15th Dec 2016 07:46
LONDON (Alliance News) - Oil and gas facility builder Petrofac Ltd on Thursday said it expects full year profit to meet its guidance but dip slightly from last year as it warned the integrated energy services division will drag down overall results.
Petrofac said net profit is expected to be in line with guidance for 2016 at USD410.0 million, but that will still have fallen from USD440.0 million in 2015. Both figures exclude exceptional items, including a USD101.0 million final charge in 2016 from the Laggan-Tormore loss, a troubled contract that also hit results last year.
Based on that final charge alone, net profit in 2016 will fall to USD309.0 million. In 2015, after Laggan-Tormore had been taken into account, net profit was only USD9.0 million.
Petrofac said the integrated energy service business - involving upstream developments for existing and new projects - will drag results down by reporting a loss of about USD55.0 million, dragging down the net profit of USD465.0 million generated by the rest of the business.
The loss from the integrated energy services unit ipredominantly reflects low realised oil and gas prices and a change in depreciation policy, Petrofac said.
On a brighter note, revenue is expected to hit a record this year, and Petrofac said operational efficiency has improved while the headcount has been reduced by 25%. The order intake stands at about USD1.40 billion, which Petrofac said reflected "challenging market conditions".
The backlog stands at USD14.50 billion at the end of November, down from USD17.40 billion at the end of June, showing a steep decline in only three months.
Petrofac said it has also reduced its capital intensity with USD300.0 million worth of proceeds from exiting the Berantai risk service contract that had been signed back in July.
Net debt is expected to stand at around USD900.0 million at the end of 2016, around the same level seen at the end of 2015.
"2016 has been a challenging year for the industry. The deferral and cancellation of project tenders has contributed to significantly reduced order intake in our lump-sum business year to date. Order intake in our reimbursable business has been more resilient, which will partially offset the anticipated reduction in engineering, procurement and construction revenues in 2017 from record levels this year," said Chief Executive Ayman Asfari.
"Our existing backlog continues to provide excellent visibility for group revenue next year and our bidding activity has increased during the last quarter of the year. We remain very focused on maintaining our cost competitiveness and discipline in a competitive market, and are well-positioned for a recovery in our core markets," he added.
By Joshua Warner; [email protected]; @JoshAlliance
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