Petrofac Limited ( PFC)
Petrofac Limited: Results for the six months ended 30 June 2023
10-Aug-2023 / 07:00 GMT/BST
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PETROFAC LIMITED
RESULTS FOR THE SIX MONTHSED 30 JUNE 2023
-- Major increase in Group backlog to USUSD6.6 billion at 30 June 2023 (31 December 2022: USUSD3.4 billion) with
strong order intake in both E&C and Asset Solutions
-- Strong operating performance in Asset Solutions and IES, in line with expectations
-- E&C first half EBIT loss of USUSD122 million reflecting the combination of lower levels of activity,
onerous contracts with no margin recognition, adverse operating leverage, and USUSD67 million one-off write downs in
contract settlements resulting from measures taken to protect full year cash flows
-- Good progress in resolving historical contractual disputes to release working capital in the second half
-- As a result of these actions, the free cash outflow of USUSD225 million in the first half is expected to
largely reverse in the second half, maintaining a target of broadly neutral free cash flow for the full year
-- Well positioned to continue backlog growth in both E&C and Asset Solutions, with a healthy pipeline
scheduled for award in the next 16 months of USUSD60 billion
Six months ended 30 June 2023 Six months ended 30 June 2022 (restated)(3)
USUSDm Business Separately disclosed Reported Business Separately disclosed Reported
performance (1) items performance (1) items
Revenue 1,207 - 1,207 1,247 - 1,247
EBIT (96) (7) (103) 52 25 77
Net (loss)/profit (160) (5) (165) 15 24 39
(2)
Tareq Kawash, Petrofac's Group Chief Executive, commented:
"Whilst the first half of 2023 reflected the challenges of the
legacy contract portfolio, it was also Petrofac's strongest period
for new awards in many years. Thanks to the efforts of our people
around the Group, we secured USUSD4.3 billion of new orders in core
markets and in new energies. This high-quality backlog, a growing
talented team and a diverse pipeline of future opportunities
provides Petrofac with a strong base from which to move
forward.
"As I look ahead to the second half, my focus is on continuing
to close out the legacy portfolio, improving our financial
resilience and strengthening the balance sheet through the
commercial settlements and advance payments due in the period,
whilst delivering exemplary execution and selectively bidding to
grow our high-quality backlog.
"After four months as CEO, I am encouraged by the energy and
drive in the business. We have demonstrated the strength of our
competitive position with a succession of significant contract
wins, providing us with confidence and momentum to deliver further
progress in the second half and beyond." DIVISIONAL HIGHLIGHTS
Engineering & Construction (E&C)
E&C nearly tripled its backlog in the first half, securing
USUSD3.4 billion of new awards, in both our core markets, with
long-standing clients, and in new energies.
In core markets, Petrofac won two major contracts, a gas
compressor station for ADNOC in the UAE, and a petrochemical
facility for Sonatrach in Algeria, broadening our portfolio within
this sector in partnership with a petrochemicals technical
specialist. In new energies, TenneT selected the Petrofac-Hitachi
Energy partnership for a multi-year framework agreement covering
six projects, worth approximately EUR13 billion, with the first
contract already awarded and valued at over EUR2 billion, split
between the partnership.
E&C financial results for the six months ended 30 June
2023(1)
-- USUSD3.4 billion of new order intake resulting in backlog of
USUSD4.5 billion (31 December 2022: USUSD1.6billion)
-- Revenue down 32% to USUSD0.5 billion (H1 2022: USUSD0.7
billion)
-- EBIT loss of USUSD122 million
The financial performance in the first half reflected low levels
of activity on the legacy portfolio of contracts, with the new
awards driving the growth in backlog but with minimal impact on
other financial metrics in the period. Revenue in the first half
reflected the lower levels of activity from the lower opening
backlog compared with the prior period. The first half EBIT loss of
USUSD122 million included approximately USUSD67 million of one-off
write-downs on legacy contracts resulting from actions taken by
management to protect full year cash flows. E&C results also
continue to reflect the impact of onerous contracts with no margin
recognition, adverse operating leverage due to low levels of
activity and an element of additional cost overruns on legacy
contracts.
We remain focused on closing out legacy contracts, with five of
the remaining eight contracts expected to be completed(5) during
the second half of the year or early in 2024. On the Thai Oil
Clean
Fuels contract, good progress is being made on the construction
phases of the project. The execution
plan remains in line with the update provided with the 2022
year-end results and operational and commercials discussions with
the client are ongoing.
Bidding activity remains high with a total pipeline scheduled
for award in the 16-months to December 2024 of approximately
USUSD44 billion, of which USUSD8 billion is scheduled for award in
2023. Activity on new contracts is moving apace and we continue to
build on our existing talent base through active recruitment across
the project delivery disciplines. Asset Solutions
Asset Solutions delivered a robust financial performance in the
first half, with backlog growth resulting from the new order intake
of USUSD0.9 billion in the period. It maintained its core 40%
market share in the UK, and a renewal rate of over 80% for
operations and maintenance contracts. In line with our strategy to
leverage our UK centre of excellence and expand our geographic
footprint into higher margin markets, in July, Petrofac was awarded
a three-year multi-million pound integrated services contract for
an FPSO(7) vessel by CNRI in Ivory Coast, growing our presence in
Africa.
Asset Solutions financial results for the six months ended 30
June 2023(1)
-- USUSD2.1 billion in backlog with a book-to-bill of 1.4x in
the first half of 2023
-- Revenue up by 34% to USUSD0.7 billion (H1 2022: USUSD0.5
billion)
-- EBIT of USUSD14 million (H1 2022: USUSD33 million)
Asset Solutions also delivered revenue growth in the first half,
underpinned by the strong order intake in 2022 and the year to
date. EBIT margin decreased to 2.1% (H1 2022: 6.5%), in line with
expectations, due to contract mix across the service lines, with
the completion of historic high margin contracts in the first half
of 2022, and a higher contribution of pass-through revenue.
In new energies, we saw increased levels of activity in the
first half, as we continued to secure further early-stage awards
and strategic alliances with technology providers, including an
exclusive partnership with OCI Global to deliver their
gasification-based green methanol projects. We remain well
positioned over the medium-term to secure engineering, procurement
and construction scopes of work, as well as other execution phase
project work, as projects reach final investment decision.
Integrated Energy Services (IES)
IES delivered another period of strong financial performance in
the first half, with higher revenue and higher production compared
to the prior period.
IES financial results for the six months ended 30 June
2023(1)
-- Net production up 16% to 640 thousand barrels of oil (kboe)
(H1 2022: 553 kboe)
-- Revenue increased 13% to USUSD63 million (H1 2022: USUSD56
million)
-- EBITDA increased to USUSD48 million (H1 2022: USUSD44
million) CASH FLOW AND NET DEBT
In the first half, there was a free cash outflow of USUSD225
million, which resulted in a net debt of USUSD584 million at 30
June 2023 (31 December 2022: USUSD349 million). This movement
reflects both the operating loss and a net working capital outflow.
The net working capital outflow was principally in the E&C
operating segment due to delays in the settlement resolutions
required to secure cash collections. Progress on these resolutions
was made in the first half however, with corresponding receipts
expected during the second half. Alongside cash advances on the new
contract wins, we expect that this will result in a broadly neutral
free cash flow for the full year. Liquidity(8) was USUSD253 million
at 30 June 2023 (31 December 2022: USUSD506 million).
In the short term, the Group is reliant on a small number of
relatively high value collections in respect of the conclusion of
historical contracts, settlements and new awards. The expected
timing and realisation of these collections reflect management's
assessment of the most likely outcome. However, the resolution of
these matters is not wholly within Petrofac's control and,
consequently, there remains a level of uncertainty which is
disclosed within note 2.4 to the interim condensed consolidated
financial statements. ORDER BACKLOG
The Group's backlog(6) increased substantially to USUSD6.6
billion at 30 June 2023 (31 December 2022: USUSD3.4 billion),
reflecting significant order intake in E&C (USUSD3.4 billion)
and in Asset Solutions (USUSD0.9 billion), with three major EPC
project awards in the first half of the year, which also included a
six-project EUR13 billion framework agreement expected to provide
an additional five future 2GW HVDC projects, with the first
contract awarded in March 2023 and valued at over EUR2 billion,
split between the partnership.
30 June 2023 31 December 2022
USUSD billion USUSD billion
Engineering & Construction 4.5 1.6
Asset Solutions 2.1 1.8
Group backlog 6.6 3.4 OUTLOOK
The outlook for new awards in E&C is robust, with a total
pipeline scheduled for award by December 2024 of approximately
USUSD44 billion, of which USUSD8 billion is scheduled for award in
2023. Bidding activity also remains high, with USUSD6 billion of
bids submitted.
E&C has secured revenue of USUSD0.5 billion for the second
half of 2023, approximately a third of which from contracts with no
future margin contribution. Due to the small portfolio of active
contracts, and an adverse operating leverage, we expect an EBIT
loss of approximately 10% in E&C for the full year, before the
impact of the USUSD67 million of write-downs.
Asset Solutions has a strong pipeline of opportunities with
USUSD16 billion scheduled for award by December 2024, of which
USUSD7 billion is scheduled for award in 2023.
Asset Solutions has secured revenue of USUSD0.7 billion for the
second half of 2023. The business is expected to continue to
perform well, with revenue growth driven by focused geographic
expansion and new order intake in Well Engineering &
Decommissioning. We expect EBIT to be second half weighted, with a
healthy full year EBIT in 2023, albeit lower than 2022, reflecting
the roll-off of certain high margin contracts and a higher
proportion of pass-through revenue.
IES is expected to deliver another robust production performance
in 2023, with production marginally lower than 2022. At USUSD85/bbl
oil price, EBITDA is expected to be in the range of USUSD65 million
to USUSD75 million, taking into account hedging.
At Group level, we expect cash flow to be broadly neutral in
2023. In the second half, we expect a positive tailwind from cash
advances collected from new E&C awards won in the first half,
coupled with an unwind of working capital. FINANCIAL STATEMENTS
Click on, or paste the following link into your browser, to view
the Group's interim condensed consolidated financial statements for
the six months ended 30 June 2023:
https://www.petrofac.com/media/i4khgz50/
petrofac-half-year-2023-results-financial-statements.pdf
PRESENTATION
Our half year results presentation and equity analysts call will
be held at 8:30am today and will be webcast live via:
https://broadcaster-audience.mediaplatform.com/#/event/64bf64ce1c86d434a61289d6/registration
NOTES 1. Business performance before separately disclosed items.
This measurement is shown by Petrofac as a meansof measuring
underlying business performance. See note 4 to the interim
condensed consolidated financialstatements. 2. Attributable to
Petrofac Limited shareholders. 3. The prior year numbers are
restated; see note 2.6 to the interim condensed consolidated
financialstatements 4. New order intake is defined as new contract
awards and extensions, net variation orders and the
rollingincrement attributable to Asset Solutions contracts which
extend beyond five years. 5. Completed and substantially completed
contracts: contracts where (i) a Provisional Acceptance
Certificate(PAC) has been issued by the client, or (ii) transfer of
care and custody (TCC) to the client has taken place, or(iii) PAC
or TCC are imminent, and no substantive work remains to be
performed by Petrofac. 6. Backlog consists of: the estimated
revenue attributable to the uncompleted portion of Engineering
&Construction division projects; and, for the Asset Solutions
division, the estimated revenue attributable to thelesser of the
remaining term of the contract and five years. 7. Floating
Production Storage and Offloading (FPSO) vessel. 8. Gross liquidity
of USUSD253 million on 30 June 2023 consisted of USUSD253 million
of gross cash. Gross cashincluded USUSD9 million held in countries
whose exchange controls significantly restrict or delay the
remittance ofthese amounts to foreign jurisdictions. It also
included USUSD127 million in joint operation bank accounts which
aregenerally available to meet the working capital requirements of
those joint operations, but which can only be madeavailable to the
Group for its general corporate use with the agreement of the joint
operation partners.
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 made on the basis of current
knowledge and assumptions and involve risks and uncertainties.
Various factors could cause actual future results, performance or
events to differ materially from those expressed 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
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
Martin Robinson
NOTES TO EDITORS
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 7,950 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
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ISIN: GB00B0H2K534
Category Code: IR
TIDM: PFC
LEI Code: 2138004624W8CKCSJ177
Sequence No.: 263566
EQS News ID: 1700213
End of Announcement EQS News Service
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