25th Feb 2015 14:13
LONDON (Alliance News) - Petrofac Ltd shares rose on Wednesday after it said it has maintained its dividend for 2014 and its order backlog continued to rise, but it reported a drop in net profit for 2014 after a significant impairment charge and lowered its net profit target in 2015 to reflect the drop in the prevailing oil price.
In addition, the company said it has signed an agreement to form a strategic marketing alliance with US engineering and construction company McDermott International Inc to pursue opportunities together across a wide range of geographies.
Petrofac shares were up 9.8% to 895.00 pence per share on Wednesday afternoon.
Petrofac is a an oilfield services company to the international oil and gas industry with four main divisions: onshore engineering and construction, offshore projects and operations, engineering and consulting services and its integrated energy service business.
For the year ended December 31, the company reported earnings before interest, tax, depreciation and amortization of USD935 million, down from USD1.03 billion in 2013. Petrofac said Ebitda margins were lower from its onshore and offshore divisions, partially offset by margin growth from its integrated energy service unit.
Petrofac's net profit for the year fell to USD120 million, a significant drop from USD650 million a year earlier, as it booked significant exceptional items and a writedown on its integrated services portfolio. Excluding the writedowns and impairments, profit fell to USD581 million from USD650 million, which was ahead of analyst expectations but at the lower end of the company's guidance. Earnings per share fell to 168.99 cents in 2014 from 189.10 cents.
Exceptional items in relation to the company's integrated energy service unit totalled USD461 million, predominantly attributed to Ticleni field in Romania, the Greater Stella Area in the North Sea, and the lower oil price environment, it said.
Petrofac kept its final dividend flat from 2013, at 43.80 cents per share, leading to a total dividend for the year of 65.80 cents, also flat from a year earlier.
"We are committed to delivering value for our clients and our shareholders and we are well positioned to meet the challenges presented by the lower oil price. We remain on course to deliver net profit in 2015 in line with our previous guidance," said Asfari.
In November, Petrofac set a net profit guidance of around USD500 million, however this was based on an oil price of around USD82 per barrel. It has now revised down its guidance to USD460 million based on a price of USD60 per barrel, to reflect the fall in oil prices since the middle of 2014.
For every USD1 increase or decrease to the oil price, Petrofac says it impacts its net earnings by around USD2 million.
"Other than the movement in the oil price the group continues to perform in line with management expectations at the time of the November announcement," it said.
"Having taken robust action to address the challenges we have faced on the Ticleni, Greater Stella Area and Laggan-Tormore projects, Petrofac enters 2015 in a much stronger position," said Chief Executive Ayman Asfari.
Revenue for 2014 reached USD6.24 billion, a slight decline from USD6.32 billion in 2013, with good growth in offshore projects and operations and engineering and consulting services more than offset by lower revenue from onshore engineering and construction and its Integrated Energy Services business.
Petrofac's order backlog hit "record year-end levels" after reporting a 26% increase from 2013 to USD18.9 billion from USD15.0 billion. Petrofac said this is in addition to USD3.5 billion of order intakes that have been secured in the year to date, giving the company "excellent revenue visibility for 2015 and beyond," it said.
In 2014, Petrofac spent a total of USD668 million in capital expenditure on property, plant and equipment, up from USD597 million in 2013. It spent an additional USD97 million on its intangible oil and gas assets in the period, over double that spent in 2013, it said.
Its net debt position remains at the same level as at the end of 2013, at USD700 million, and the company said it delivered overhead and operating cost savings of USD170 million in 2014 across its portfolio, with the intention of targeting further savings in 2015, it said.
"While the operating environment remains uncertain, with the industry adjusting to a lower oil price environment, we are well positioned and will maintain our bidding discipline and focus on our areas of core strength. We enter 2015 with a very cost-effective structure and we are continuing to drive cost savings to maintain our strong competitive position," said Petrofac.
In a separate statement Wednesday, the company said it has signed a memorandum of understanding with Houston-based McDermott International to form a five-year strategic marketing alliance. Under the alliance, the two companies will jointly pursue opportunities in the deepwater subsea, umbilicals, risers and flowlines sector, otherwise known as the SURF sector.
The two companies will be targeting regions in the US Gulf of Mexico, Mexico, West Africa, Brazil, the Mediterranean, and the North Sea, it said.
"The alliance will give both parties a wider geographic reach and enhanced access to world-class opportunities. The blend of experience, assets and capabilities will enable us to offer clients a very competitive integrated solution for their deepwater developments," said Petrofac.
By Joshua Warner; [email protected]; @JoshAlliance
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