DJ Petrofac Limited: RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020
Petrofac Limited ( PFC)
Petrofac Limited: RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020
20-Apr-2021 / 07:00 GMT/BST
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PETROFAC LIMITED
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020
- Protected margins and conserved cash in challenging market conditions
- Achieved cost savings of USUSD140 million, ahead of target
- Business performance net profit of USUSD48 million (1)(2)
- Reported net loss of USUSD180 million post impairments and separately disclosed items (2)
- New order intake of USUSD1.6 billion; 22% of awards in new energies (3)
- Net debt of USUSD116 million and liquidity of USUSD1.1 billion (8)
Year ended 31 December 2020 Year ended 31 December 2019
USUSDm Business Separately disclosed Reported Business Separately disclosed Reported
performance items performance items
Revenue 4,081 - 4,081 5,530 - 5,530
EBITDA 211 n/a n/a 559 n/a n/a
Net profit / (loss) 48 (228) (180) 276 (203) 73
(2)
Sami Iskander, Petrofac's Group Chief Executive, commented:
"Since joining Petrofac at the beginning of November, I have spent a lot of time listening to our people, our clients and our stakeholders. These discussions have confirmed the fundamental strengths that have made Petrofac one of the leading service providers to the energy industry over many years. They have also clarified what we need to do better to restore confidence and set the business on a course to grow with existing and new clients. This period has also been challenging following the SFO's announcement in early January. However, I am reassured by our uncompromising approach to compliance and ethics that is consistent with international best practice, independently audited, and critical to our future success.
"Our 2020 results demonstrate it has been a difficult year for Petrofac and the industry. The way the business has adapted to new ways of working to deliver for our clients - whilst reducing costs and conserving cash - is testament to the hard work, agility and resilience of our people.
"We look to the future with a clear plan and refreshed strategy focused on consistent best-in-class execution, returning to growth and delivering superior returns. This means reshaping our business to rebuild our backlog by capitalising on the recovery in addressable markets, diversifying into new geographies and accelerating our pivot to new energies. In parallel, we will deliver on our ESG commitments and continue to improve our cost-competitiveness. I am confident that we will recover to deliver sustainable value for all our stakeholders over the medium term."
DIVISIONAL HIGHLIGHTS
Engineering & Construction (E&C)
E&C's financial performance in the year was materially impacted by the COVID-19 pandemic, which has disrupted project schedules and increased costs, as well as the recognition of losses on a small number of contracts. Furthermore, the decline in oil prices resulted in a contraction in capital spending by clients in the period, resulting in delays in tender awards, the termination of our Dalma contracts and a tighter commercial environment. Despite these challenges, E&C has continued to safely deliver its projects and has taken swift action to reduce costs.
E&C financial results for the 12 months ended 31 December 2020: (1)(2) - Revenue down 31% to USUSD3.1 billion, driven by lower activity and variation orders - Net profit margin down 4.2 ppts to 2.0%, largely reflecting COVID-19 related cost increases, a change in project
mix and the recognition of contract losses, partially mitigated by cost savings - Net profit of USUSD62 million - USUSD0.7 billion of new order intake, reflecting the decline in industry awards
Engineering & Production Services (EPS)
EPS delivered a resilient financial performance in the year, benefitting from robust order intake and lower overhead costs, which helped mitigate the impact of weaker market conditions and the expected year-on-year decline in contract margins and contribution from associates. Order intake has benefitted from awards in new energies, building our presence in carbon capture, utilisation and storage (CCUS), hydrogen and waste-to-fuels.
EPS financial results for the 12 months ended 31 December 2020: (1)(2) - Revenue up 5% to USUSD0.9 billion, with growth in Projects offsetting lower Operations activity - Net profit margin down 1.2 ppts to 4.2%, with declines in both contract margins and the contribution from
associates (5) partly mitigated by overhead cost reductions and lower tax - Net profit down 19% to USUSD39 million - USUSD0.9 billion of awards, representing a book-to-bill of 1.0x
Integrated Energy Services (IES)
IES' financial performance in the year was largely defined by the sharp fall in commodity prices and completion of the sale of our remaining interests in Mexico. Production was also impacted by an unplanned outage at Cendor in PM304 in December, which is ongoing. These materially reduced revenue, with subsequent losses mitigated by reductions in operating and overhead cost savings, as well as lower interest, tax and depreciation.
IES financial results for the 12 months ended 31 December 2020: (1)(2) - Revenue down 43% to USUSD110 million - Lower average realised price (6) down 42% to USUSD39/boe - Equity production down 10% to 1.9 mmboe (net) - Lower PEC tariff income and cost recovery - EBITDA down 54% to USUSD39 million (5) - Decline in revenue, largely driven by the fall in oil price - Depreciation of the Mexican Peso - Material reduction in operating and overhead costs - Net loss of USUSD18 million (2019: USUSD4 million loss (5)) - Lower interest, tax and depreciation
SepArately disclosed items
The reported net loss of USUSD180 million (2019: USUSD73 million net profit) was negatively impacted by separately disclosed items and certain re-measurements of USUSD228 million (2019: USUSD203 million), of which approximately USUSD209 million were non-cash items. These predominantly related to: - A non-cash impairment of USUSD79 million and a fair value adjustment of USUSD42 million (both post-tax) as a result of
the fair value of the consideration received for the sale of our remaining 51% interest in our Mexican operations
in November 2020 being lower than expected. We have commenced legal proceedings to recover disputed consideration
of USUSD80 million; and, - A non-cash impairment charge of USUSD64 million (post-tax) following a review of the carrying amount of the
investment in Block PM304 in Malaysia.
NET DEBT AND LIQUIDITY
Net debt was USUSD116 million at 31 December 2020 (31 December 2019: USUSD15 million net cash), largely reflecting an anticipated working capital outflow in the year. A free cash outflow of USUSD73 million (31 December 2019: USUSD138 million inflow) principally reflected the impact of lower EBITDA and lower cash conversion, partly offset by lower tax and interest. Cost saving initiatives, the suspension of dividend payments and a reduction in capital investment conserved approximately USUSD275 million of cash flow in the year. These actions, together with USUSD140 million in gross cash proceeds from the sale of non-core assets in 2020, have protected the balance sheet and reduced capital intensity.
Liquidity was approximately USUSD1.1 billion as at 31 December 2020 (8) (31 December 2019: USUSD1.5 billion), following repayment of USUSD100 million of term loans, the retirement of USUSD200 million of undrawn facilities and the addition and extension of USUSD250 million of new liquidity secured during the year. Our leverage ratio was 1.2x at the end of the period.
On 1 February 2021 and after the period end, the Group increased its short-term liquidity position by issuing GBP300 million in commercial paper with a maturity of 12 months under the UK Government's Covid Corporate Financing Facility. Furthermore, on 7 April 2021, the Group amended its revolving credit facility, extending USD610 million of the committed facility to June 2022, with a six-month extension option to December 2022, subject to lender's agreement. The Group also agreed to amend the ADCB term loan, extending USD90 million of this committed facility to April 2022.
DIVIDEND
In April 2020, the Board suspended the payment of the final dividend in response to the COVID-19 pandemic and the fall in oil prices. The Board recognises the importance of dividends to shareholders, but in light of current market conditions has decided that dividend payments will remain suspended and therefore no dividend will be paid in respect of 2020 (2019: 12.7 US cents per share).
ORDER BACKLOG
The Group's backlog decreased 32% to USUSD5.0 billion at 31 December 2020 (2019: USUSD7.4 billion), reflecting low new order intake in E&C as clients deferred awards in response to the COVID-19 pandemic and fall in oil prices, as well as the termination of the USUSD1.5 billion Dalma contracts in the UAE.
31 December 2020 31 December 2019
USUSD billion USUSD billion
Engineering & Construction 3.3 5.7
Engineering & Production Services 1.7 1.7
Group backlog 5.0 7.4
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