9th May 2014 07:02
LONDON (Alliance News) - Petrofac Ltd Friday said it has achieved good Engineering, Construction, Operations & Maintenance progress in its first quarter, but it warned that net profit will fall in 2014 due to lower-than-expected earnings from its Integrated Energy Services operations, due partly to delays in development of is major Greater Stella Area project.
The oil and gas services company said it now expects its net profit to fall to between USD580 million and USD600 million in 2014 from USD650 million in 2013, which it attributed to low earnings from the Integrated Energy Services division.
The company confirmed in February that it expected net income in 2014 to be either flat or to grow modestly year-on-year. It had said it expected further growth in 2015, but this would depend on the timing of potential engineering, construction, operations and maintenance contract awards during 2014.
On Friday, Petrofac said the Integrated Energy Services losses came from delays to the development of its Greater Stella Area project in the North Sea, lower than expected production at its Ticleni site in Romania, dilution of its equity interest in Nigerian company Seven Energy Ltd, and not enough contribution from its new awards during the year.
The company announced delays to the development of its topsides processing plant at the FPF1 floating production facility on the Greater Stella Area. It now believes it will not achieve the relocation of the developed facility to its site before this year's winter weather without completing significant offshore work and has therefore moved back this process until spring 2015.
As such, production from the Greater Stella development has now also been held back until mid-2015.
The company added that production from its Ticleni field remains below expectations, but it spent the latter half of 2013 completing additional studies to improve its understanding of the field and drilling at the area is expected to resume one a revised Field Development plan has been completed.
"In (Integrated Energy Services), following a review of our existing and prospective projects, we are working hard to deliver improvements in operational performance on the existing portfolio and are re-focusing our IES business development plans," Chief Executive Ayman Asfari said in a statement.
"We have stepped back from certain business development opportunities and, going forward, we will prioritise IES opportunities which best lever our existing core areas of strength, which offer clear synergies with ECOM, and which deliver attractive returns on capital employed," he added.
However, the company did say it has seen good performance from its Engineering, Construction, Operations & Maintenance operations, with an order intake of USD4.4 billion in its first quarter ended March 31.
Petrofac said the order intake took its backlog to USD18.6 billion at March 31, from USD15.0 billion at December 31, giving the company good revenue visibility moving forward.
The company has achieved USD3 billion in new awards in the year to date in Kuwait and Oman and said its pipeline of bidding opportunities remains strong making it confident of growing its Onshore Engineering & Construction backlog through 2014.
Petrofac added that it has net debt of USD900 million at March 31, higher than USD700 million at December 31.
The news comes after the company announced in February modest net profit growth and revenue growth for 2013 that was in line with, to slightly better than, market expectations.
At the time, the company said its revenue increase was due to good growth in Offshore Projects & Operations, Engineering & Consulting Services, and Integrated Energy Services, due to high levels of activity.
By Tom McIvor; [email protected]; @TomMcIvor1
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