Petrofac Limited ( PFC)
This announcement contains inside information
PETROFAC LIMITEDTRADING UPDATE
Petrofac issues the following pre-close trading update for the year ending 31 December 2023.
FINANCIAL AND STRATEGIC UPDATE:
OPERATIONAL PERFORMANCE:
BACKLOG AND OUTLOOK:
Tareq Kawash, Petrofac’s Group Chief Executive, commented:
“Our focus on rebuilding the backlog and unwinding historic working capital has resulted in tangible progress against our organic plan to strengthen the Group’s financial position.
“To further accelerate progress, my near-term priority, and that of our Board and leadership, remains on improving liquidity and materially strengthening the Group’s balance sheet, to deliver on our long-term potential.
“We are completing contracts in the legacy portfolio as planned, we continue to deliver well in the initial phases of the contracts awarded in 2023, and, as a result of excellent order intake, we enter 2024 with a high-quality backlog in both traditional and renewable energy of approximately US$8 billion. This provides us with good revenue visibility and demonstrates the continued confidence customers have in Petrofac’s delivery.”
FINANCIAL AND STRATEGIC UPDATE The Group has made good progress on its near-term priorities, since its announcement on 4 December 2023. Today, we announced that the Group has secured the performance guarantee for the first contract awarded under its Framework Agreement with TenneT, which was also supplemented with the second contract award under the agreement. The Group remains in active discussion with credit providers and its clients to secure the guarantees required for other new contracts in its portfolio.
Cash flow and net debt(1) The Group has continued to advance contractual settlements, collecting approximately US$180 million in the year to date. As referenced in the business update on 4 December 2023, due to the delays in securing guarantees, the Group no longer expects to collect advance payments on new contracts before the year-end.
Measures taken by management resulted in positive free cash flow in the second half, even in the absence of advance payment receipts, albeit this was offset by an increase of over US$100 million in collateral for guarantees. As a result, net debt at year-end is expected to be modestly higher than at the interim results (30 June 2023: US$584 million).
The Group has continued to maintain liquidity above its financial covenant.
Review of strategic and financial options On 4 December 2023, the Group announced that Aidan de Brunner had joined the Company as a Non-Executive Director to drive engagement with finance providers, investors and other stakeholders in an active review of strategic and financial options with the objective of materially strengthening the Company’s balance sheet, securing bank guarantees and improving short-term liquidity. Further announcements will be made as appropriate.
GROUP TRADING The Group continues to perform well for its clients. Management expects to report Group revenue of approximately US$2.5 billion, in line with guidance. Full-year business performance EBIT loss is expected to be approximately US$180 million. This includes approximately US$110 million one-off write-downs in contract settlements to protect cash flows and a one-off bad debt provision of approximately US$12 million for a client going into administration in the Asset Solutions business unit.
DIVISIONAL HIGHLIGHTS Engineering & Construction (E&C) The financial performance in E&C reflected the low opening backlog and the maturity of its legacy contract portfolio. Full year E&C revenues are expected to be around US$1.0 billion, with a full year EBIT loss of approximately US$215 million, including approximately US$110 of one-off write-downs on legacy contracts to protect and accelerate cash flows.
Following E&C’s strongest order intake in many years, it has good visibility of future revenue and profit growth. Guidance will be provided with the Group’s annual results, as usual.
Operationally, the initial phases of the new contracts secured in 2023 are progressing well. We previously guided that five of the remaining eight legacy contracts were expected to be completed or substantially completed(4) during 2023 or early 2024. Progress remains on track, with two reaching that milestone in 2023 and the remaining three expected to follow in early 2024.
With respect to the Thai Oil Clean Fuels project, good progress continues to be made on the construction phases and we are achieving our interim milestones. Negotiations are ongoing with our client and partners in relation to the reimbursement of additional committed costs. The timing of these negotiations is not wholly within the Company’s control and therefore, there is a risk to the 2023 EBIT numbers stated above. A project and commercial update will be provided with the publication of the Group’s full year results in 2024.
Year-to-date, following the second contract award under the TenneT framework agreement, E&C has secured new orders of approximately US$5.3 billion, split broadly evenly between our core markets and energy transition projects under the TenneT framework. Backlog is expected to be approximately US$5.9 billion at 31 December 2023, of which almost 90% relates to contracts secured in 2023.
Asset Solutions Asset Solutions has had another successful year, with order intake for the year-to-date of US$1.5 billion comprising renewals and extensions in core markets and new contract awards in both core markets and new geographies.
Full year revenues are expected to be US$1.4 billion with EBIT of between US$20 million and US$25 million, following a bad debt provision approximately US$12 million relating to a customer entering administration. Excluding this one-off event, expected underlying EBIT of between US$32 million and US$37 million reflects the completion of historic high margin contracts in 2022 and a higher contribution of pass-through revenues.
Integrated Energy Services (IES) IES has continued to deliver ahead of expectations. Net production is expected to be broadly in line with the prior year (2022: 1,261kboe). The average realised oil price (net of royalties)(5) for the year to date is expected to be approximately US$90/bbl, including the impact of hedging (2022: US$110/bbl), with the full year EBITDA expected to marginally exceed the guided range of US$65 million to US$75 million.
ORDER BACKLOG The Group's backlog(3) is expected to be approximately US$8.0 billion at 31 December 2023 (30 June 2023: US$6.6 billion), reflecting the exceptional order intake in both E&C and Asset Solutions.
Conference call Tareq Kawash, Group Chief Executive and Afonso Reis e Sousa, Chief Financial Officer, will host a conference call for analysts and investors at 8.30am today.
Analysts and investors can access the call on: +44 (0) 330 551 0200. Password: Quote ‘Petrofac Trading Update’ when prompted by the operator.
NOTES
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
Sophie Reid, Group Director of Communications
Teneo (for Petrofac) +44 (0) 207 353 4200 petrofac@teneo.com
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 8,500 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: | TST |
TIDM: | PFC |
LEI Code: | 2138004624W8CKCSJ177 |
Sequence No.: | 292987 |
EQS News ID: | 1800591 |
End of Announcement | EQS News Service |
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UK Regulatory announcement transmitted by EQS Group AG. The issuer is solely responsible for the content of this announcement.