe by Britain’s Serious Fraud Office (SFO) into dealings in Saudi Arabia and Iraq, the firm’s results were as good as could be expected, analysts said.
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Nicholad Hyett, equity analyst at Hargreaves Lansdown, said: “The first thing we look for when opening a set of Petrofac results is the size of the order book and bidding pipeline.
“Securing new orders with an ongoing SFO investigation and uncertain market conditions has been a challenge, and even the best company will struggle to grow profits without contracts to work on. Lower revenues create challenges for margins as well, since keeping the skill base intact without projects to work on costs money.
“The good news is that the balance sheet remains healthy, thanks in part to disposals in the upstream business, and that should keep Petrofac on an even keel for some time yet. Still, an oil & gas group slowly digesting itself to sustain the dividend is never a pretty sight”.
Petrofac used the results to warn that financial performance would suffer in 2020 as the firm makes additional investments in order to “preserve our market-leading execution capability”.
The combination of these investments and the fall in new orders over the last couple of years will have an impact on the firm’s finances, but it added that an improving market outlook was reason for optimism.
What Petrofac said
Ayman Asfari, the group’s chief executive, said: “Our results for 2019 reflect solid operational performance across the business and good progress delivering our strategy.
“Best-in-class execution has delivered attractive margins in our core businesses, underpinned by an unrelenting drive to strengthen our cost competitiveness by investing in talent, local content and digital technology”.