DJ Petrofac Limited: Trading Update
Petrofac Limited ( PFC) Petrofac Limited: Trading Update 28-Jun-2022 / 07:00 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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TRADING UPDATE
Petrofac issues the following pre-close trading update for the six months ending 30 June 2022.
-- Trading and expectations in line with guidance provided in the AGM statement
-- Given the improved macro environment, E&C is expected to secure strong order intake in the second halfand deliver backlog growth year on year
-- Continued robust performance and order intake in Asset Solutions; on track to deliver full year EBITmargin of 5-6%, in line with guidance
-- Strong IES performance driven by higher production and stronger oil price
-- Well positioned with a healthy Group pipeline scheduled for award in the next 18 months
-- Net debt of USUSD345 million(4) and liquidity of USUSD507 million(5) at 23 June 2022, with net debt expectedto reduce in the second half
Sami Iskander, Petrofac's Group Chief Executive, commented: "We have made good progress in the first half of the year to position the business strategically to capitalise on the expected multi-year upcycle ahead, supported by a strong energy price environment and ambitious growth plans from clients in our core markets. Bidding activity in E&C is high and Asset Solutions has secured a strong order intake in the year to date. IES has delivered a significant increase in production and is benefitting from high oil prices. As previously reported, first half financial performance has been adversely impacted by delays and cost-overruns in our small and mature existing E&C portfolio.
"Looking forward, we expect Asset Solutions and IES to continue to deliver strong performance. Notwithstanding the short-term challenges in the existing E&C portfolio, we continue to expect the second half of 2022 to mark an inflection point for a sustained period of growth in backlog. We have a healthy 18 month Group bidding pipeline and we expect to grow the E&C backlog in 2022 and to secure significant new orders in 2023, underpinned by opportunities in the UAE and offshore wind."
DIVISIONAL HIGHLIGHTS
Engineering & Construction (E&C)
E&C continues to be impacted by the lingering impact of the pandemic as described in the AGM statement that has resulted in cost increases and some relatively unfavourable commercial settlements with clients. These dynamics will largely play out within the year, with a number of projects scheduled for completion over the course of the year and early 2023.
First half revenues in 2022 are expected to be around USUSD0.6 billion reflecting the lower levels of activity compared with the prior year period and project delays. Second half revenue is expected to be broadly in line with the first half. E&C is expected to report a first half EBIT loss of approximately USUSD35-45 million due to the immediate recognition of the additional Covid-related project costs to completion. In the second half, subject to the outcome of the final commercial settlements, it is expected to report a marginal EBIT profit, partially offsetting the loss in the first half.
The outlook for new awards in E&C is robust, supported by high energy prices and increased focus on energy security. Bidding activity is high and the 18 month pipeline is approximately USUSD53 billion with USUSD14 billion scheduled for award in 2022 and USUSD39 billion in 2023. Order intake (1) in the first half comprised USUSD125 million of variation orders on existing contracts with the majority of new contracts scheduled for award in the second half of the year. E&C backlog is expected to grow in 2022 and is well positioned to deliver a sustained period of growth in backlog as markets continue to improve.
Asset Solutions (AS)
The financial performance in the first half of 2022 has been robust, with revenue expected to be approximately USUSD0.5 billion. Revenue is expected to be higher in the second half, supported by strong order intake in the year to date.
The EBIT margin for the first six months of 2022 is currently expected to be between 6.0% and 6.5%, while full year EBIT margin guidance remains 5-6%, with lower margins in the second half due to contract mix.
Order intake (1) has been strong with USUSD0.8 billion contract awards and extensions secured in the first half, including significant awards in the Wells & Decommissioning service line in Australia, the Gulf of Mexico and Mauritania. Asset Operations and Asset Developments have secured awards in the UK and India. While order intake is expected to be first-half weighted, AS is expected to deliver a full year book-to-bill of greater than 1.0x, supporting revenue growth in 2023.
In New Energy Services, the strong momentum in 2021 has continued to increase in 2022 with a series of early-stage awards and we are making material progress with developing further strategic alliances with technology providers. In line with our strategy, a number of the early-stage opportunities we have performed engineering works on in new energy sectors beyond offshore wind are maturing and we are well positioned to secure execution phase project work later this year.
Integrated Energy Services (IES)
IES financial performance in the first half of the year has been strong, with a significant increase in production compared with prior year and higher oil prices. Net production is expected to be over 500 thousand barrels of oil (kbbls) for the first half of the year (H1 2021: 210 kbbls), reflecting the additional production from the East Cendor development, which commenced in June 2021 and the partial reinstatement of the main Cendor field production with a temporary gas lift system post the outage that occurred in December 2020. Net production in the second half is expected to increase further, with guidance for full year average production maintained at 3.0-3.5 kbbls/d (H1 2022 average net production: 2.9 kbbls/d).
The average realised oil price (net of royalties) (3) for the first half is expected to be approximately USUSD100/bbl (H1 2021: USUSD70/bbl), including the impact of hedging.
As previously guided, assuming an average USUSD100 Brent price for unhedged production for the remainder of 2022, IES is expected to deliver EBITDA of between USUSD80 million and USUSD90 million. Depreciation, which is highly correlated to production, is expected to be approximately USUSD45/bbl, in line with prior year.
ORDER BACKLOG
The Group's backlog (2) is expected to decrease marginally to USUSD3.8 billion at 30 June 2022 (31 December 2021: USUSD4.0 billion), reflecting progress delivered on the existing project portfolio and low new order intake in E&C, partially offset by strong order intake in Asset Solutions.
30 June 2022 31 December 2021
USUSD billion USUSD billion
Engineering & Construction 1.9 2.4
Asset Solutions 1.9 1.6
Group backlog 3.8 4.0
CASH FLOW, NET DEBT AND LIQUIDITY
Net debt (4) was USUSD345 million at 23 June 2022 (31 December 2021: USUSD144 million) reflecting the payment of the USUSD104 million SFO penalty and a working capital outflow largely driven by slower payments from clients, partially offset by the final USUSD51 million of proceeds from the Greater Stella Area divestment and USUSD47 million from the settlement related to the dispute on consideration payable from the divestment of the Mexico operations. Liquidity (5) was USUSD507 million at 23 June 2022 (31 December 2021: USUSD705 million).
Net debt is expected to reduce in the second half of the year due to a reduction in working capital in E&C. As previously guided, principally as a result of the E&C performance and despite delays in cash collections due to extended commercial settlements, the Group expects to have a modest free cash outflow in the year.
Conference call
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)330 336 9601, confirmation code: 1605431
The Group's half year results for period ended 30 June 2022 are scheduled to be announced on 11 August 2022.
NOTES 1. 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. 2. 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. 3. Average net realised price is net of royalties and hedging gains or losses. It is based on sales volumes,which may differ from production due to under/over-lifting in the period. 4. Net debt comprises interest-bearing loans and borrowings less cash and short-term deposits (i.e. excludesIFRS 16 lease liabilities). 5. Liquidity of USUSD507 million consists of USUSD426 million of gross cash and USUSD81 million of undrawncommitted facilities. Gross cash includes USUSD37 million held in certain countries whose exchange controlssignificantly restrict or delay the remittance of these amounts to foreign jurisdictions. It also includes USUSD220million in joint operation bank accounts which are generally available to meet the working capital requirements ofthose joint operations, but which can only be made available to the Group for its general corporate use with theagreement 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) 20 7811 4900
Jonathan Yarr, Head of Investor Relations
jonathan.yarr@petrofac.com
Alison Flynn, Group Head of Communications
alison.flynn@petrofac.com
+44 (0) 20 7811 4913
Tulchan Communications Group
+44 (0) 20 7353 4200
petrofac@tulchangroup.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 8,200 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 OAM Categories: 3.1. Additional regulated information required to be disclosed under the laws of a Member State Sequence No.: 170953 EQS News ID: 1384937 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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(END) Dow Jones Newswires
June 28, 2022 02:00 ET (06:00 GMT)
