Final Results

9th Mar 2009 07:00



CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2008

			2008		2007
	Notes		US$'000		US$'000
Revenue	4a		3,329,536		2,440,251
Cost of sales	4b		(2,751,063)		(2,029,772)
Gross profit			578,473		410,479
Selling, general and administration expenses	4e		(227,765)		(165,308)
Other income	4c		7,421		3,951
Other expenses	4d		(2,543)		(621)
Profit from operations before tax
and finance income/(costs)			355,586		248,501
Finance costs	5		(13,906)		(8,527)
Finance income	5		16,688		18,259
Profit before tax			358,368		258,233
Income tax expense	6		(93,379)		(69,517)
Profit for the year attributable to Petrofac Limited shareholders			264,989		188,716
Earnings per share (US cents)	7
- Basic			78.03		55.14
- Diluted			77.11		54.61

The attached notes 1 to 32 form part of these consolidated financial statements.

CONSOLIDATED BALANCE SHEET

At 31 December 2008

					As restated
			2008		2007
	Notes		US$'000		US$'000
ASSETS
Non-current assets
Property, plant and equipment	9		413,064		256,237
Goodwill	11		97,534		71,743
Intangible assets	12		38,353		9,010
Available-for-sale financial assets	14		566		1,586
Derivative financial instruments	15		7,227		1,775
Other financial assets	15		1,899		23
Deferred income tax assets	6c		46,444		11,472
			605,087		351,846
Current assets
Inventories	16		4,077		2,256
Work in progress	17		252,695		270,181
Trade and other receivables	18		700,931		509,025
Due from related parties	30		2,907		3,147
Derivative financial instruments	15		5,631		27,298
Other financial assets	15		4,078		2,702
Cash and short-term deposits	19		694,415		581,552
			1,664,734		1,396,161
TOTAL ASSETS			2,269,821		1,748,007
EQUITY AND LIABILITIES
Equity attributable to Petrofac Limited shareholders
Share capital	20		8,636		8,636
Share premium			68,203		68,203
Capital redemption reserve			10,881		10,881
Shares to be issued	10		1,988		-
Treasury shares	21		(69,333)		(29,842)
Other reserves	23		(39,292)		87,433
Retained earnings			577,739		377,450
			558,822		522,761
Minority interests			209		209
TOTAL EQUITY			559,031		522,970
Non-current liabilities
Interest-bearing loans and borrowings	24		88,188		81,640
Provisions	25		29,663		19,046
Other financial liabilities	26		32,265		13,870
Deferred income tax liabilities	6c		38,196		34,137
			188,312		148,693
Current liabilities
Trade and other payables	27		513,329		408,017
Due to related parties	30		559		744
Interest-bearing loans and borrowings	24		54,412		28,455
Other financial liabilities	26		6,362		864
Income tax payable			110,428		47,577
Billings in excess of cost and estimated earnings	17		285,527		208,105
Accrued contract expenses	28		551,861		382,582
			1,522,478		1,076,344
TOTAL LIABILITIES			1,710,790		1,225,037
TOTAL EQUITY AND LIABILITIES			2,269,821		1,748,007

The financial statements on pages 73 to 126 were approved by the Board of Directors on 6 March 2009 and signed on its behalf by Keith Roberts - Chief Financial Officer.

The attached notes 1 to 32 form part of these consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENT 

For the year ended 31 December 2008

								As restated
				2008				2007
	Notes			US$'000				US$'000
OPERATING ACTIVITIES
Profit before tax				358,368				258,233
Adjustments for:
Depreciation, amortisation, impairment and write off	4b, 4e			63,366				52,758
Share-based payments	4f			9,448				5,412
Difference between other long-term employment benefits paid and amounts recognised in the income statement				9,007				5,852
Net finance (income)	5			(2,782)				(9,732)
Loss (gain) on disposal of property, plant and equipment	4b,4c			41				(8,834)
Gain on disposal of held for sale assets	4c			-				(243)
Other non-cash items, net				11,303				1,756
Operating profit before working capital changes				448,751				305,202
Trade and other receivables				(194,817)				(170,531)
Work in progress				17,486				97,688
Due from related parties				240				4,578
Inventories				(1,821)				(313)
Other current financial assets				(1,680)				(395)
Trade and other payables				104,708				64,044
Billings in excess of cost and estimated earnings				77,422				83,115
Accrued contract expenses				117,505				(12,455)
Due to related parties				(185)				562
				567,609				371,495
Other non-current items, net				(1,927)				133
Cash generated from operations				565,682				371,628
Interest paid				(11,526)				(7,004)
Income taxes paid, net				(67,418)				(32,417)
Net cash flows from operating activities				486,738				332,207
INVESTING ACTIVITIES
Purchase of property, plant and equipment			(255,542)				(117,157)
Acquisition of subsidiaries, net of cash acquired	10		(40,774)				(4,902)
Payment of deferred consideration on acquisition	10		-				(64)
Purchase of intangible oil & gas assets	12		(37,036)				(48,604)
Purchase of available-for-sale financial assets			-				-
Proceeds from disposal of property, plant and equipment			1,031				12,166
Interest received			16,704				18,562
Net cash flows used in investing activities			(315,617)				(139,999)

The attached notes 1 to 32 form part of these consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENT (continued)

For the year ended 31 December 2008

					As restated
			2008		2007
	Notes		US$'000		US$'000
FINANCING ACTIVITIES
Proceeds from interest-bearing loans and borrowings			25,000		-
Repayment of interest-bearing loans and borrowings			(6,213)		(2,767)
Shareholders loan note transactions, net			-		216
Treasury shares purchased	21		(42,500)		(21,698)
Equity dividends paid			(64,135)		(39,479)
Net cash flows used in financing activities			(87,848)		(63,728)
NET INCREASE IN CASH AND CASH EQUIVALENTS			83,273		128,480
Cash and cash equivalents at 1 January			565,886		437,406
CASH AND CASH EQUIVALENTS AT 31 DECEMBER	19		649,159		565,886

The attached notes 1 to 32 form part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2008 

	Issued		Capital
	share	Share	redemption	Shares to	*Treasury	Other	Retained		Minority	Total
	capital	premium	reserve	be issued	shares	reserves	earnings	Total	interests	equity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
					(note 21)	(note 23)
Balance at 1 January 2008 as previously reported	8,636	68,203	10,881	-	(29,842)	50,467	377,450	485,795	209	486,004
Restatement	-	-	-	-	-	36,966	-	36,966	-	36,966
Balance at 1 January 2008
as restated	8,636	68,203	10,881	-	(29,842)	87,433	377,450	522,761	209	522,970
Foreign currency translation	-	-	-	-	-	(84,232)	-	(84,232)	-	(84,232)
Net gains on maturity of cash flow
hedges recycled in the year	-	-	-	-	-	(32,103)	-	(32,103)	-	(32,103)
Net changes in fair value of
derivatives and financial assets
designated as cash flow hedges	-	-	-	-	-	(25,907)	-	(25,907)	-	(25,907)
Net changes in the fair value
of available-for-sale
financial assets	-	-	-	-	-	(879)	-	(879)	-	(879)
Impairment of available-for-sale
financial asset	-	-	-	-	-	355	-	355	-	355
Total income and expenses
for the year recognised
in equity	-	-	-	-	-	(142,766)	-	(142,766)	-	(142,766)
Net profit for the year	-	-	-	-	-	-	264,989	264,989	-	264,989
Total income and expenses
for the year	-	-	-	-	-	(142,766)	264,989	122,223	-	122,223
Shares to be issued on acquisition	-	-	-	1,988	-	-	-	1,988	-	1,988
(note 10)
Share-based payments charge (note 22)	-	-	-	-	-	9,448	-	9,448	-	9,448
Shares vested/forfeited during the year (note 21)	-	-	-	-	3,009	(3,009)	-	-	-	-
Treasury shares purchased (note 21)	-	-	-	-	(42,500)	-	-	(42,500)	-	(42,500)
Transfer to reserve for share-based payments (note 22)	-	-	-	-	-	9,602	-	9,602	-	9,602
Dividends (note 8)	-	-	-	-	-	-	(64,700)	(64,700)	-	(64,700)
Balance at 31 December 2008	8,636	68,203	10,881	1,988	(69,333)	(39,292)	577,739	558,822	209	559,031

* Shares held by Petrofac Employee Benefit Trust.

The attached notes 1 to 32 form part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

For the year ended 31 December 2008 

	Issued		Capital
	share	Share	redemption	*Treasury	Other	Retained		Minority	Total
	capital	premium	reserve	shares	reserves	earnings	Total	interests	equity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
				(note 21)	(note 23)
Balance at 1 January 2007 as previously reported	8,629	66,210	10,881	(8,144)	19,611	227,508	324,695	209	324,904
Restatement	-	-	-	-	19,213	-	19,213	-	19,213
Balance at 1 January 2007
as restated	8,629	66,210	10,881	(8,144)	38,824	227,508	343,908	209	344,117
Foreign currency translation	-	-	-	-	(72)	-	(72)	-	(72)
Net gain on maturity of cash flow
hedges recycled in the year	-	-	-	-	(22,183)	-	(22,183)	-	(22,183)
Net changes in fair value of
derivatives and financial assets
designated as cash flow hedges	-	-	-	-	59,487	-	59,487	-	59,487
Net changes in the fair value
of available-for-sale
financial assets	-	-	-	-	(140)	-	(140)	-	(140)
Total income and expenses
for the year recognised
in equity	-	-	-	-	37,092	-	37,092	-	37,092
Net profit for the year	-	-	-	-	-	188,716	188,716	-	188,716
Total income and expenses
for the year	-	-	-	-	37,092	188,716	225,808	-	225,808
Share-based payments charge (note 22)	-	-	-	-	5,412	-	5,412	-	5,412
Shares issued on acquisition (note 20)	7	1,993	-	-	-	-	2,000	-	2,000
Treasury shares purchased (note 21)	-	-	-	(21,698)	-	-	(21,698)	-	(21,698)
Transfer to reserve for share-based payments (note 22)	-	-	-	-	6,105	-	6,105	-	6,105
Dividends (note 8)	-	-	-	-	-	(38,774)	(38,774)	-	(38,774)
Balance at 31 December 2007
as restated	8,636	68,203	10,881	(29,842)	87,433	377,450	522,761	209	522,970

* Shares held by Petrofac Employee Benefit Trust.

The attached notes 1 to 32 form part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2008 

1 CORPORATE INFORMATION 

The consolidated financial statements of Petrofac Limited (the "Company") for the year ended 31 December 2008 were authorised for issue in accordance with a resolution of the directors on 6 March 2009. 

Petrofac Limited is a limited liability company registered in Jersey under the Companies (Jersey) Law 1991 and is the holding company for the international group of Petrofac subsidiaries (together "the group"). The Company's 31 December 2008 financial statements are shown on pages 127 to 143. The group's principal activity is the provision of facilities solutions to the oil & gas production and processing industry.

A full listing of all group companies, and joint venture companies, is contained in note 32 to these consolidated financial statements.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and available-for-sale financial assets which have been measured at fair value. The presentation currency of the consolidated financial statements is United States dollars and all values in the financial statements are rounded to the nearest thousand (US$'000) except where otherwise stated. Certain comparative information has been reclassified to conform to current period presentation and prior period earnings per shares numbers have been revised to be consistent with the current period presentation.

Statement of compliance

The consolidated financial statements of Petrofac Limited and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) and applicable requirements of Jersey law. 

Basis of consolidation

The consolidated financial statements comprise the financial statements of Petrofac Limited and its subsidiaries. The financial statements of its subsidiaries are prepared for the same reporting year as the Company and where necessary, adjustments are made to the financial statements of the group's subsidiaries to bring their accounting policies into line with those of the group.

Subsidiaries are consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which control is transferred out of the group. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group balances and transactions, including unrealised profits, have been eliminated on consolidation.

Minority interests in subsidiaries consolidated by the group are disclosed separately from the group's equity and income statement. Losses attributable to minority interests in excess of the minority's interest in the net assets of the subsidiary are adjusted against the interest of the group unless there is a binding obligation on the part of the minority to contribute additional investment in the subsidiary.

New standards and interpretations

The group has adopted new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on or after 1 January 2008. The principal effects of the adoption of these new and amended standards and interpretations are discussed below:

IFRIC 11 'IFRS 2 Group and Treasury Share Transactions'

This interpretation clarifies that where any arrangement is made whereby an employee is granted rights to an entity's equity instruments; it is to be accounted for as an equity-settled scheme. This treatment would also hold true where the entity buys the instruments from an existing shareholder or any other party to provide the equity instruments to the employee. The adoption of this interpretation did not affect the group's operating results or financial position for the year ended 31 December 2008. 

IFRIC 14 'IAS19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'

This interpretation provides guidance on how to assess the limit on the amount of surplus in a defined benefit scheme that can be recognised as an asset under IAS 19 Employee Benefits. The adoption of this interpretation did not affect the group's operating results or financial position for the year ended 31 December 2008 as the group does not have any defined benefit schemes for its employees.

IAS 39 'Financial Instruments: Recognition and Measurement' and IFRS7 'Financial Instruments: Disclosures - Reclassification of Financial Assets (Amendments)'

These amendments in IAS 39 and IFRS7 permit reclassification of certain financial instruments held for trading and available for sale categories. These amendments did not affect the group's operating results or financial position for the year ended 31 December 2008.

 

Certain new standards, amendments to and interpretations of existing standards have been issued and are effective for the group's accounting periods beginning on or after 1 January 2009 or later periods which the group has not early adopted. Those that are applicable to the group are as follows:

IAS 1 'Presentation of Financial Statements (Revised)' effective for annual periods beginning on or after 1 January 2009, has been revised to enhance the usefulness of information presented in the financial statements. Management is considering the approach to meeting this requirement. 

IFRS 2 'Amendments to IFRS 2 - Vesting Conditions and Cancellations' is required to be applied to periods beginning on or after 1 January 2009. This amendment clarifies the definition of non-vesting conditions and prescribes accounting treatment of an award that is cancelled because a non-vesting condition is not satisfied. This will have no significant impact on the group's financial statements.

IFRS 3 'Business Combinations (Revised)' and the amended version of IAS 27 'Consolidated and Separate Financial Statements', effective for annual periods beginning on or after 1 July 2009, have been enhanced to, amongst other matters, specify the accounting treatments for acquisition costs, contingent consideration, pre-existing relationships and reacquired rights. The revised standards include detailed guidance in respect of step acquisitions and partial disposals of subsidiaries and associates as well as in respect of allocation of income to non-controlling interests. Further, an option has been added to IFRS 3 to permit an entity to recognise 100 per cent of the goodwill of an acquired entity, not just the acquiring entity's portion of the goodwill. The impact of this standard on the group is not expected to be significant.

IFRS 8 'Operating Segments' introduces the management approach to segment reporting. IFRS 8, which becomes mandatory for the group's 2009 financial information, will require the disclosure of segment information based on the internal reports regularly reviewed by the group's Chief Operating Decision Maker in order to assess each segment's performance and allocate resources to them. The adoption of this standard does not have any impact on the financial position of the group. However, the segment information disclosed will change as a result of the recent internal restructuring of the group which is further discussed on page 6. 

Revisions to IAS 23 'Borrowing costs' have removed the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalise borrowing costs as part of the cost of such assets. The revised standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. This will have no significant impact on the group.

IAS 27 'Consolidated and Separate Financial Statements - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (Amendments)' effective for annual periods beginning on or after 1 January 2009, has deleted the use of the 'cost method' of accounting for investments with respect to holding companies' separate financial statements. Also, in cases of reorganisations where a new parent is introduced above an existing one, the cost of the subsidiary is the previous carrying amount rather than its fair value. This will impact the separate financial statements of parent companies within the group, but does not have any impact on the consolidated financial statements of the group.

IAS 32 'Financial Instruments: Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (Amendments)' effective for annual periods beginning on or after 1 January 2009, requires the classification of puttable financial instruments as equity if they have certain specified features. This will have no impact on the group.

IFRIC 16 'Hedges of a Net Investment in a Foreign Operation' this interpretation provides guidance in respect of hedges of foreign currency gains and losses on a net investment in a foreign operation. This interpretation is effective for periods beginning on or after 1 October 2008. The impact on the group is not considered to be significant.

IAS 39 'Financial Instruments: Recognition and Measurement - Eligible hedged item (Amendment)' is effective for periods beginning on or after 1 July 2009. This amendment addresses only the designation of a one-sided risk in a hedged item and the designation of inflation as a hedged risk or a portion in particular situations. This will have no impact on the group.

Other interpretations and amendments that have been issued but are not yet effective and are not considered applicable to the group are IFRIC 13 'Customer Loyalty Programmes', IFRIC 15 'Agreements for the Construction of Real Estate' and IFRS 1 'First-time Adoption of IFRS - Cost of an Investment in a Subsidiary, Jointly Controlled Entity of Associate (Amendments)'.

Significant accounting judgements and estimates

Judgements

In the process of applying the group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Revenue recognition on fixed-price engineering, procurement and construction contracts: the group recognises revenue on fixed-price engineering, procurement and construction contracts using the percentage-of-completion method, based on surveys of work performed. The group has determined this basis of revenue recognition is the best available measure of progress on such contracts.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Project cost to complete estimates: at each balance sheet date the group is required to estimate costs to complete on fixed price contracts. Estimating costs to complete on such contracts requires the group to make estimates of future costs to be incurred, based on work to be performed beyond the balance sheet date.

Onerous contract provisions: the group provides for future losses on long-term contracts where it is considered probable that the contract costs are likely to exceed revenues in future years. Estimating these future losses involves a number of assumptions about the achievement of contract performance targets and the likely levels of future cost escalation over time.

Impairment of goodwill: the group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the group to make an estimate of the expected future cash flows from each cash-generating unit and also to determine a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31 December 2008 was US$97,534,000 (2007: US$71,743,000).

Deferred tax assets: the group recognises deferred tax assets on unused tax losses where it is probable that future taxable profits will be available for utilisation. This requires management to make judgements and assumptions regarding the amount of deferred tax that can be recognised as well as the likelihood of future taxable profits. The carrying amount of recognised tax losses at 31 December 2008 was US$33,165,000 (2007: US$8,512,000).

Income tax: the Company and its subsidiaries are subject to routine tax audits and also a process whereby tax computations are discussed and agreed with the appropriate authorities. Whilst the ultimate outcome of such tax audits and discussions cannot be determined with certainty, management estimates the level of provisions required for both current and deferred tax on the basis of professional advice and the nature of current discussions with the tax authority concerned. 

Recoverable value of intangible oil & gas and other intangible assets: the group determines at each balance sheet date whether there is any evidence of impairment in the carrying value of its intangible oil & gas and other intangible assets. This requires management to estimate the recoverable value of its intangible assets for example by reference to quoted market values, similar arms length transactions involving these assets or value in use calculations.

Units of production depreciation: estimated proven plus probable reserves are used in determining the depreciation of oil & gas assets such that the depreciation charge is proportional to the depletion of the remaining reserves over their life of production. These calculations require the use of estimates and assumptions including the amount of economically recoverable reserves and estimates of future oil & gas capital expenditure.

Interests in joint ventures 

The group has a number of contractual arrangements with other parties which represent joint ventures. These take the form of agreements to share control over other entities ('jointly controlled entities') and commercial collaborations ('jointly controlled operations'). The group's interests in jointly controlled entities are accounted for by proportionate consolidation, which involves recognising its proportionate share of the joint venture's assets, liabilities, income and expenses with similar items in the consolidated financial statements on a line-by-line basis. Where the group collaborates with other entities in jointly controlled operations, the expenses the group incurs and its share of the revenue earned is recognised in the income statement. Assets controlled by the group and liabilities incurred by it are recognised in the balance sheet. Where necessary, adjustments are made to the financial statements of the group's jointly controlled entities and operations to bring their accounting policies into line with those of the group.

Foreign currency translation

The Company's functional and presentational currency is United States dollars. In the accounts of individual subsidiaries, transactions in currencies other than a company's functional currency are recorded at the prevailing rate of exchange at the date of the transaction. At the year end, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates of exchange prevailing at the balance sheet date. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are translated using the rate of exchange as at the dates of the initial transactions. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated using the rate of exchange at the date the fair value was determined. All foreign exchange gains and losses are taken to the income statement with the exception of exchange differences arising on monetary assets and liabilities that form part of the group's net investment in subsidiaries. These are taken directly to equity until the disposal of the net investment at which time they are recognised in the income statement. 

The balance sheets of overseas subsidiaries and joint ventures are translated into US dollars using the closing rate method, whereby assets and liabilities are translated at the rates of exchange prevailing at the balance sheet date. The income statements of overseas subsidiaries and joint ventures are translated at average exchange rates for the year. Exchange differences arising on the retranslation of net assets are taken directly to a separate component of equity.

On the disposal of a foreign entity, accumulated exchange differences are recognised in the income statement as a component of the gain or loss on disposal.

Property, plant and equipment 

Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Cost comprises the purchase price or construction cost and any costs directly attributable to making that asset capable of operating as intended. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Depreciation is provided on a straight-line basis other than on oil & gas assets at the following rates.

Oil & gas facilities 10% - 12.5%

Plant and equipment 4% - 33%

Buildings and leasehold improvements 5% - 33% (or shorter of the lease term)

Office furniture and equipment  25% - 100%

Vehicles 20% - 33%

Tangible oil & gas assets are depreciated, on a field-by-field basis, using the unit-of-production method based on entitlement to proven and probable reserves, taking account of estimated future development expenditure relating to those reserves. 

Each asset's estimated useful life, residual value and method of depreciation are reviewed and adjusted if appropriate at each financial year end.

No depreciation is charged on land or assets under construction. 

The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in profit or loss when the item is derecognised. Gains are not classified as revenue.

Non-current assets held for sale

Non-current assets or disposal groups are classified as held for sale when it is expected that the carrying amount of an asset will be recovered principally through sale rather than continuing use. Assets are not depreciated when classified as held for sale.

Borrowing costs

Borrowing costs directly attributable to the construction of qualifying assets, which are assets that necessarily take a substantial period of time to prepare for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognised as interest payable in the income statement in the period in which they are incurred.

Goodwill 

Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity at the date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that such carrying value may be impaired.

 

For the purpose of impairment testing, goodwill acquired is allocated to the cash-generating units that are expected to benefit from the synergies of the combination. Each unit or units to which goodwill is allocated represents the lowest level within the group at which the goodwill is monitored for internal management purposes and is not larger than a segment based on either the group's primary or the group's secondary reporting format determined in accordance with IAS14 'Segment Reporting'.

Impairment is determined by assessing the recoverable amount of the cash-generating units to which the goodwill relates. Where the recoverable amount of the cash-generating units is less than the carrying amount of the cash-generating units and related goodwill, an impairment loss is recognised.

Where goodwill has been allocated to cash-generating units and part of the operation within those units is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating units retained.

Deferred consideration payable on acquisition

When, as part of a business combination, the group defers a proportion of the total purchase consideration payable for an acquisition, the amount provided for is calculated based on the best estimate of the timing of additional payments discounted back to present value with the discount factor element recognised as a finance cost in the income statement.

Intangible assets - non oil & gas assets

Intangible assets acquired in a business combination are initially measured at cost being their fair values at the date of acquisition and are recognised separately from goodwill as the asset is separable or arises from a contractual or other legal right and its fair value can be measured reliably. After initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets with a finite life are amortised over their useful economic life using a straight line method unless a better method reflecting the pattern in which the asset's future economic benefits are expected to be consumed can be determined. The amortisation charge in respect of intangible assets is included in the selling, general and administration expenses line of the income statement. The expected useful lives of assets are reviewed on an annual basis. Any change in the useful life or pattern of consumption of the intangible asset is treated as a change in accounting estimate and is accounted for prospectively by changing the amortisation period or method. Intangible assets are tested for impairment whenever there is an indication that the asset may be impaired.

Oil & gas assets

Capitalised costs

The group's activities in relation to oil & gas assets are limited to assets in the evaluation, development and production phases.

Oil & gas evaluation and development expenditure is accounted for using the successful efforts method of accounting.

Evaluation expenditures

Expenditure directly associated with evaluation (or appraisal) activities is capitalised as an intangible asset. Such costs include the costs of acquiring an interest, appraisal well drilling costs, payments to contractors and an appropriate share of directly attributable overheads incurred during the evaluation phase. For such appraisal activity, which may require drilling of further wells, costs continue to be carried as an asset whilst related hydrocarbons are considered capable of commercial development. Such costs are subject to technical, commercial and management review to confirm the continued intent to develop, or otherwise extract value. When this is no longer the case, the costs are written-off in the income statement. When such assets are declared part of a commercial development, related costs are transferred to tangible oil & gas assets. All intangible oil & gas assets are assessed for any impairment prior to transfer and any impairment loss is recognised in the income statement.

Development expenditures

Expenditure relating to development of assets which include the construction, installation and completion of infrastructure facilities such as platforms, pipelines and development wells, is capitalised within property, plant and equipment.

Changes in unit-of-production factors

Changes in factors which affect unit-of-production calculations are dealt with prospectively, not by immediate adjustment of prior years' amounts.

Decommissioning

Provision for future decommissioning costs is made in full when the group has an obligation to dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reasonable estimate of that liability can be made. The amount recognised is the present value of the estimated future expenditure. An amount equivalent to the discounted initial provision for decommissioning costs is capitalised and amortised over the life of the underlying asset on a unit-of-production basis over proven and probable reserves. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the oil & gas asset. 

The unwinding of the discount applied to future decommissioning provisions is included under finance costs in the income statement.

Available-for-sale financial assets

Investments classified as available-for-sale are initially stated at fair value, including acquisition charges associated with the investment.

After initial recognition, available-for-sale financial assets are measured at their fair value using quoted market rates. Gains and losses are recognised as a separate component of equity until the investment is sold or impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement.

Impairment of assets (excluding goodwill)

At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to assess whether there is an indication that those assets may be impaired. If any such indication exists, the group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows attributable to the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment is treated as a revaluation increase. 

Inventories

Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Cost comprises purchase price, cost of production, transportation and other directly allocable expenses. Costs of inventories, other than raw materials, are determined using the first-in-first-out method. Costs of raw materials are determined using the weighted average method.

Work in progress and billings in excess of cost and estimated earnings

Fixed price lump sum engineering, procurement and construction contracts are presented in the balance sheet as follows:

For each contract, the accumulated cost incurred, as well as the estimated earnings recognised at the contract's percentage of completion less provision for any anticipated losses, after deducting the progress payments received or receivable from the customers, are shown in current assets in the balance sheet under "Work in progress". 

Where the payments received or receivable for any contract exceed the cost and estimated earnings less provision for any anticipated losses, the excess is shown as "Billings in excess of cost and estimated earnings" within current liabilities.

Trade and other receivables 

Trade receivables are recognised and carried at original invoice amount less an allowance for any amounts estimated to be uncollectable. An estimate for doubtful debts is made when there is objective evidence that the collection of the full amount is no longer probable under the terms of the original invoice. Impaired debts are derecognised when they are assessed as uncollectable.

Cash and cash equivalents

Cash and cash equivalents consist of cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consists of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Interest-bearing loans and borrowings

All interest-bearing loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs directly attributable to the borrowing.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Provisions

Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised in the income statement as a finance cost.

Derecognition of financial assets and liabilities

Financial assets

A financial asset (or, where applicable a part of a financial asset) is derecognised where:

the rights to receive cash flows from the asset have expired;

the group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass-through' arrangement; or

the group has transferred its rights to receive cash flows from the asset and either a) has transferred substantially all the risks and rewards of the asset, or b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

If an existing financial liability is replaced by another from the same lender, on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised in the income statement.

Pensions and other long-term employment benefits

The group has various defined contribution pension schemes in accordance with the local conditions and practices in the countries in which it operates. The amount charged to the income statement in respect of pension costs reflects the contributions payable in the year. Differences between contributions payable during the year and contributions actually paid are shown as either accrued liabilities or prepaid assets in the balance sheet.

The group's other long-term employment benefits are provided in accordance with the labour laws of the countries in which the group operates, further details of which are given in note 25.

Share-based payment transactions

Employees (including directors) of the group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions'). 

Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Petrofac Limited ('market conditions'), if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the relevant employees become fully entitled to the award (the 'vesting period'). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the group's best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. Equity awards cancelled are treated as vesting immediately on the date of cancellation, and any expense not recognised for the award at that date is recognised in the income statement.

Petrofac Employee Benefit Trust

The Petrofac Employee Benefit Trust was established on 7 March 2007 to warehouse ordinary shares purchased to satisfy various new share scheme awards made to the employees of the Company, which will be transferred to the members of the scheme on their respective vesting dates subject to satisfying the performance conditions of each scheme. The trust has been consolidated in the financial statements in accordance with SIC 12 'Special Purpose Entities'. The cost of shares temporarily held by Petrofac Employee Benefit Trust are reflected as treasury shares and deducted from equity.

Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys the right to use the asset.

The group has entered into various operating leases the payments for which are recognised as an expense in the income statement on a straight-line basis over the lease terms.

Revenue recognition

Revenue is recognised to the extent that it is probable economic benefits will flow to the group and the revenue can be reliably measured. The following specific recognition criteria also apply:

Engineering, procurement and construction services (Engineering & Construction)

Revenues from fixed-price lump-sum contracts are recognised on the percentage-of-completion method, based on surveys of work performed once the outcome of a contract can be estimated reliably. In the early stages of contract completion, when the outcome of a contract cannot be estimated reliably, contract revenues are recognised only to the extent of costs incurred that are expected to be recoverable. 

Revenues from cost-plus-fee contracts are recognised on the basis of costs incurred during the year plus the fee earned measured by the cost-to-cost method.

Revenues from reimbursable contracts are recognised in the period in which the services are provided based on the agreed contract schedule of rates.

Provision is made for all losses expected to arise on completion of contracts entered into at the balance sheet date, whether or not work has commenced on these contracts.

Incentive payments are included in revenue when the contract is sufficiently advanced that it is probable that the specified performance standards will be met or exceeded and the amount of the incentive payments can be measured reliably. Claims are only included in revenue when negotiations have reached an advanced stage such that it is probable the claim will be accepted and can be measured reliably.

Facilities management, engineering and training services (Operations Services)

Revenues from reimbursable contracts are recognised in the period in which the services are provided based on the agreed contract schedule of rates.

Revenues from fixed-price contracts are recognised on the percentage-of-completion method, measured by milestones completed or earned value once the outcome of a contract can be estimated reliably. In the early stages of contract completion, when the outcome of a contract cannot be estimated reliably, contract revenues are recognised only to the extent of costs incurred that are expected to be recoverable.

Incentive payments are included in revenue when the contract is sufficiently advanced that it is probable that the specified performance standards will be met or exceeded and the amount of the incentive payments can be measured reliably. Claims are only included in revenue when negotiations have reached an advanced stage such that it is probable the claim will be accepted and can be measured reliably.

Oil & gas activities (Energy Developments)

Oil & gas revenues comprise the group's share of sales from the processing or sale of hydrocarbons on an entitlement basis, when the significant risks and rewards of ownership have been passed to the buyer.

Income taxes

Income tax expense represents the sum of current income tax and deferred tax. 

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to the taxation authorities. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised on all temporary differences at the balance sheet date between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with the following exceptions:

where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

deferred income tax assets are recognised only to the extent that it is probable that a taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the asset is realised or the liability is settled, based on tax rates and tax laws enacted or substantively enacted at the balance sheet date.

Current and deferred income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise, income tax is recognised in the income statement.

Derivative financial instruments and hedging 

The group uses derivative financial instruments such as forward currency contracts, interest rate collars and swaps and oil price collars and forward contracts to hedge its risks associated with foreign currency, interest rate and oil price fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the income statement.

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate cap, swap and oil price collar contracts is determined by reference to market values for similar instruments.

For the purposes of hedge accounting, hedges are classified as:

fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability; or

cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction.

The group formally designates and documents the relationship between the hedging instrument and the hedged item at the inception of the transaction, as well as its risk management objectives and strategy for undertaking various hedge transactions. The documentation also includes identification of the hedging instrument, the hedged item or transaction, the nature of risk being hedged and how the group will assess the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in the hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items.

The treatment of gains and losses arising from revaluing derivatives designated as hedging instruments depends on the nature of the hedging relationship, as follows:

Fair value hedges

For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged; the derivative is remeasured at fair value and gains and losses from both are taken to the income statement. For hedged items carried at amortised cost, the adjustment is amortised through the income statement such that it is fully amortised by maturity.

The group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the group revokes the designation.

Cash flow hedges

For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects the income statement.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as 

a hedge is revoked, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Embedded derivatives

Contracts are assessed for the existence of embedded derivatives at the date that the group first becomes party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. Embedded derivatives which are not clearly and closely related to the underlying asset, liability or transaction are separated and accounted for as stand alone derivatives.

3 SEGMENT INFORMATION 

The group's primary operations are organised on a worldwide basis into three business segments: Engineering & Construction, Operations Services and Energy Developments. The accounting policies of the segments are the same as those described in note 2 above. The group accounts for inter-segment sales as if the sales were to third parties, that is, at arms length prices. The group evaluates the performance of its segments and allocates resources to them based on this evaluation. 

The group's secondary segment reporting format is geographical. Geographical segments are based on the location of the group's assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

Business segments

The following tables present revenue and profit information and certain asset and liability information relating to the group's business segments for the years ended 31 December 2008 and 2007. Included within the corporate, consolidation and eliminations columns are certain balances, which due to their nature, are not allocated to segments.

Year ended 31 December 2008

	Engineering				Consolidation
	&	Operations	Energy	Corporate	adjustments &
	Construction	Services	Developments	& others	eliminations	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Revenue
External sales	2,212,704	963,475	153,357	-	-	3,329,536
Inter-segment sales	6,698	18,945	-	-	(25,643)	-
Total revenue	2,219,402	982,420	153,357	-	(25,643)	3,329,536
Segment results	265,853	46,737	51,713	(1,176)	(215)	362,912
Unallocated corporate
costs	-	-	-	(7,326)	-	(7,326)
Profit / (loss) before tax and
finance income / (costs)	265,853	46,737	51,713	(8,502)	(215)	355,586
Finance costs	(380)	(4,190)	(8,247)	(7,547)	6,458	(13,906)
Finance income	19,522	903	224	8,075	(12,036)	16,688
Profit / (loss) before
income tax	284,995	43,450	43,690	(7,974)	(5,793)	358,368
Income tax (expense)/income	(60,919)	(11,641)	(21,810)	(571)	1,562	(93,379)
Profit / (loss) for the year	224,076	31,809	21,880	(8,545)	(4,231)	264,989

Year ended 31 December 2007

	Engineering				Consolidation
	&	Operations	Energy	Corporate	adjustments &
	Construction	Services	Developments	& others	eliminations	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Revenue
External sales	1,409,817	897,602	132,832	-	-	2,440,251
Inter-segment sales	5,131	13,372	-	-	(18,503)	-
Total revenue	1,414,948	910,974	132,832	-	(18,503)	2,440,251
Segment results	158,197	44,891	51,637	(236)	51	254,540
Unallocated corporate
costs	-	-	-	(6,039)	-	(6,039)
Profit / (loss) before tax and
finance income / (costs)	158,197	44,891	51,637	(6,275)	51	248,501
Finance costs	(662)	(4,384)	(205)	(8,572)	5,296	(8,527)
Finance income	18,013	1,247	331	3,857	(5,189)	18,259
Profit / (loss) before
income tax	175,548	41,754	51,763	(10,990)	158	258,233
Income tax (expense)/income	(38,454)	(12,857)	(18,375)	169	-	(69,517)
Profit / (loss) for the year	137,094	28,897	33,388	(10,821)	158	188,716

Year ended 31 December 2008

					Consolidation
	Engineering & Construction	Operations Services	Energy Developments	Corporate & others	adjustments & eliminations	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Assets and liabilities
Segment assets	1,638,278	406,229	450,813	-	(305,049)	2,190,271
Inter-segment assets	(292,538)	(12,117)	(394)	-	305,049	-
Investments	-	-	566	-	-	566
	1,345,740	394,112	450,985	-	-	2,190,837
Unallocated assets	-	-	-	32,540	-	32,540
Income tax assets	6,406	2,395	37,162	919	(438)	46,444
Total assets	1,352,146	396,507	488,147	33,459	(438)	2,269,821
Segment liabilities	1,136,732	271,371	407,711	-	(362,664)	1,453,150
Inter-segment liabilities	(3,846)	(35,726)	(323,092)	-	362,664	-
	1,132,886	235,645	84,619	-	-	1,453,150
Unallocated liabilities	-	-	-	109,016	-	109,016
Income tax liabilities	90,679	11,270	46,231	882	(438)	148,624
Total liabilities	1,223,565	246,915	130,850	109,898	(438)	1,710,790
Other segment information
Capital expenditures:
Property, plant
and equipment	55,976	8,156	197,718	325	(6,633)	255,542
Intangible oil & gas assets	-	-	37,036	-	-	37,036
Other intangible assets	-	12,009	-	-	-	12,009
Goodwill	-	52,353	-	-	-	52,353
Charges:
Depreciation	19,253	4,264	22,254	425	(840)	45,356
Amortisation	-	2,829	-	-	-	2,829
Impairment	-	-	5,355	-	-	5,355
Write-off of intangible oil & gas assets	-	-	9,826	-	-	9,826
Other long-term employment benefits	7,870	2,240	60	53	-	10,223
Share-based payments	4,706	2,313	1,059	1,370	-	9,448

Year ended 31 December 2007

					Consolidation
	Engineering & Construction	Operations Services	Energy Developments	Corporate & others	adjustments & eliminations	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Assets and liabilities
Segment assets	1,222,444	339,682	244,500	-	(86,438)	1,720,188
Inter-segment assets	(82,050)	(4,388)	-	-	86,438	-
Investments	-	-	1,586	-	-	1,586
	1,140,394	335,294	246,086	-	-	1,721,774
Unallocated assets	-	-	-	14,761	-	14,761
Income tax assets	2,895	1,000	13,650	618	(6,691)	11,472
Total assets	1,143,289	336,294	259,736	15,379	(6,691)	1,748,007
Segment liabilities	824,166	219,248	173,303	-	(178,559)	1,038,158
Inter-segment liabilities	(9,621)	(43,731)	(125,207)	-	178,559	-
	814,545	175,517	48,096	-	-	1,038,158
Unallocated liabilities	-	-	-	105,165	-	105,165
Income tax liabilities	53,175	10,147	23,767	1,316	(6,691)	81,714
Total liabilities	867,720	185,664	71,863	106,481	(6,691)	1,225,037
Other segment information
Capital expenditures:
Property, plant
and equipment	44,683	6,447	66,484	130	(587)	117,157
Intangible oil & gas assets	-	-	49,700	-	-	49,700
Other intangible assets	-	2,369	-	-	-	2,369
Goodwill	-	14,233	-	-	-	14,233
Charges:
Depreciation	15,654	4,567	22,476	449	(845)	42,301
Amortisation	-	1,771	-	-	-	1,771
Impairment	-	-	8,686	-	-	8,686
Other long-term employment benefits	5,075	1,492	7	31	-	6,605
Share-based payments	2,667	1,382	589	774	-	5,412

Geographical segments

The following tables present revenue, assets and capital expenditure by geographical segments for the years ended 31 December 2008 and 2007.

Year ended 31 December 2008

	Middle East	CIS /
	& Africa	Asia Pacific	Europe	Americas	Consolidated
	US$'000	US$'000	US$'000	US$'000	US$'000
Segment revenue	1,744,623	791,141	785,256	8,516	3,329,536
Carrying amount of segment assets	1,355,000	325,733	581,655	7,433	2,269,821
Capital expenditure:
Property, plant and equipment	72,508	13,802	169,022	210	255,542
Intangible oil & gas assets	-	27,210	9,826	-	37,036
Other intangible assets	-	-	12,009	-	12,009
Goodwill	-	-	52,353	-	52,353
Year ended 31 December 2007
	Middle East	CIS /
	& Africa	Asia Pacific	Europe	Americas	Consolidated
	US$'000	US$'000	US$'000	US$'000	US$'000
Segment revenue	1,104,569	513,083	815,707	6,892	2,440,251
Carrying amount of segment assets	1,131,287	247,972	360,140	8,608	1,748,007
Capital expenditure:
Property, plant and equipment	85,169	17,640	14,261	87	117,157
Intangible oil & gas assets	-	15,927	33,773	-	49,700
Other intangible assets	2,369	-	-	-	2,369
Goodwill	14,233	-	-	-	14,233

4 REVENUES AND EXPENSES

a. Revenue

	2008		2007
	US$'000		US$'000
Rendering of services	3,214,782		2,346,431
Sale of crude oil & gas	102,036		85,592
Sale of processed hydrocarbons	12,718		8,228
	3,329,536		2,440,251

Included in revenues from rendering of services are Operations Services revenues of a 'pass-through' nature with zero or low margins amounting to US$275,947,000 (2007: US$227,048,000).

b. Cost of sales

Included in cost of sales for the year ended 31 December 2008 is US$88,000 (2007: US$8,590,000 gain) loss on disposal of property, plant and equipment used to undertake various engineering and construction contracts. In addition depreciation charged on property, plant and equipment of US$39,143,000 during 2008 (2007: US$37,759,000) is included in cost of sales (note 9).

Also included in cost of sales are forward points and ineffective portions on derivatives designated as cash flow hedges of US$11,826,000 (2007: nil).

c. Other income

	2008		2007
	US$'000		US$'000
Foreign exchange gains	6,134		3,003
Gain on sale of property, plant and equipment	47		244
Gain on sale of asset held for sale	-		243
Other income	1,240		461
	7,421		3,951

d. Other expenses

	2008		2007
	US$'000		US$'000
Foreign exchange losses	1,932		441
Other expenses	611		180
	2,543		621

e. Selling, general and administration expenses 

	2008		2007
	US$'000		US$'000
Staff costs	125,039		93,915
Depreciation	6,213		4,542
Amortisation (note 12)	2,829		1,771
Impairment (note 12 and 14)	5,355		8,686
Write-off of intangible oil & gas assets	9,826		-
Other operating expenses	78,503		56,394
	227,765		165,308

Other operating expenses consist mainly of office, travel, legal and professional and contracting staff costs.

f. Staff costs 

	2008		2007
	US$'000		US$'000
Total staff costs:
Wages and salaries	682,869		603,324
Social security costs	28,892		29,544
Defined contribution pension costs	11,948		11,927
Other long-term employee benefit costs (note 25)	10,223		6,605
Expense of share-based payments (note 22)	9,448		5,412
	743,380		656,812

Of the US$743,380,000 of staff costs shown above, US$618,341,000 (2007: US$562,897,000) are included in cost of sales, with the remainder in selling, general and administration expenses.

The average number of persons employed by the group during the year was 10,383 (2007: 9,027).

g. Auditors' remuneration 

The group paid the following amounts to its auditors in respect of the audit of the financial statements and for other services provided to the group:

	2008		2007
	US$'000		US$'000
Audit of the group financial statements	1,177		945
Other fee to auditors:
Auditing the accounts of subsidiaries	236		197
Other services relating to taxation	107		89
All other services	46		95
	1,566		1,326

5 FINANCE (COSTS) / INCOME

	2008		2007
	US$'000		US$'000
Interest payable:
Long-term borrowings	(2,888)		(4,921)
Other interest, including short-term loans and overdrafts	(1,239)		(2,092)
Unwinding of discount on deferred consideration and decommissioning provisions	(1,910)		(1,514)
Ineffective foreign currency cash flow hedge	(8,157)		-
Time value portion of derivatives designated as hedges (note 31)	288		-
Total finance cost	(13,906)		(8,527)
Interest receivable:
Bank interest receivable	15,989		18,255
Other interest receivable	699		4
Total finance income	16,688		18,259

6 INCOME TAX

a. Tax on ordinary activities

The major components of income tax expense are as follows:

	2008		2007
	US$'000		US$'000
Current income tax
Current income tax charge	128,243		69,436
Adjustments in respect of current income tax of previous years	4,373		(228)
Deferred income tax
Relating to origination and reversal of temporary differences	(33,393)		688
Adjustments in respect of deferred income tax of previous years	(5,844)		(379)
Income tax expense reported in the income statement	93,379		69,517

b. Reconciliation of total tax charge

A reconciliation between the income tax expense and the product of accounting profit multiplied by the Company's domestic tax rate is as follows:

	2008		2007
	US$'000		US$'000
Accounting profit before tax	358,368		258,233
At Jersey's domestic income tax rate of 20% (2007: 20%)	71,674		51,647
Profits exempt from Jersey income tax	(71,674)		(51,647)
Higher income tax rates of other countries, including withholding taxes	92,922		89,884
Overhead allowances - high rate jurisdiction	(4,484)		(14,456)
Expenditure not allowable for income tax purposes - high rate jurisdiction	6,192		3,256
Income not taxable - high rate jurisdiction	(415)		-
Adjustments in respect of previous periods	(1,470)		(615)
Tax effect of utilisation of tax losses not previously recognised	(312)		(183)
Unrecognised tax losses	946		86
Losses recognised in the period	-		(8,455)
At the effective income tax rate of 26.1% (2007: 26.9%)	93,379		69,517

For the year to 31 December 2008, the Company obtained Jersey exempt company status and was therefore exempt from Jersey income tax on non-Jersey source income and bank interest (by concession). From 1 January 2009, the Jersey exempt company status regime has been abolished and under the new regime the Company will be charged tax in Jersey at the rate of 0%. No material impact to the income tax expense is expected as a result of this change.

c. Deferred income tax

Deferred income tax relates to the following:

	Consolidated Balance Sheet				Consolidated Income Statement
	2008		2007		2008		2007
	US$'000		US$'000		US$'000		US$'000
Deferred income tax liabilities
Fair value adjustment on acquisitions	3,610		1,940		(800)		(453)
Accelerated depreciation	23,065		903		19,778		502
Other temporary differences	11,521		31,294		(18,094)		8,334
Gross deferred income tax liabilities	38,196		34,137
Deferred income tax assets
Losses available for offset	33,165		8,512		(28,747)		(6,661)
Decelerated depreciation for tax purposes	5,893		1,558		(3,932)		(655)
Share scheme	2,799		716		(3,024)		(716)
Other temporary differences	4,587		686		(4,418)		(42)
Gross deferred income tax assets	46,444		11,472
Deferred income tax charge					(39,237)		309

d. Unrecognised tax losses

Deferred income tax assets are recognised for tax loss carry-forwards and tax credits to the extent that the realisation of the related tax benefit through the future taxable profits is probable. The group did not recognise deferred income tax assets of US$20,732,000 (2007: US$19,672,000).

	2008		2007
	US$'000		US$'000
Expiration dates for tax losses
On completion of the contract	-		2,600
No earlier than 2022	11,906		11,972
No expiration date	6,534		5,100
	18,440		19,672
Tax credits (no expiration date)	2,292		-
	20,732		19,672

7 EARNINGS PER SHARE 

Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary shareholders, after adjusting for any dilutive effect, by the weighted average number of ordinary shares outstanding during the year.

The following reflects the income and share data used in calculating basic and diluted earnings per share:

	2008		2007
	US$'000		US$'000
Net profit attributable to ordinary shareholders for basic and diluted earnings per share	264,989		188,716

	2008		2007
	Number		Number
	'000		'000
Weighted average number of ordinary shares for basic earnings per share	339,585		342,246
Effect of diluted potential ordinary shares granted under share-based payment schemes	4,072		3,313
Adjusted weighted average number of ordinary shares for diluted earnings per share	343,657		345,559

8 DIVIDENDS PAID AND PROPOSED

	2008		2007
	US$'000		US$'000
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2006: 6.43 cents per share	-		22,018
Interim dividend 2007: 4.90 cents per share	-		16,756
Final dividend for 2007: 11.50 cents per share	39,164		-
Interim dividend 2008: 7.50 cents per share	25,536		-
	64,700		38,774
	2008		2007
	US$'000		US$'000
Proposed for approval at AGM
(not recognised as a liability as at 31 December)
Equity dividends on ordinary shares
Final dividend for 2008: 17.90 cents per share (2007: 11.50 cents per share)	61,831		39,725

9 PROPERTY, PLANT AND EQUIPMENT

			Land,
			buildings			Office
			and			furniture	Capital
	Oil & gas	Oil & gas	leasehold	Plant and		and	work in
	assets	facilities	improvements	equipment	Vehicles	equipment	progress	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Cost
At 1 January 2007	28,780	124,740	21,462	20,986	6,684	34,445	9,075	246,172
Additions	65,078	631	1,170	6,604	1,092	20,593	21,989	117,157
Acquisition of subsidiaries	-	-	-	-	-	47	-	47
Transfer from intangible  oil & gas assets (note 12)	41,657	-	-	-	-	-	-	41,657
Disposals	-	-	(1,642)	(4,514)	(3,378)	(2,187)	-	(11,721)
Exchange difference	-	-	257	(520)	45	522	-	304
At 1 January 2008	135,515	125,371	21,247	22,556	4,443	53,420	31,064	393,616
Additions	189,214	-	35,018	2,935	2,516	25,859	-	255,542
Acquisition of subsidiaries	-	-	190	-	-	534	-	724
Transfer from capital work in progress	-	-	31,064	-	-	-	(31,064)	-
Disposals	-	-	(723)	(683)	(318)	(875)	-	(2,599)
Exchange difference	(45,626)	-	(3,708)	(2,573)	(67)	(9,891)	-	(61,865)
At 31 December 2008	279,103	125,371	83,088	22,235	6,574	69,047	-	585,418
Depreciation
At 1 January 2007	(802)	(60,169)	(4,288)	(15,162)	(4,790)	(17,785)	-	(102,996)
Charge for the year	(8,072)	(13,491)	(1,321)	(1,277)	(1,676)	(16,464)	-	(42,301)
Disposals	-	-	1,568	1,637	3,030	2,154	-	8,389
Exchange difference	-	-	(19)	(247)	(31)	(174)	-	(471)
At 1 January 2008	(8,874)	(73,660)	(4,060)	(15,049)	(3,467)	(32,269)	-	(137,379)
Charge for the year	(7,748)	(13,366)	(5,346)	(2,598)	(1,052)	(15,246)	-	(45,356)
Disposals	-	-	544	20	237	726	-	1,527
Exchange difference	435	-	879	1,115	47	6,378	-	8,854
At 31 December 2008	(16,187)	(87,026)	(7,983)	(16,512)	(4,235)	(40,411)	-	(172,354)
Net carrying amount:
At 31 December 2008	262,916	38,345	75,105	5,723	2,339	28,636	-	413,064
At 31 December 2007	126,641	51,711	17,187	7,507	976	21,151	31,064	256,237

No interest has been capitalised within oil & gas facilities during the year (2007: nil) and the accumulated capitalised interest, net of depreciation at 31 December 2008, was US$1,430,000 (2007: US$1,929,000). 

Additions to oil & gas assets in the year mainly comprise development expenses capitalised on the group's interest in the Don area assets of US$167,265,000 (2007: US$33,773,000). Depreciation has not been charged on this asset as commercial production has not yet started.

Included in oil & gas assets are US$2,879,000 (2007: US$1,315,000) of capitalised decommissioning costs net of depreciation provided on the PM304 asset in Malaysia, Chergui asset in Tunisia and the Don area assets in the United Kingdom.

Of the total charge for depreciation in the income statement, US$39,143,000 (2007: US$37,759,000) is included in cost of sales and US$6,213,000 (2007: US$4,542,000) in selling, general and administration expenses.

Capital work in progress comprises of expenditures incurred on the construction of a new office building in Sharjah, United Arab Emirates. During 2008, this was transferred to land, buildings and leasehold improvements on commencing use of the building.

10 BUSINESS COMBINATIONS

Acquisitions in 2008

Eclipse Petroleum Technology Limited

On 25 July 2008, the group acquired a 100% interest in the share capital of Eclipse Petroleum Technology Limited (Eclipse), a specialist production engineering company. The consideration for the acquisition inclusive of transaction costs of Sterling 195,000 (equivalent US$388,000), was Sterling 8,150,000 (equivalent US$16,200,000). The consideration of Sterling 7,955,000 (equivalent US$15,812,000), excluding transaction costs, comprised of Sterling 6,000,000 (equivalent US$11,927,000) in cash, Sterling 1,000,000 (equivalent US$1,988,000) to be satisfied with 158,177 ordinary shares vesting in two years' time and the balance being the discounted value of deferred consideration amounting to Sterling 955,000 (equivalent US$1,897,000) payable based on the estimated future profitability of Eclipse. The deferred consideration in no event will exceed an additional amount of Sterling 9,000,000 (equivalent US$17,892,000). 

The provisional fair values of the identifiable assets and liabilities of Eclipse on completion of the acquisition are analysed below:

	Recognised on		Carrying
	acquisition		value
	US$'000		US$'000
Property, plant and equipment	673		673
Intangible assets	2,402		223
Trade and other receivables	3,407		3,407
Cash and short-term deposits	571		571
Total assets	7,053		4,874
Less:
Deferred tax liability	(610)		-
Trade and other payables	(2,483)		(2,483)
Total liabilities	(3,093)		(2,483)
Fair value of net assets acquired	3,960		2,391
Goodwill arising on acquisition	12,240
Consideration at acquisition	16,200

			US$'000
Cash outflow on acquisition (translated at the payment date):
Cash acquired with subsidiary			571
Cash paid on acquisition			(12,002)
Legal and professional expenses paid on acquisition			(351)
Net cash outflow on the acquisition of subsidiary			(11,782)

Intangible assets recognised on acquisition comprise a proprietary software system which is being amortised over its remaining economic useful life of six years on a straight-line basis.

The residual goodwill above comprises the fair value of expected future synergies and business opportunities arising from the integration of the business in to the group.

From the date of acquisition, Eclipse has contributed a net loss of US$436,000 to the net profit of the group after charging US$475,000 of post acquisition costs relating to amortisation of intangibles and finance costs in respect of deferred consideration payable. 

Caltec Limited

On 29 August 2008, the group acquired a 100% interest in the share capital of Caltec Limited (Caltec), a specialist production technology company, for a consideration of Sterling 26,776,000 (equivalent US$48,956,000), including transaction costs of Sterling 596,000 (equivalent US$1,093,000).  The consideration of Sterling 26,180,000 (equivalent US$47,863,000), excluding transaction costs, comprised of Sterling 15,699,000 (equivalent US$28,641,000) in cash as initial consideration and working capital adjustments and the balance being the discounted value of deferred consideration of Sterling 10,481,000 (equivalent US$19,222,000) payable based on the expected achievement of future performance targets set for the company. The deferred consideration in no event will exceed an additional amount of Sterling 15,000,000 (equivalent US$27,510,000).

The provisional fair values of the identifiable assets and liabilities of Caltec on completion of the acquisition are analysed below:

	Recognised on		Carrying
	acquisition		value
	US$'000		US$'000
Property, plant and equipment	51		51
Intangible assets	10,021		191
Trade and other receivables	2,105		2,105
Cash and short-term deposits	966		966
Total assets	13,143		3,313
Less:
Deferred tax liability	(2,753)		-
Trade and other payables	(1,547)		(1,547)
Total liabilities	(4,300)		(1,547)
Fair value of net assets acquired	8,843		1,766
Goodwill arising on acquisition	40,113
Consideration at acquisition	48,956

			US$'000
Cash outflow on acquisition (translated at the payment date):
Cash acquired with subsidiary			966
Cash paid on acquisition			(28,911)
Legal and professional expenses paid on acquisition			(1,047)
Net cash outflow on the acquisition of subsidiary			(28,992)

Intangible assets recognised on acquisition represent patented technology which is being amortised over its remaining economic useful life of ten years on a straight-line basis.

The residual goodwill above comprises the fair value of expected future synergies and business opportunities arising from the integration of the business in to the group.

From the date of acquisition, Caltec has contributed a net loss of US$657,000 to the net profit of the group after charging US$821,000 of post acquisition costs relating to amortisation of intangibles and finance costs in respect of deferred consideration payable. 

If the above combinations had taken place at the beginning of the year, net profit of the group would have been US$262,738,000 and revenue would have been US$3,340,269,000.

Acquisitions in 2007

SPD Group Limited

On 16 January 2007, the group acquired a 51% interest in the share capital of SPD Group Limited (SPD), a specialist provider of well operations services. The consideration for the acquisition of the 51% interest inclusive of transaction costs of US$172,000, was US$7,872,000. Consideration of US$7,700,000 (excluding transaction costs) was settled by a cash payment of US$3,935,000, issuance of loan notes payable of US$1,765,000 and the balance of US$2,000,000 by issuance of 274,938 new ordinary shares of the Company at market value on 19 January 2007 to the vendor over three years in equal instalments on the anniversary of the transaction. On 27 December 2007, the outstanding loan notes of US$1,765,000 were repaid to the vendors.

The terms of the sale and purchase agreement for the remaining 49% interest in the share capital of SPD which convey call option rights on the acquirer and minority share holder put option rights over these shares and the respective rights to dividends and share of profits of the two parties are such that this transaction has been accounted for as a 100% acquisition of the business by the group. The discounted deferred consideration for the remaining 49% of the share capital of SPD was originally estimated at US$12,025,000 based on the discounted value of an agreed multiple of the future earnings of SPD and the total consideration for the 100% interest therefore, including transaction costs, amounted to US$19,897,000. The fair value of net assets acquired was US$5,664,000, which included intangible assets recognised on acquisition of US$2,369,000. These intangible assets recognised on acquisition comprise customer contracts which are being amortised over their remaining economic useful lives on a straight-line basis (note 12).

During the year, a charge of US$1,323,000 (2007: US$1,455,000) for the unwinding of interest has been reflected in the income statement as an interest expense (note 5).

The deferred consideration was reassessed at year end in light of latest financial projections for the business and the current carried amount was considered to be appropriate.

The residual goodwill of US$14,233,000 (2007: US$14,233,000) comprises the fair value of expected future synergies and business opportunities arising from the integration of the business in to the group.

11 GOODWILL

A summary of the movements in goodwill is presented below:

	2008		2007
	US$'000		US$'000
At 1 January	71,743		56,732
Acquisitions during the year (note 10)	52,353		14,233
Exchange difference	(26,562)		778
At 31 December	97,534		71,743

Goodwill acquired through business combinations has been allocated to three groups of cash-generating units, which are reportable segments, for impairment testing as follows:

Facilities Management (comprising Petrofac Facilities Management Limited, Plant Asset Management Limited, SPD, Eclipse and Caltec)

Training (comprising Petrofac Training Limited and PPS Process Control & Instrumentation Limited)

Energy Developments (comprising Petrofac Energy Developments International Limited)

These represent the lowest level within the group at which the goodwill is monitored for internal management purposes.

Facilities Management and Training cash-generating units

The recoverable amounts for the Facilities Management and Training units have been determined based on value in use calculations, using discounted pre-tax cash flow projections. Management has adopted a ten year projection period to assess each unit's value in use as it is confident based on past experience of the accuracy of long-term cash flow forecasts that these projections are reliable. The cash flow projections are based on financial budgets approved by senior management covering a five year period, extrapolated thereafter at a growth rate of 5% per annum. Management considers this a conservative long-term growth rate relative to both the economic outlook for the units in their respective markets within the oil & gas industry and the growth rates experienced in the recent past by each unit. 

Energy Developments cash-generating unit

The recoverable amount of the Energy Developments unit is also determined on a value in use calculation using discounted pre-tax cash flow projections based on financial budgets and economic parameters for the unit approved by senior management and covering a five year period, as referred to in IAS 36.

Carrying amount of goodwill allocated to each group of cash-generating units

	2008		2007
	US$'000		US$'000
Facilities Management unit	77,086		44,769
Training unit	18,231		24,757
Energy Developments unit	2,217		2,217
	97,534		71,743

Key assumptions used in value in use calculations

The calculation of value in use for both the Facilities Management and Training units is most sensitive to the following assumptions:

Market share: the assumption relating to market share for the Facilities Management unit is based on the unit re-securing those existing customer contracts in the UK which are due to expire during the projection period; for the Training unit, the key assumptions relate to management's assessment of maintaining the unit's market share in the UK and developing further the business in international markets.

Growth rate: estimates are based on management's assessment of market share having regard to macro-economic factors and the growth rates experienced in the recent past by each unit. A growth rate of 5% per annum has been applied for the remaining five years of the ten year projection period.

Net profit margins: estimates are based on management's assumption of achieving a level of performance at least in line with the recent past performance of each of the units.

Discount rate:  management has used a pre-tax discount rate of 16.1% (2007: 9.8%) per annum for Facilities Management cash-generating unit and 15.1% (2007: 9.8%) per annum for Training cash-generating unit which are derived from the estimated weighted average cost of capital of the group. This discount rate has been calculated using an estimated risk free rate of return adjusted for the group's estimated equity market risk premium and the group's cost of debt.

The calculation of value in use for the Energy Developments unit is most sensitive to the following assumptions:

Discount rate: management has used an estimate of the pre-tax weighted average cost of capital of the group plus a risk premium to reflect the particular risk characteristics of each individual investment. The discount rate used for 2008 was 11.4% for each asset (2007: 10.0%).

Oil & gas prices: management has used an oil price assumption of US$55 (2007: US$55) per barrel and a gas price of US$6.40 (2007: n/a) per mcf for the impairment testing of its individual oil & gas investments.

Reserve volumes and production profiles: management has used its internally developed economic models of reserves and production as a basis of calculating value in use.

Sensitivity to changes in assumptions

With regard to the assessment of value in use of the cash generating units, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the relevant unit to exceed its recoverable amount, after giving due consideration to the macro-economic outlook for the oil & gas industry and the commercial arrangements with customers underpinning the cash flow forecasts for each of the units.

12 INTANGIBLE ASSETS

	2008		2007
	US$'000		US$'000
Intangible oil & gas assets
Cost:
At 1 January	15,927		16,788
Additions	37,036		49,700
Disposals	-		(8,793)
Asset written off	(9,826)		-
Transferred to tangible oil & gas assets (note 9)	-		(41,657)
Exchange difference	-		(111)
At 31 December	43,137		15,927
Accumulated impairment:
At 1 January	(8,686)		-
Impairment	(5,000)		(8,686)
At 31 December	(13,686)		(8,686)
Net book value of intangible oil & gas assets at 31 December	29,451		7,241
Other intangible assets
Cost:
At 1 January	3,930		1,561
Additions on acquisition (note 10)	12,009		2,369
Acquired intangible assets (note 10)	414		-
Exchange difference	(2,461)		-
At 31 December	13,892		3,930
Accumulated amortisation:
At 1 January	(2,161)		(390)
Amortisation	(2,829)		(1,771)
At 31 December	(4,990)		(2,161)
Net book value of other intangible assets at 31 December	8,902		1,769
Total intangible assets	38,353		9,010

Intangible oil & gas assets

Oil & gas asset additions above mainly comprise of US$24,658,000 of capitalised expenditure on near field appraisal wells in the group's 30% interest in Block PM304, offshore Malaysia.

Prior year additions to oil & gas assets included US$32,673,000 in respect of the Don area development and US$15,927,000 of well appraisal costs on Permit NT/P68.

During the year, US$9,826,000 of capitalised development costs were written-off in respect of a dry exploration well.

During the year an impairment provision of US$5,000,000 was made against the group's interest in Permit NT/P68 in Australia due to the continuing uncertainties surrounding the commercial outcome of the project.

There were investing cash outflows relating to capitalised intangible oil & gas assets of US$37,036,000 (2007: US$48,604,000) in the current period arising from pre-development activities. As at 31 December 2008 there were cash and deposits of US$495,000 (2007: US$3,582,000), trade and other receivables of nil (2007: US$3,106,000) and trade and other payables of US$508,000 (2007: US$4,840,000) arising from pre-development activities in the current period.

Other intangible assets comprise the fair values of customer contracts, proprietary software and patent technology (note 10) arising on acquisition. These intangible assets are being amortised over their remaining estimated economic useful life of three, six and ten years respectively on a straight-line basis and the related amortisation charges included in selling, general and administrative expenses (note 4e)

 

13 INTEREST IN JOINT VENTURES

 

In the normal course of business, the group establishes jointly controlled entities and operations for the execution of certain of its operations and contracts. A list of these joint ventures is disclosed in note 32. The group's share of assets, liabilities, revenues and expenses relating to jointly controlled entities and operations are as follows:

	2008		2007
	US$'000		US$'000
Revenue	28,878		37,140
Cost of sales	(21,481)		(10,990)
Gross profit	7,397		26,150
Selling, general and administration expenses	(1,200)		(1,246)
Finance income, net	87		42
Profit before income tax	6,284		24,946
Income tax	(523)		(819)
Net profit	5,761		24,127
Current assets	38,295		46,991
Non-current assets	3,644		3,883
Total assets	41,939		50,874
Current liabilities	2,446		12,667
Non-current liabilities	-		323
Total liabilities	2,446		12,990
Net assets	39,493		37,884

14 AVAILABLE-FOR-SALE FINANCIAL ASSETS

	2008		2007
	US$'000		US$'000
Shares - listed	133		1,022
Units in a mutual fund	433		564
	566		1,586

Available-for-sale financial assets consist of investments in the ordinary shares of quoted companies and units in a mutual fund and therefore have no fixed maturity date or coupon rate.

During the year, a provision for impairment of US$355,000 (2007: nil) was made against the above listed shares held as an available-for-sale financial asset on the basis that the recent fall in the market value of these shares was considered to be significant.

15 DERIVATIVE FINANCIAL INSTRUMENTS AND OTHER FINANCIAL ASSETS

	2008		2007
	US$'000		US$'000
Non-current
Fair value of derivative instruments (note 31)	7,227		1,775
Other financial assets
Restricted cash	1,899		-
Other	-		23
	1,899		23
Current
Fair value of derivative instruments (note 31)	5,631		27,298
Other financial assets
Interest receivable	1,047		1,351
Restricted cash	2,736		1,351
Other	295		-
	4,078		2,702

Restricted cash comprises deposits with financial institutions securing various guarantees and performance bonds associated with the group's trading activities and cash in escrow against reimbursed long-term employee benefits charged to a customer. This cash will be released on the maturity of these guarantees and performance bonds and on the transfer/cessation of employment of the relevant employee for which the long-term benefit is held in escrow.

16 INVENTORIES

	2008		2007
	US$'000		US$'000
Crude oil	1,669		1,173
Processed hydrocarbons	805		18
Stores and spares	744		732
Raw materials	859		333
	4,077		2,256

Included in the income statement are costs of inventories expensed of US$22,404,000 (2007: US$23,528,000).

17 WORK IN PROGRESS AND BILLINGS IN EXCESS OF COST AND ESTIMATED EARNINGS

	2008		2007
	US$'000		US$'000
Cost and estimated earnings	3,782,100		2,194,088
Less: billings	(3,529,405)		(1,923,907)
Work in progress	252,695		270,181
Billings	1,509,548		1,114,500
Less: cost and estimated earnings	(1,224,021)		(906,395)
Billings in excess of cost and estimated earnings	285,527		208,105
Total cost and estimated earnings	5,006,121		3,100,483
Total billings	5,038,953		3,038,407

18 TRADE AND OTHER RECEIVABLES

	2008		2007
	US$'000		US$'000
Trade receivables	608,023		453,256
Retentions receivable	2,241		3,450
Advances	31,977		19,154
Prepayments and deposits	24,849		19,450
Other receivables	33,841		13,715
	700,931		509,025

Trade receivables are non-interest bearing and are generally on 30 to 60 days' terms. Trade receivables are reported net of provision for impairment. The movements in the provision for impairment against trade receivables totalling US$608,023,000 (2007: US$453,256,000) are as follows:

	2008				2007
	Specific	General			Specific	General
	impairment	impairment	Total		impairment	impairment	Total
	US$'000	US$'000	US$'000		US$'000	US$'000	US$'000
At 1 January	4,086	1,216	5,302		5,073	364	5,437
Charge for the year	1,361	482	1,843		2,948	849	3,797
Amounts written off	-	(333)	(333)		(3,555)	-	(3,555)
Unused amounts reversed	(1,530)	(15)	(1,545)		(382)	-	(382)
Exchange difference	(219)	(54)	(273)		2	3	5
At 31 December	3,698	1,296	4,994		4,086	1,216	5,302

At 31 December, the analysis of trade receivables is as follows:

	Neither past	Number of days past due
	due nor
	impaired	< 30	31-60	61-90	91-120	121-360	> 360
		days	days	days	days	days	days	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Unimpaired	325,844	197,790	45,106	11,012	10,460	12,714	1,319	604,245
Impaired	-	734	86	618	666	3,032	3,636	8,772
	325,844	198,524	45,192	11,630	11,126	15,746	4,955	613,017
Less: impairment provision	-	(190)	(85)	(194)	(249)	(1,640)	(2,636)	(4,994)
Net trade receivables 2008	325,844	198,334	45,107	11,436	10,877	14,106	2,319	608,023
Unimpaired	206,327	176,426	41,030	16,170	1,937	4,580	876	447,346
Impaired	-	162	745	1,865	1,772	4,653	2,015	11,212
	206,327	176,588	41,775	18,035	3,709	9,233	2,891	458,558
Less: impairment provision	-	(162)	(745)	(222)	(947)	(2,040)	(1,186)	(5,302)
Net trade receivables 2007	206,327	176,426	41,030	17,813	2,762	7,193	1,705	453,256

The credit quality of trade receivables that are neither past due nor impaired is assessed by management with reference to externally prepared customer credit reports and the historic payment track records of the counterparties.

Advances represent payments made to certain of the group's sub-contractors for projects in progress, on which the related work had not been performed at the balance sheet date.

All trade and other receivables are expected to be settled in cash.

Certain trade and other receivables will be settled in cash using currencies other than the reporting currency of the group, and will be largely paid in Sterling and Kuwaiti Dinars.

19 CASH AND SHORT-TERM DEPOSITS

	2008		2007
	US$'000		US$'000
Cash at bank and in hand	107,461		106,454
Short-term deposits	586,954		475,098
Total cash and bank balances	694,415		581,552

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the group, and earn interest at respective short-term deposit rates. The fair value of cash and bank balances is US$694,415,000 (2007: US$581,552,000).

For the purposes of the cash flow statement, cash and cash equivalents comprise the following:

	2008		2007
	US$'000		US$'000
Cash at bank and in hand	107,461		106,454
Short-term deposits	586,954		475,098
Bank overdrafts (note 24)	(45,256)		(15,666)
	649,159		565,886

20 SHARE CAPITAL

The share capital of the Company as at 31 December was as follows:

	2008		2007
	US$'000		US$'000
Authorised
750,000,000 ordinary shares of US$0.025 each
(2007: 750,000,000 ordinary shares of US$0.025 each)	18,750		18,750
Issued and fully paid
345,434,858 ordinary shares of US$0.025 each
(2007: 345,434,858 ordinary shares of US$0.025 each)	8,636		8,636

The movement in the number of issued and fully paid ordinary shares is as follows:

	Number
Ordinary shares:
Ordinary shares of US$0.025 each at 1 January 2007	345,159,920
Issued during the year on acquisition of a subsidiary (note 10)	274,938
Ordinary shares of US$0.025 each at 1 January 2008	345,434,858
Movement during the year	-
Ordinary shares of US$0.025 each at 31 December 2008	345,434,858

The share capital comprises only one class of ordinary shares. The ordinary shares carry a voting right and the right to a dividend.

21 TREASURY SHARES

For the purpose of making awards under its employee share schemes, the Company acquires its own shares which are held by the Petrofac Employee Benefit Trust. All these shares have been classified in the balance sheet as treasury shares within equity.

The movements in total treasury shares are shown below:

	2008			2007
	Number	US$'000		Number	US$'000
At 1 January	4,052,024	29,842		1,500,135	8,144
Acquired during the year	5,854,194	42,500		2,551,889	21,698
Vested/forfeited during the year	(365,912)	(3,009)		-	-
At 31 December	9,540,306	69,333		4,052,024	29,842

As at 31 December 2008 5,504,819 of the above shares were held by Lehman Brothers in a client custody account which is now being managed by their appointed administrator. The Company is currently in discussion with the administrator to procure the release of these shares.

Included in the above treasury shares are 274,938 shares held in relation to the acquisition of SPD Group Limited in 2007 (note 10).

22 SHARE-BASED PAYMENT PLANS

Performance Share Plan (PSP)

Under the Performance Share Plan of the Company, share awards are granted to executive Directors and a restricted number of other senior executives of the group. The shares cliff vest at the end of three years subject to continued employment and the achievement of certain pre-defined non-market and market based performance conditions. The non-market based condition governing the vesting of 50% of the total award, is subject to achieving between 15% and 25% earning per share (EPS) growth targets over a three year period. The fair values of the equity-settled award relating to the EPS part of the scheme are estimated based on the quoted closing market price per Company share at the date of grant with an assumed vesting rate per annum built into the calculation (subsequently trued up at year end based on the actual leaver rate during the period from award date to year end) over the three year vesting period of the plan. The fair value and assumed vesting rates of the EPS part of the scheme are shown below: 

	Fair value per share	Trued up vesting rate
2008 awards	522p	98.9%
2007 awards	415p	97.1%
2006 awards	353p	95.3%

The remaining 50% market performance based part of these awards is dependent on the total shareholder return (TSR) of the group compared to an index composed of selected relevant companies. The fair value of the shares vesting under this portion of the award is determined by an independent valuer using a Monte Carlo simulation model taking into account the terms and conditions of the plan rules and using the following assumptions at the date of grant:

	2008 awards	2007 awards	2006 awards
Expected share price volatility  (based on median of comparator group's three year volatilities)	32.0%	29.0%	28.0%
Share price correlation with comparator group	22.0%	17.0%	10.0%
Risk-free interest rate	3.79%	5.20%	4.60%
Expected life of share award	3 years	3 years	3 years
Fair value of TSR portion	287p	245p	234p

The following shows the movement in the number of shares held under the PSP scheme outstanding but not exercisable:

	2008		2007
	Number		Number
Outstanding at 1 January	864,181		431,194
Granted during the period	456,240		449,537
Forfeited during the period	(21,612)		(16,550)
Outstanding at 31 December	1,298,809		864,181

The number of awards still outstanding but not exercisable at 31 December 2008 is made up of 451,178 in respect of 2008 awards (2007: nil), 436,603 in respect of 2007 awards (2007: 443,070) and 411,028 for 2006 awards (2007: 421,111).

The charge recognised in the current year amounted to US$2,258,000 (2007: US$1,497,000).

Deferred Bonus Share Plan (DBSP)

Executive Directors and selected employees were originally eligible to participate in this scheme although the Remuneration Committee decided during 2007 that executive Directors should no longer continue to participate. Participants may be invited to elect or in some cases, be required, to receive a proportion of any bonus in ordinary shares of the Company ("Invested Awards"). Following such an award, the Company will generally grant the participant an additional award of a number of shares bearing a specified ratio to the number of his or her invested shares ("Matching Shares"). The 2006 awards vest on the third anniversary of the grant date provided that the participant did not leave the group's employment, subject to a limited number of exceptions. However, a change in the rules of the DBSP scheme was approved by shareholders at the Annual General Meeting of the Company on 11 May 2007 such that for the March 2007 share awards and for any awards made thereafter, the invested and matching shares would, unless the Remuneration Committee of the Board of Directors determined otherwise, vest 33.33% on the first anniversary of the date of grant, a further 33.33% on the second anniversary of the date of grant and the final 33.34% of the award on the third anniversary of the date of grant. 

At the year end the values of the bonuses settled by shares cannot be determined until all employees have confirmed the voluntary portion of their bonus they wish to be settled by shares rather than cash and until the Remuneration Committee has approved the mandatory portion of the employee bonuses to be settled in shares. Once the voluntary and mandatory portions of the bonus to be settled in shares are determined, the final bonus liability to be settled in shares is transferred to the reserve for share-based payments. The costs relating to the matching shares are recognised over the relevant vesting period and the fair values of the equity-settled matching shares granted to employees are based on the quoted closing market price at the date of grant adjusted for the trued up percentage vesting rate of the plan. The details of the fair values and assumed vesting rates of the DBSP scheme are below:

	Weighted average fair value per share	Trued up vesting rate
2008 awards	522p	95.8%
2007 awards	415p	91.2%
2006 awards	353p	87.0%

The following shows the movement in the number of shares held under the DBSP scheme outstanding but not exercisable:

	2008		2007
	Number*		Number*
Outstanding at 1 January	2,558,711		1,104,503
Granted during the period	1,777,080		1,582,166
Vested during the period	(385,700)		(3,204)
Forfeited during the period	(194,708)		(124,754)
Outstanding at 31 December	3,755,383		2,558,711

* Includes invested and matching shares.

The number of awards still outstanding but not exercisable at 31 December 2008 is made up of 1,688,558 in respect of 2008 awards (2007: nil), 1,084,602 in respect of 2007 awards (2007: 1,500,298) and 982,223 for 2006 awards (2007: 1,058,413).

The charge recognised in the 2008 income statement in relation to matching share awards amounted to US$5,665,000 (2007: US$3,411,000).

Share Incentive Plan (SIP)

All UK employees, including UK resident Directors, are eligible to participate in the scheme. Employees may invest up to Sterling 1,500 per tax year of gross salary (or, if lower, 10% of salary) to purchase ordinary shares in the Company. There is no holding period for these shares.

Restricted Share Plan (RSP)

Under the Restricted Share Plan scheme, employees are granted shares in the Company over a discretionary vesting period which may or may not be, at the direction of the Remuneration Committee of the Board of Directors, subject to the satisfaction of performance conditions.  At present there are no performance conditions applying to this scheme nor is there currently any intention to introduce them in the future. The fair values of the awards granted under the plan at various grant dates during the year are based on the quoted market price at the date of grant adjusted for an assumed vesting rate over the relevant vesting period. For details of the fair values and assumed vesting rate of the RSP scheme, see below:

	Weighted average fair value per share	Trued up vesting rate
2008 awards	478p	98.1%
2007 awards	456p	100.0%
2006 awards	278p	96.3%

The following shows the movement in the number of shares held under the RSP scheme outstanding but not exercisable:

	2008		2007
	Number		Number
Outstanding at 1 January	394,216		161,101
Granted during the period	811,399		239,567
Vested during the period	(5,180)		-
Forfeited during the period	(15,724)		(6,452)
Outstanding at 31 December	1,184,711		394,216

The number of awards still outstanding but not exercisable at 31 December 2008 is made up of 795,675 in respect of 2008 awards (2007: nil), 234,387 in respect of 2007 awards (2007: 239,567), and 154,649 for 2006 awards (2007: 154,649).

During the year the Company recognised a charge of US$1,525,000 (2007: US$504,000) in relation to the above.

The group has recognised a total charge of US$9,448,000 (2007: US$5,412,000) in the income statement during the year relating to the above employee share-based schemes (see note 4f) which has been transferred to the reserve for share-based payments along with US$9,602,000 of the bonus liability accrued for the year ended 31 December 2007 which has been voluntarily elected or obliged to be settled in shares granted during the year (2007: US$6,105,000).

For further details on the above employee share-based payment schemes refer pages 62 to 64 of the Directors' Remuneration Report.

 

23 OTHER RESERVES

	Net unrealised
	gains/(losses) on	Net unrealised
	available-for-	(losses) /	Foreign	Reserve for
	sale-financial	gains on	currency	share-based
	assets	derivatives	translation	payments	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 January 2007 as previously reported	738	9,340	4,889	4,644	19,611
Restatement*	-	19,213	-	-	19,213
Balance at 1 January 2007 as restated *	738	28,553	4,889	4,644	38,824
Foreign currency translation	-	-	(72)	-	(72)
Net gains on maturity of cash flow
hedges recycled in the year	-	(22,183)	-	-	(22,183)
Net changes in fair value of derivatives and financial assets
designated as cash flow hedges	-	59,487	-	-	59,487
Changes in fair value of available-for-sale
financial assets	(140)	-	-	-	(140)
Share-based payments charge (note 22)	-	-	-	5,412	5,412
Transfer during the year (note 22)	-	-	-	6,105	6,105
Balance at 1 January 2008 as restated *	598	65,857	4,817	16,161	87,433
Foreign currency translation	-	-	(84,232)	-	(84,232)
Net gains on maturity of cash flow
hedges recycled in the year	-	(32,103)	-	-	(32,103)
Net changes in fair value of derivatives and financial assets
designated as cash flow hedges	-	(25,907)	-	-	(25,907)
Changes in fair value of available-for-sale
financial assets	(879)	-	-	-	(879)
Impairment of available-for-sale financial assets	355	-	-	-	355
Share-based payments charge (note 22)	-	-	-	9,448	9,448
Transfer during the year (note 22)	-	-	-	9,602	9,602
Shares vested during the year (note 22)	-	-	-	(3,009)	(3,009)
Balance at 31 December 2008	74	7,847	(79,415)	32,202	(39,292)

*During 2008, the Company has identified that in prior periods certain gains and losses on cash flow hedges have been recycled to accrued contract expenses from other reserves (net unrealised (losses) / gains on derivatives) ahead of the contract costs to which they relate impacting the income statement. As a result US$19,213,000 has been reclassified from contract costs to other reserves at 1 January 2007 and the amount transferred in 2007 adjusted by US$17,753,000. The impact on the income statement was immaterial so no adjustment has been made.

Nature and purpose of other reserves

Net unrealised gains / (losses) on available-for-sale financial assets

This reserve records fair value changes on available-for-sale financial assets held by the group net of deferred tax effects. Realised gains and losses on the sale of available-for-sale financial assets are recognised as other income or expenses in the income statement.

Net unrealised gains / (losses) on derivatives

The portion of gains or losses on cash flow hedging instruments that are determined to be effective hedges are included within this reserve net of related deferred tax effects. When the hedged transaction occurs or is no longer forecast to occur the gain or loss is transferred out of equity to the income statement. Realised net gains amounting to US$31,713,000 (2007: US$21,475,000) relating to foreign currency forward contracts and financial assets designated as cash flow hedges have been recognised in cost of sales, realised net gains of US$63,000 (2007: US$708,000) relating to interest rate derivatives have been classified as a net interest expense and a realised net gain of US$327,000 (2007: nil) was added to revenues in respect of oil derivatives. 

The forward currency points element of derivative financial instruments relating to forward currency contracts amounting to a net loss of US$11,826,000 (2007: nil) have been recognised in the cost of sales. The time value portion gain on interest rate derivatives of US$433,000 (2007: nil) and loss on oil derivatives of US$145,000 (2007: nil) were netted off/ and added to interest payable.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements in foreign subsidiaries. It is also used to record exchange differences arising on monetary items that form part of the group's net investment in subsidiaries.

Reserve for share-based payments

The reserve for share-based payments is used to record the value of equity settled share-based payments awarded to employees and transfers out of this reserve are made upon vesting of the original share awards.

The transfer during the year reflects the transfer from accrued expenses within trade and other payables of the bonus liability relating to the year ended 2007 of US$9,602,000 (2006 bonus of US$6,105,000) which has been voluntarily elected or mandatorily obliged to be settled in shares during the year (note 22). 

24 INTEREST-BEARING LOANS AND BORROWINGS

The group had the following interest-bearing loans and borrowings outstanding:

		31 December 2008			31 December 2007	Effective
		Actual interest rate%			Actual interest rate%	interest rate%	Maturity	2008	2007
								US$'000	US$'000
Current
Revolving credit facility	(i)	-			US LIBOR + 0.875%	US LIBOR + 0.875%	-	-	6,500
Short term loan	(ii)	-			KD Discount Rate + 1.50%	KD Discount Rate + 1.50%	-	-	3,627
Bank overdrafts	(iii)	UK LIBOR + 0.875%, US LIBOR + 0.875%, KD Discount Rate + 2.00%			UK LIBOR + 0.875%, US LIBOR +0.875%, KD Discount Rate + 1.50%	UK LIBOR + 0.875%, US LIBOR + 0.875%, KD Discount Rate + 2.00%	on demand	45,256	15,666
Other loans:
Current portion of term loan	(iv)	US/UK LIBOR + 0.875%			US/UK LIBOR + 0.875%	4.18% to 4.88% (2007: 4.95% to 5.84%)		9,156	2,662
								54,412	28,455
Non-current
Revolving credit facility	(v)	US/UK LIBOR + 0.875%			US/UK LIBOR + 0.875%	3.74% to 5.02% (2007: 4.97% to 5.62%)	2013	18,720	8,953
Revolving credit facility	(i)	US LIBOR + 0.875%			US LIBOR + 0.875%	3.11%	2010	20,000	-
Term loan	(iv)	US/UK LIBOR + 0.875%			US/UK LIBOR + 0.875%	4.18% to 4.88% (2007: 4.95% to 5.84%)	2009-2013	54,847	75,019
								93,567	83,972
Less:
Debt acquisition costs net of accumulated amortisation and effective rate adjustments								(5,379)	(2,332)
								88,188	81,640

Details of the group's interest-bearing loans and borrowings are as follows:

(i) Revolving credit facilities

This facility, provided by The Royal Bank of Scotland / Halifax Bank of Scotland (RBS/HBOS), is repayable on 31 December 2010.

(ii) Short-term loan

The short-term loan is denominated in Kuwaiti Dinars (KD) and relates to funding provided for a project in Kuwait. The loan was settled during 2008. 

(iii) Bank overdrafts

Bank overdrafts are drawn down in US dollars, Kuwaiti Dinars and Sterling denominations to meet the group's working capital requirements. These are repayable on demand.

(iv) Term loan

The term loan with RBS/HBOS at 31 December 2008 comprised drawings of US$33,998,000 (2007: US$35,310,000) denominated in US$ and US$30,005,000 (2007: US$42,371,000) denominated in Sterling. Both elements of the loan are repayable over a period of five years commencing 31 December 2008 to 30 September 2013.

(v) Revolving credit facility

The drawings against this facility, which is also provided by RBS/HBOS, will be converted to a term loan on 30 September 2010 to be repaid over a period of three years ending 30 September 2013. The drawings at 31 December 2008 comprised US$13,900,000 (2007: US$2,400,000) denominated in US$ and US$4,820,000 (2007: US$6,553,000) denominated in Sterling. 

The group's credit facilities and debt agreements contain covenants relating to cash flow cover, cost of borrowings cover, dividends and various other financial ratios. With the exception of Petrofac International Ltd, which under its existing bank covenants, is restricted from making upstream cash payments in excess of 70 per cent of its net income in any one year, none of the Company's subsidiaries is subject to any material restrictions on their ability to transfer funds in the form of cash dividends, loans or advances to the Company. 

25 PROVISIONS

	Other long- term
	employment		Provision for
	benefits provision		decommissioning		Total
	US$'000		US$'000		US$'000
At 1 January 2008	17,218		1,828		19,046
Additions during the year	10,223		1,546		11,769
Unused amounts reversed/paid in the year	(1,216)		-		(1,216)
Unwinding of discount	-		64		64
At 31 December 2008	26,225		3,438		29,663

Other long- term employment benefits provision

Labour laws in certain countries in which the group operates require employers to provide for other long- term employment benefits. These benefits are payable to employees at the end of their period of employment. The provision for these long- term benefits is calculated based on the employees' last drawn salary at the balance sheet date and length of service, subject to the completion of a minimum service period in accordance with the local labour laws of the jurisdictions in which the group operates. The amount is payable to the employees on being transferred to another jurisdiction or on cessation of employment.

Provision for decommissioning

The decommissioning provision primarily relates to the Company's obligation for the removal of facilities and restoration of the site at the PM304 field in Malaysia, at Chergui in Tunisia and on the Don assets in the United Kingdom. The liability is discounted at the rate of 3.50% on PM304 (2007: 3.50%), 5.25% on Chergui and 3.40% (2007: nil) on Don. The unwinding of the discount is classified as a finance cost (note 5). The Company estimates that the cash outflows against these provisions will arise in 2014 on PM304, in 2018 on Chergui and in 2013 on Don assuming no further development of the asset.

26 OTHER FINANCIAL LIABILITIES

	2008		2007
	US$'000		US$'000
Other financial liabilities - non-current
Deferred consideration	32,147		13,622
Fair value of derivative instruments (note 31)	-		130
Other	118		118
	32,265		13,870
Other financial liabilities - current
Interest payable	118		812
Fair value of derivative instruments (note 31)	6,244		52
	6,362		864

27 TRADE AND OTHER PAYABLES

	2008		2007
	US$'000		US$'000
Trade payables	275,058		187,417
Advances received from customers	76,845		61,744
Accrued expenses	149,684		136,514
Other taxes payable	6,876		16,885
Other payables	4,866		5,457
	513,329		408,017

Trade payables are non-interest bearing and are normally settled on terms of between 30 and 60 days.

Advances from customers represent payments received for contracts on which the related work had not been performed at the balance sheet date.

Included in other payables are retentions held against subcontractors of US$911,000 (2007: US$4,292,000).

Certain trade and other payables will be settled in currencies other than the reporting currency of the group, mainly in Sterling, Euros and Kuwaiti Dinars.

28 ACCRUED CONTRACT EXPENSES

			As restated
	2008		2007
	US$'000		US$'000
Accrued contract expenses	543,191		379,356
Reserve for contract losses	8,670		3,226
	551,861		382,582

The reserve for contract losses is to cover costs in excess of revenues on certain contracts.

29 COMMITMENTS AND CONTINGENCIES

Commitments

In the normal course of business the group will obtain surety bonds, letters of credit and guarantees, which are contractually required to secure performance, advance payment or in lieu of retentions being withheld. Some of these facilities are secured by issue of corporate guarantees by the Company in favour of the issuing banks. 

At 31 December 2008, the group had letters of credit of US$24,096,000 (2007: US$8,184,000) and outstanding letters of guarantee, including performance and bid bonds, of US$865,120,000 (2007: US$663,292,000) against which the group had pledged or restricted cash balances of, in aggregate, US$1,506,000 (2007: US$1,351,000). 

At 31 December 2008, the group had outstanding forward exchange contracts amounting to US$166,412,000 (2007: US$326,442,000). These commitments consist of future obligations to either acquire or sell designated amounts of foreign currency at agreed rates and value dates (note 31). 

Leases

The group has financial commitments in respect of non-cancellable operating leases for office space and equipment. These non-cancellable leases have remaining non-cancellable lease terms of between one and seventeen years and, for certain property leases, are subject to renegotiation at various intervals as specified in the lease agreements. The future minimum rental commitments under these non-cancellable leases are as follows:

	2008		2007
	US$'000		US$'000
Within one year	59,292		70,870
After one year but not more than five years	72,729		76,493
More than five years	54,787		52,827
	186,808		200,190

Included in the above are commitments relating to the lease of an office building extension in Aberdeen, United Kingdom of US$44,573,000 (2007: US$54,933,000) and the lease of a drilling rig for the Don Southwest project of US$35,744,000 (2007: US$43,200,000).

Minimum lease payments recognised as an operating lease expense during the year amounted to US$26,557,000 (2007: US$21,359,000). 

Capital commitments

At 31 December 2008, the group had capital commitments of US$44,035,000 (2007: US$29,630,000) excluding the above lease commitments.

Included in the above are commitments for the development of the Don assets amounting to US$8,610,000 (2007: nil) and commitments relating to the further appraisal and development of wells as part of the Cendor project in Malaysia amounting to US$26,468,000 (2007: US$11,389,000).

30 RELATED PARTY TRANSACTIONS 

The consolidated financial statements include the financial statements of Petrofac Limited and the subsidiaries listed in note 32. Petrofac Limited is the ultimate parent entity of the group.

The following table provides the total amount of transactions which have been entered into with related parties:

		Sales to related	Purchases from	Amounts owed	Amounts owed
		parties	related parties	by related parties	to related parties
		US$'000	US$'000	US$'000	US$'000
Joint ventures	2008	9,081	1,858	2,907	367
	2007	180	507	3,147	625
Other Directors'	2008	-	1,277	-	192
interests	2007	-	614	-	119

All sales to and purchases from joint ventures are made at normal market prices and the pricing policies and terms of these transactions are approved by the group's management.

All related party balances will be settled in cash.

Purchases in respect of other Directors' interests of US$1,277,000 (2007: US$614,000) reflect the market rate based costs of chartering the services of an aeroplane used for the transport of senior management and Directors of the group on company business, which is owned by an offshore trust of which the Chief Executive of the Company is a beneficiary. 

Compensation of key management personnel 

The following details remuneration of key management personnel of the group comprising of executive and non-executive Directors of the Company and other senior personnel. Further information relating to the individual Directors is provided in the Directors' Remuneration report on pages 56 to 69.

	2008		2007
	US$'000		US$'000
Short-term employee benefits	5,542		5,063
Other long-term employment benefits	59		43
Share-based payments	1,311		906
Fees paid to non-executive directors	554		546
	7,466		6,558

31 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Risk management objectives and policies

The group's principal financial assets and liabilities, other than derivatives, comprise trade and other receivables, cash and short-term deposits, interest-bearing loans and borrowings, trade and other payables and deferred consideration.

The group's activities expose it to various financial risks particularly associated with interest rate risk on its variable rate loans and borrowings and foreign currency risk on both conducting business in currencies other than reporting currency as well as translation of the assets and liabilities of foreign operations to the reporting currency. These risks are being addressed by using a combination of various derivative instruments, principally interest rate swaps, caps and forward currency contracts in line with the group's hedging policy. The group has a policy not to enter into speculative trading of financial derivatives.

The Board of Directors of the Company has established an Audit Committee and Risk Committee to help identify, evaluate and manage the significant financial risks faced by the group and their activities are discussed in detail on pages 45 to 55. 

The other main risks besides interest rate and foreign currency risk arising from the group's financial instruments are credit risk, liquidity risk and commodity price risk and the policies relating to these risks are discussed in detail below:

Interest rate risk 

Interest rate risk arises from the possibility that changes in interest rates will affect the value of the group's interest-bearing financial liabilities and assets.

The group's exposure to market risk arising from changes in interest rates relates primarily to the group's long-term variable rate debt obligations and its cash and bank balances. The group's policy is to manage its interest cost using a mix of fixed and variable rate debt and specifically to keep between 60% and 80% of its term borrowings at fixed or capped rates of interest. At 31 December 2008, after taking into account the effect of interest rate swaps and collars, approximately 65.1% (2007: 69.1%) of the group's term borrowings are at a fixed or capped rate of interest.

Interest rate sensitivity analysis

The impact on the group's pre-tax profit and equity due to a reasonably possible change in interest rates is demonstrated in the table below. The analysis assumes that all other variables remain constant.

	Pre-tax profit			Equity
	100 basis	100 basis		100 basis	100 basis
	point increase	point decrease		point increase	point decrease
	US$'000	US$'000		US$'000	US$'000
31 December 2008	(882)	882		(705)	(1,615)
31 December 2007	(1,058)	1,058		272	(670)

The following table reflects the maturity profile of these financial liabilities and assets: 

Year ended 31 December 2008

	Within	1-2	2-3	3-4	4-5	More than
	1 year	years	years	years	years	5 years	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Floating rates
Revolving credit facilities (note 24)	-	20,936	4,212	6,552	7,020	-	38,720
Bank overdrafts (note 24)	45,256	-	-	-	-	-	45,256
Term loan (note 24)	9,156	11,250	15,625	18,750	9,222	-	64,003
Interest rate collars (note 31)	1,137	-	-	-	-	-	1,137
Interest rate swap (note 31)	37	-	-	-	-	-	37
	55,586	32,186	19,837	25,302	16,242	-	149,153
Financial assets
Floating rates
Cash and short-term deposits (note 19)	694,415	-	-	-	-	-	694,415
Restricted cash balances (note 15)	2,736	207	-	-	-	1,692	4,635
	697,151	207	-	-	-	1,692	699,050

Year ended 31 December 2007

	Within	1-2	2-3	3-4	4-5	More than
	1 year	years	years	years	years	5 years	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Floating rates
Revolving credit facilities (note 24)	6,500	-	448	2,015	3,134	3,356	15,453
Short-term loan (note 24)	3,627	-	-	-	-	-	3,627
Bank overdrafts (note 24)	15,666	-	-	-	-	-	15,666
Term loan (note 24)	2,662	10,000	11,250	15,625	18,750	19,394	77,681
Interest rate collars (note 31)	-	130	-	-	-	-	130
	28,455	10,130	11,698	17,640	21,884	22,750	112,557
Financial assets
Floating rates
Cash and short-term deposits (note 19)	581,552	-	-	-	-	-	581,552
Restricted cash balances (note 15)	1,351	-	-	-	-	-	1,351
Interest rate swap (note 31)	-	28	-	-	-	-	28
	582,903	28	-	-	-	-	582,931

Financial liabilities in the above table are disclosed gross of debt acquisition costs and effective rate adjustments of US$5,379,000 (2007: US$2,332,000).

Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. The other financial instruments of the group that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk.

Derivative instruments designated as cash flow hedges 

At 31 December 2008, the group held the following derivative instruments, designated as cash flow hedges in relation to floating rate interest-bearing loans and borrowings:

				Fair value of asset/(liability)
	Nominal amount		Date	2008	2007
Instrument	(US$ equivalent)	Period to maturity	commenced	US$'000	US$'000
UK LIBOR interest rate swap	US$2,629,000	9 months	31 December 2004	(37)	28
UK LIBOR interest rate collar	US$30,131,000	1 year	31 December 2007	(705)	(74)
US LIBOR interest rate collar	US$34,138,000	1 year	31 December 2007	(432)	(56)

During 2008, changes in fair value of a loss of US$1,607,000 (2007: US$102,000) relating to these derivative instruments were taken to equity and a gain of US$63,000 (2007: US$708,000) were recycled from equity into interest expense in the income statement. The time value portion of these derivatives of a gain of US$433,000 (2007: nil) was netted-off against interest expense.

Foreign currency risk

The group is exposed to foreign currency risk on sales, purchases, and translation of assets and liabilities that are in a currency other than the functional currency of its operating units. The group is also exposed to the translation of the functional currencies of its units to the US dollar reporting currency of the group. The following table summarises the percentage of foreign currency denominated revenues, costs, financial assets and financial liabilities, expressed in US dollar terms, of the group totals. 

	2008		2007
	% of foreign currency denominated items		% of foreign currency denominated items
Revenues	43.8%		48.6%
Costs	61.6%		68.7%
Current financial assets	57.9%		67.9%
Non-current financial assets	0.0%		0.6%
Current financial liabilities	64.8%		45.8%
Non-current financial liabilities	25.6%		44.0%

The group uses forward currency contracts to manage the currency exposure on transactions significant to its operations. It is the group's policy not to enter into forward contracts until a highly probable forecast transaction is in place and to negotiate the terms of the derivative instruments used for hedging to match the terms of the hedged item to maximise hedge effectiveness. 

 

Foreign currency sensitivity analysis

The income statements of foreign operations are translated into the reporting currency using a weighted average rate of conversion. Foreign currency monetary items are translated using the closing rate at the date of the balance sheet. Revenues and costs in currencies other than the functional currency of an operating unit are recorded at the prevailing rate at the date of the transaction. The following significant exchange rates applied during the year in relation to US dollars:

	2008			2007
	Average rate	Closing rate		Average rate	Closing rate
Sterling	1.85	1.46		2.01	1.99
Kuwaiti Dinars	3.72	3.62		3.51	3.66
Euros	1.48	1.39		1.38	1.46

The following table summarises the impact on the group's pre-tax profit and equity (due to change in the fair value of monetary assets, liabilities and derivative instruments) of a reasonably possible change in US dollar exchange rates with respect to different currencies:

	Pre-tax profit			Equity
	+10% US dollar rate increase	-5% US dollar rate decrease		+10% US dollar rate increase	-5% US dollar rate decrease
	US$'000	US$'000		US$'000	US$'000
31 December 2008	(16,355)	8,177		10,597	(6,135)
31 December 2007	(27,285)	13,642		(35,065)	17,532

Derivative instruments designated as cash flow hedges 

At 31 December 2008, the group had foreign exchange forward contracts designated as cash flow hedges with a fair value gain of US$10,165,000 (2007: US$28,657,000) in equity as follows: 

							Net unrealised
	Contract value			Fair value			gain/(loss)
	2008	2007		2008	2007		2008	2007
	US$'000	US$'000		US$'000	US$'000		US$'000	US$'000
Euro currency (sales) purchases	(41,655)	321,264		(31,783)	349,964		9,488	28,700
Sterling currency purchases	26,747	4,500		19,621	4,448		(2,956)	(52)
Yen currency purchases	7,465	678		8,716	687		-	9
Kuwaiti Dinars sales	(90,545)	-		(86,912)	-		3,633	-
							10,165	28,657

The above foreign exchange contracts mature and will affect income between January 2009 and April 2010 (2007: between January 2008 and February 2009).

At 31 December 2008, the group had cash and short-term deposits designated as cash flow hedges with a fair value loss of US$2,205,000 (2007:gain US$36,966,000) as follows: 

							Net unrealised
				Fair value			gain/(loss)
				2008	2007		2008	2007
				US$'000	US$'000		US$'000	US$'000
Euro currency cash and short-term deposits				269,409	235,479		2,653	35,143
Sterling currency cash and short-term deposits				15,667	16,697		(4,858)	1,823
							(2,205)	36,966

During 2008, changes in fair value of US$(25,950,000) (2007: US$59,253,000) relating to these derivative instruments and financial assets were taken to equity and US$31,713,000 (2007: US$21,475,000) were recycled from equity into cost of sales in the income statement. The forward points and ineffective portion of the above foreign exchange forward contracts of a loss of US$11,826,000 (2007: nil) was recognised in the income statement (note 4b and 4d).

Commodity price risk - oil prices

The group is exposed to the impact of changes in oil & gas prices on its revenues and profits generated from sales of crude oil & gas. The group did not hedge this risk related to the sale of gas production from its Chergui investment which started production from August 2008 as, in accordance with the group policy, hedging of production should only take place after obtaining sufficiently reliable and regular long-term forecasted production data. 

During the year, the group used a zero premium oil price collar to hedge its exposure to fluctuations in oil prices which matured on a monthly basis from 31 January 2008 to 31 December 2008. The collar hedged 240,000 barrels of oil production and during the year a gain of US$327,000 was recognised in the income statement on the maturity of the contract.

On 30 September 2008, the group entered into an oil price collar, with a premium payable of US$87,000 maturing on a monthly basis from 1 January 2009 to 30 June 2009, which hedges 60,000 barrels of oil. The fair value of this oil price collar at 31 December 2008 was US$1,349,000 with a gain recognised in equity of US$1,494,000 being its intrinsic value and an interest expense recognised in the year of US$145,000 on its time value portion.

The following table summarises the impact on the group's pre-tax profit and equity (due to a change in the fair value of oil derivative instruments and the underlifting asset/overlifting liability) of a reasonably possible change in the oil price:

	Pre-tax profit			Equity
	+10 US$/bbl increase	-10 US$/bbl decrease		+10 US$/bbl increase	-10 US$/bbl decrease
	US$'000	US$'000		US$'000	US$'000
31 December 2008	-	-		251	(250)
31 December 2007	(446)	446		(1,739)	741

Credit risk

The group trades only with recognised, creditworthy third parties. Divisional Risk Review Committees (DRRC) have been set up by the Board of Directors to evaluate the creditworthiness of each individual third party at the time of entering into new contracts. Limits have been placed on the approval authority of the DRRC above which the approval of the Board of Directors of the Company is required. Receivable balances are monitored on an ongoing basis with appropriate follow-up action taken where necessary. At 31 December 2008, the group's five largest customers accounted for 50.7% of outstanding trade receivables and work in progress (2007: 58.0%).

With respect to credit risk arising from the other financial assets of the group, which comprise cash and cash equivalents, available-for-sale financial assets and certain derivative instruments, the group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Liquidity risk

The group's objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, revolving credit facilities, project finance and term loans to reduce its exposure to liquidity risk. The maturity profiles of the group's financial liabilities at 31 December 2008 are as follows: 

Year ended 31 December 2008

						Contractual
	6 months	6-12	1-2	2-5	More than	undiscounted	Carrying
	or less	months	years	years	5 years	cash flows	amount
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Interest-bearing loans and borrowings	49,835	4,577	31,235	62,332	-	147,979	142,600
Trade and other payables (excluding advances from customers)	380,145	56,339	-	-	-	436,484	436,484
Due to related parties	469	90	-	-	-	559	559
Deferred consideration	-	-	29,454	8,894	-	38,348	32,147
Derivative instruments	5,436	808	-	-	-	6,244	6,244
Interest payable	118	-	-	-	-	118	118
Interest payments	1,817	1,817	2,799	4,236	-	10,669	-
	437,820	63,631	63,488	75,462	-	640,401	618,152

Year ended 31 December 2007

						Contractual
	6 months	6-12	1-2	2-5	More than	undiscounted	Carrying
	or less	months	years	years	5 years	cash flows	amount
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Interest-bearing loans and borrowings	19,293	9,162	10,000	51,222	22,750	112,427	110,095
Trade and other payables (excluding advances from customers)	345,833	440	-	-	-	346,273	346,273
Due to related parties	744	-	-	-	-	744	744
Deferred consideration	1,964	2,088	9,570	-	-	13,622	13,622
Derivative instruments	52	-	130	-	-	182	182
Interest payable	812	-	-	-	-	812	812
Interest payments	2,481	2,480	3,900	10,163	1,492	20,516	-
	371,179	14,170	23,600	61,385	24,242	494,576	471,728

The group uses various funded facilities provided by banks and its own financial assets to fund the above mentioned financial liabilities.

Capital management

The group's policy is to maintain a healthy capital base to sustain future growth and maximise shareholder value. 

The group seeks to optimise shareholder returns by maintaining a balance between debt and capital and monitors the efficiency of its capital structure on a regular basis. The gearing ratio and return on shareholders' equity is as follows:

			As restated
	2008		2007
	US$'000		US$'000
Cash and short-term deposits	694,415		581,552
Interest-bearing loans and borrowings (A)	(142,600)		(110,095)
Net cash (B)	551,815		471,457
Equity attributable to Petrofac Limited shareholders (C)	558,822		522,761
Profit for the year attributable to Petrofac Limited shareholders (D)	264,989		188,716
Gross gearing ratio (A/C)	25.5%		21.1%
Net gearing ratio (B/C)	Net cash position		Net cash position
Shareholders' return on investment (D/C)	47.4%		36.1%

Fair values of financial assets and liabilities

The fair value of the group's financial instruments and their carrying amounts included within the group's balance sheet are set out below: 

	Carrying amount			Fair value
	2008	2007		2008	2007
	US$'000	US$'000		US$'000	US$'000
Financial assets
Cash and short-term deposits	694,415	581,552		694,415	581,552
Restricted cash	4,635	1,351		4,635	1,351
Available-for-sale financial assets	566	1,586		566	1,586
Oil derivative	1,349	336		1,349	336
Interest rate swap	-	28		-	28
Forward currency contracts	11,509	28,709		11,509	28,709
Financial liabilities
Interest-bearing loans and borrowings	142,600	110,095		142,600	110,095
Deferred consideration	32,147	13,622		32,147	13,622
Interest rate collars	1,137	130		1,137	130
Interest rate swap	37	-		37	-
Forward currency contracts-designated as cash flow hedge	900	52		900	52
Forward currency contracts-undesignated	4,170	-		4,170	-

Market values have been used to determine the fair values of available-for-sale financial assets and forward currency contracts. The fair values of interest rate swaps and collars have been calculated by discounting the expected future cash flows at prevailing interest rates. The fair values of long-term interest-bearing loans and borrowings are their amortised costs determined as the present value of discounted future cash flows using the effective interest rate. The Company considers that the carrying amounts of trade and other receivables, trade and other payables, other current and non-current financial assets and liabilities approximate their fair values and are therefore excluded from the above table.

32 SUBSIDIARIES AND JOINT VENTURES

At 31 December 2008, the group had investments in the following subsidiaries and incorporated joint ventures:

		Proportion of nominal
		value of issued shares
Name of company	Country of incorporation	controlled by the group
Trading subsidiaries		2008	2007
Petrofac Inc.	USA	*100	*100
Petrofac International Ltd	Jersey	*100	*100
Petrofac Energy Developments Limited	England	*100	*100
Petrofac Energy Developments International Limited	Jersey	*100	*100
Petrofac UK Holdings Limited	England	*100	*100
Petrofac Facilities Management International Limited	Jersey	*100	*100
Petrofac Services Limited	England	*100	*100
Petrofac Services Inc.	USA	*100	*100
Petrofac Training International Limited	Jersey	*100	*100
Petroleum Facilities E & C Limited	Jersey	*100	*100
Petrofac Employee Benefit Trust	Jersey	*100	*100
Atlantic Resourcing Limited	Scotland	100	100
Petrofac Algeria EURL	Algeria	100	100
Petrofac Engineering India Private Limited	India	100	100
Petrofac Engineering Services India Private Limited	India	100	100
Petrofac Engineering Limited	England	100	100
Petrofac Offshore Management Limited	Jersey	100	100
Petrofac FZE	United Arab Emirates	100	100
Petrofac Facilities Management Group Limited	Scotland	100	100
Petrofac Facilities Management Limited	Scotland	100	100
Petrofac International Nigeria Ltd	Nigeria	100	100
Petrofac Pars (PJSC)	Iran	100	100
Petrofac Iran (PJSC)	Iran	100	100
Plant Asset Management Limited	Scotland	100	100
Petrofac Nuigini Limited	Papua New Guinea	100	100
PFMAP Sendirian Berhad	Malaysia	100	100
Petrofac Caspian Limited	Azerbaijan	100	100
Petrofac (Malaysia-PM304) Limited	England	100	100
Petrofac Training Group Limited	Scotland	100	100
Petrofac Training Holdings Limited	Scotland	100	100
Petrofac Training Limited	Scotland	100	100
Petrofac Training Inc.	USA	100	100
Petrofac Training (Trinidad) Limited	Trinidad	100	100
Monsoon Shipmanagement Limited	Jersey	100	100
Petrofac E&C International Limited	United Arab Emirates	100	100
Petrofac Saudi Arabia Limited	Saudi Arabia	100	100
Petrofac Energy Developments (Ohanet) Jersey Limited	Jersey	100	100
Petrofac Energy Developments (Ohanet) LLC	USA	100	100
PEDL Limited	England	100	100
Petrofac (Cyprus) Limited	Cyprus	100	100
PKT Technical Services Ltd	Russia	**50	**50
PKT Training Services Ltd	Russia	100	100
Pt PCI Indonesia	Indonesia	80	80
Process Control and Instrumentation Services Pte Ltd	Singapore	100	100
Process Control and Instrumentation Sendirian Berhad	Malaysia	100	100
Sakhalin Technical Training Centre	Russia	80	80
Petrofac Norge AS	Norway	100	100
SPD Group Limited	British Virgin Islands	51	51
SPD UK Limited	Scotland	51	51
SPD FZCO	United Arab Emirates	51	51
SPD LLC	United Arab Emirates	**25	**25
Petrofac Energy Developments Oceania Limited	Cayman Islands	100	100
PT. Petrofac IKPT International	Indonesia	51	n/a
Petrofac Kazakhstan Limited	England	100	n/a
Petrofac International (UAE) LLC	United Arab Emirates	100	n/a
Petrofac E&C Oman LLC	Oman	100	n/a
Petrofac International South Africa (Pty) Limited	South Africa	100	n/a
Eclipse Petroleum Technology Limited	England	100	n/a
Caltec Limited	England	100	n/a
i Perform Limited	Scotland	100	n/a
Joint Ventures
Costain Petrofac Limited	England	50	50
Kyrgyz Petroleum Company	Kyrgyz Republic	50	50
MJVI Sendirian Berhad	Brunei	50	50
Spie Capag - Petrofac International Limited	Jersey	50	50
TTE Petrofac Limited	Jersey	50	50
Petrofac Emirates LLC	United Arab Emirates	**49	n/a
Dormant subsidiaries
ASJV Venezuela SA	Venezuela	100	100
Joint Venture International Limited	Scotland	100	100
Montrose Park Hotels Limited	Scotland	100	100
RGIT Ethos Health & Safety Limited	Scotland	100	100
Scota Limited	Scotland	100	100
Petrofac Russia Limited	England	100	100
Monsoon Shipmanagement Limited	Cyprus	100	100
Rubicon Response Limited	Scotland	100	100

* Directly held by Petrofac Limited 

**Companies consolidated as subsidiaries on the basis of control.

OTHER FINANCIAL INFORMATION 

At 31 December 2008

OIL AND GAS RESERVES (UNAUDITED)

	Europe			Africa			South East Asia				Total
	Oil & NGLs	Gas		Oil & NGLs	Gas		Oil & NGLs	Gas		Oil & NGLs	Gas	Oil equivalent
	mmbbl	bcf		mmbbl	bcf		mmbbl	bcf		mmbbl	bcf	mmboe
Proven reserves
At 1 January 2008
Developed	-	-		2.6	24.1		3.2	-		5.8	24.1	9.9
Undeveloped	12.2	-		-	2.0		0.2	-		12.4	2.0	12.8
Proven	12.2	-		2.6	26.1		3.4	-		18.2	26.1	22.7
Changes during the year:
Revisions	-	-		0.2	(6.2)		0.8	-		1.0	(6.2)	(0.1)
Additions	-	-		-	-		-	-		-	-	-
Acquisitions	-	-		-	-		-	-		-	-	-
Production	-	-		(0.4)	(1.1)		(0.7)	-		(1.1)	(1.1)	(1.3)
At 31 December 2008
Developed	-	-		2.4	18.7		3.5	-		5.9	18.7	9.1
Undeveloped	12.2	-		-	0.1		-	-		12.2	0.1	12.2
Proven	12.2	-		2.4	18.8		3.5	-		18.1	18.8	21.3
Probable reserves
At 1 January 2008	11.4	-		-	6.4		1.5	-		12.9	6.4	14.0
Changes during the year:
Revisions	(1.4)	-		-	(1.4)		0.2	-		(1.2)	(1.4)	(1.4)
Additions	-	-		-	-		-	-		-	-	-
Acquisitions	-	-		-	-		-	-		-	-	-
Production	-	-		-	-		-	-		-	-	-
At 31 December 2008	10.0	-		-	5.0		1.7	-		11.7	5.0	12.6
Total proven & probable reserves
At 1 January 2008	23.6	-		2.6	32.5		4.9	-		31.1	32.5	36.7
Changes during the year:
Revisions	(1.4)	-		0.2	(7.6)		1.0	-		(0.2)	(7.6)	(1.5)
Additions	-	-		-	-		-	-		-	-	-
Acquisitions	-	-		-	-		-	-		-	-	-
Production	-	-		(0.4)	(1.1)		(0.7)	-		(1.1)	(1.1)	(1.3)
At 31 December 2008	22.2	-		2.4	23.8		5.2	-		29.8	23.8	33.9

Notes

These estimates of reserves were prepared by the group's engineers and audited by a competent, independent third party based on the guidelines of the Petroleum Resources Management System (sponsored by the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers).

The reserves presented are the net entitlement volumes attributable to the company, under the terms of relevant production sharing contracts and assuming future oil prices equivalent to $55 per barrel (Brent). 

For the purpose of calculating oil equivalent total reserves, volumes of natural gas have been converted to oil equivalent volumes at the rate of 5,800 standard cubic feet of gas per barrel of oil.

SHAREHOLDER INFORMATION

At 31 December 2008

Petrofac shares are traded on the London Stock Exchange using code 'PFC.L'.

Registrar
Capita Registrars (Jersey) Limited
12 Castle Street
St Helier
Jersey JE23RT

UK Transfer Agent	Company Secretary and registered office
Capita Registrars	Ogier Corporate Services (Jersey) Limited
The Registry	Whiteley Chambers
34 Beckenham Road	Don Street
Beckenham	St Helier
Kent BR3 4TU	Jersey JE4 9WG

Legal Advisers to the Company
As to English Law	As to Jersey Law
Norton Rose LLP	Ogier
3 More London Place	Whiteley Chambers
London SE1 2AF	Don Street
	St Helier
	Jersey JE4 9WG

Joint Brokers
Credit Suisse	Nomura
1 Cabot Square	25 Bank Street
London E14 4QJ	London E14 5LE

Auditors	Corporate and Financial PR
Ernst & Young LLP	Bell Pottinger Corporate & Financial
1 More London Place	6th Floor Holborn Gate
London SE1 2AF	330 High Holborn
	London WC1V 7QD

Financial Calendar

15 May 2009	Annual General Meeting
22 May 2009	Final dividend payment
26 August 2009	Interim results announcement
November 2009	Interim dividend payment

Dates correct at time of print, but subject to change

The group's investor relations website can be found through www.petrofac.com

ENDFR EADDKESDNEAE

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