Petrofac Limited ( PFC) Petrofac Limited: Trading update
12-Apr-2023 / 07:00 GMT/BST
-----------------------------------------------------------------------------------------------------------------------
Press Release
12 April 2023
TRADING UPDATE
Petrofac issues the following trading update ahead of the
announcement of its full year results for the year ending 31
December 2022.
During the extended post-balance sheet period for the Group's
full year 2022 consolidated financial statements, management has
conducted a thorough review of the portfolio of contracts,
associated outstanding contractual and commercial issues and
opportunities to improve liquidity by accelerating working capital
inflows.
As a result of the portfolio review, the Group is recognising an
additional EBIT reduction of USUSD140 million to USUSD160 million
in the full year financial statements for 2022. This comprises both
incremental project costs and a cautious view of the quantum and
timing of recognition of certain revenue claims that would have
partly offset those costs.
As a consequence, Petrofac now expects to report a full year
Group EBIT loss of approximately USUSD150 million to USUSD170
million for 2022, including an EBIT loss of approximately USUSD240
million to USUSD260 million in Engineering & Construction
(E&C) (1).
Approximately 50% of these additional costs are expected to be
paid over the remainder of 2023, with the balance spread over 2024
and 2025. Any future recoveries from clients would mitigate this
outflow.
Additional costs
Thai Oil Clean Fuels: following the December 2022 Trading
Update, the execution strategy for this uniquely complex project
has been subject to further review during Q1 2023, in consultation
and cooperation with our client and joint venture partners. In
order to de-risk delivery, operational changes have been made,
including changes to subcontractors. A significant proportion of
the resulting costs are expected to be recovered but discussions
have not yet reached a sufficient level of maturity to recognise
this incremental revenue.
Legacy contracts: additional costs relate to final completion
activities on our legacy portfolio, primarily on projects that are
now substantially completed (2). The figures announced today also
include an allowance for adverse settlements as part of our efforts
to accelerate the release of working capital balances.
Liquidity
Net debt at 31 December 2022 was USUSD349 million (3), with
liquidity of USUSD506 million (4).
Petrofac remains focused on ensuring the Group has sufficient
liquidity to support its strategy, including unlocking the
significant working capital balances built up over the period of
the pandemic, as well as collecting cash advances on new
awards.
The Group has made significant progress in extending its
borrowing facilities, having reached agreement in principle with
its lenders to extend all three facilities by 12 months to October
2024. We will update the market following the signing of the
extension agreements.
Tareq Kawash, Petrofac's Group Chief Executive as of 1 April
2023, commented:
"Petrofac's focus is on completing legacy contracts as quickly,
efficiently and safely as possible. We are taking steps to ensure
the financial strength of the business by unlocking working capital
and, where appropriate, balancing long-term value against near-term
liquidity.
"Although we are disappointed to announce additional costs on
these legacy contracts, in particular the Thai Oil Clean Fuels
project, ongoing collaboration with clients and partners will
de-risk future delivery.
"I joined Petrofac because the business has a significant
opportunity to deploy its leading capabilities to help clients
deliver much needed energy infrastructure. This was demonstrated in
the recent significant award of a long-term agreement to support
critical European offshore wind infrastructure. Alongside
converting a healthy pipeline of future opportunities - with a
number of awards at preferred bidder stage - we are working to draw
a line under the projects of the past, putting Petrofac in a strong
position to deliver future growth."
NOTES 1. In the December 2022 Trading Update, the Group EBIT
loss was forecast to be USUSD100 million and the E&CEBIT loss
was forecast to be USUSD190 million. The Group has further analysed
the appropriate timing of therecognition of the incremental costs
on the Thai Oil Clean Fuels project identified in 2022 and
concluded that apost-balance sheet adjustment should have been made
in the income statement of the E&C division for 2021. As
aresult, we will be making a prior year adjustment of approximately
USUSD90 million to the 2021 comparator in the fullyear 2022
consolidated financial statements. This is a reallocation of costs
from 2022 to 2021 and has no impact onthe Group's financial
position at the end of 2022. This adjustment has been included in
the 2022 EBIT loss figuresdisclosed in the main body of this
trading update. 2. Substantially completed contracts are contracts
where a Provisional Acceptance Certificate or thetransfer of care
and custody to the client are imminent and no substantive work
remains to be performed byPetrofac. 3. Net debt comprises
interest-bearing loans and borrowings less cash and short-term
deposits (i.e. excludesIFRS 16 lease liabilities). 4. Liquidity
consists of gross cash and undrawn committed facilities. Gross cash
includes balances held incertain countries whose exchange controls
significantly restrict or delay the remittance of these amounts
toforeign jurisdictions. It also includes balances in joint
operation bank accounts which are generally available tomeet the
working capital requirements of those joint operations, but which
can only be made available to the Groupfor its general corporate
use with the agreement of the joint operation partners.
ENDS
For further information contact:
Petrofac:
James Boothroyd, Head of Investor Relations
James.boothroyd@petrofac.com
Sophie Reid, Group Head of Communications
Sophie.reid@petrofac.com
Teneo (for Petrofac):
+44 (0) 207 353 4200
petrofac@teneo.com
NOTES TO EDITORS
About Petrofac
Petrofac is a leading international service provider to the
energy industry, with a diverse client portfolio including many of
the world's leading energy companies. Petrofac designs, builds,
manages and maintains oil, gas, refining, petrochemicals and
renewable energy infrastructure. Our purpose is to enable our
clients to meet the world's evolving energy needs. Our four values
- driven, agile, respectful and open - are at the heart of
everything we do. Petrofac's core markets are in the Middle East
and North Africa (MENA) region and the UK North Sea, where we have
built a long and successful track record of safe, reliable and
innovative execution, underpinned by a cost effective and local
delivery model with a strong focus on in-country value. We operate
in several other significant markets, including India, South East
Asia and the United States. We have 8,000 employees based across 31
offices globally. Petrofac is quoted on the London Stock Exchange
(symbol: PFC). For additional information, please refer to the
Petrofac website at www.petrofac.com.
-----------------------------------------------------------------------------------------------------------------------
Dissemination of a Regulatory Announcement that contains inside
information in accordance with the Market Abuse Regulation (MAR),
transmitted by EQS Group. The issuer is solely responsible for the
content of this announcement.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00B0H2K534
Category Code: TST
TIDM: PFC
LEI Code: 2138004624W8CKCSJ177
OAM Categories: 2.2. Inside information
Sequence No.: 236099
EQS News ID: 1605237
End of Announcement EQS News Service
=------------------------------------------------------------------------------------
Image link:
https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1605237&application_name=news
(END) Dow Jones Newswires
April 12, 2023 02:00 ET (06:00 GMT)
Petrofac (LSE:PFC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Petrofac (LSE:PFC)
Historical Stock Chart
From Apr 2023 to Apr 2024
