20th Dec 2023 15:45
(Alliance News) - Petrofac Ltd on Wednesday announced a new contract with Hitachi Energy, sending its share price soaring, but the stock remains down over the last 12 months.
Petrofac is an energy infrastructure company with core markets in the Middle East and North Africa.
Shares in Petrofac surged up 39% to 31.00 pence each on Wednesday morning in London. However, over the last 12 months, the stock is down 56%.
"Energy services business Petrofac has been deeply unpopular with investors after a chequered history which included fines for corruption, uneven financial performance and a weak balance sheet. Therefore, any good news was always going to spark a positive share price reaction," said AJ Bell's Russ Mould
"This has proved correct with short sellers caught out after Petrofac secured a big North Sea contract and confirmed revenue roughly in line with guidance."
Petrofac said the project with Hitachi Ltd was its second under the six-project USD14 billion framework agreement with TenneT.
The agreement with Dutch-German transmission system operator TenneT aims to expand offshore wind capacity in the North Sea.
Petrofac said the new contract coincides with the confirmation that it has secured the performance guarantee requirement for the first contract, which TenneT awarded in March this year.
Petrofac's portion of the standalone contract is valued at around USD1.4 billion. It and Tokyo-based conglomerate Hitachi's Energy business will work to deliver the Nederwiek 1 under TenneT's two gigawatt programme.
John Pearson, Petrofac's chief operating officer of energy transition projects, commented: "The award of Nederwiek 1 continues our focus on the standardisation and harmonisation of design and execution that will be central to the 'design one, build many' philosophy of the 2GW programme.
"By aligning ourselves with TenneT's objectives, we are creating a blueprint for the rapid deployment of large-scale infrastructure projects crucial to Europe's energy transition."
Also on Wednesday, Petrofac said it expects its net debt for 2023 to be modestly higher than it was halfway through the year. Positive free cash flow generation, it added, has been offset by an increase in collateral required for guarantees.
Petrofac also expects approximately USD2.5 billion in full-year revenue, in line with guidance. For 2022, it had delivered USD2.59 billion in revenue.
Petrofac's Chief Executive Tareq Kawash said "we enter 2024 with a high-quality backlog in both traditional and renewable energy of approximately USD8 billion.
"This provides us with good revenue visibility and demonstrates the continued confidence customers have in Petrofac's delivery."
Meanwhile, Peel Hunt's Alexander Paterson said: "Liquidity remains tight, although above the financial covenant, and the group continues to review strategic and financial options."
By Sophie Rose, Alliance News senior reporter
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