RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021
|
Petrofac Limited ( PFC)
PETROFAC LIMITEDRESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021
First half highlights
SFO resolution, launch of refinancing and outlook
Sami Iskander, Petrofac's Group Chief Executive, commented: "These results cover my first six months as Chief Executive of Petrofac. During this time, our focus has been on aligning the business behind a strategy that will deliver the Petrofac of the future: a business known for consistent, best-in-class delivery, growing in both core and new geographies with a competitive and fast-growing proposition in new energies, and delivering superior returns.
"While the first half performance reflects the challenges of the market and Covid-19, we have continued to deliver successfully for clients and enhance our delivery capability. Importantly, the conclusion of the SFO investigation allows us to focus on the future and unlock new opportunities - with an uncompromising approach to compliance and ethics that will always be at the core of how we operate. This rigorous approach to governance sits alongside our environmental and social agenda and is critical to our future success.
"We are excited about the future. We have a new management team, an engaged and motivated staff, renewed purpose and a winning strategy in place. As announced simultaneously this morning, we have launched a refinancing plan to create a long-term, sustainable capital structure. We have strong positions in highly attractive markets at a time of exceptional growth potential. The Group has a strong bidding pipeline which includes significant opportunities in new energies, and contract awards are expected to accelerate in 2022. This supports our ambitious medium-term objectives, which will create significant shareholder value over the coming years."
Divisional Highlights
Engineering & Construction (E&C) E&C's financial performance in the first half was impacted by a continuation of challenging market conditions. A decline in first half revenue and profitability reflected lower levels of activity, a rescoping of the Sakhalin contract and disruption to project schedules caused by the Covid-19 pandemic. The recent recovery in oil prices is supportive of increased capital spending by clients in our addressable markets, and we expect the pace of awards to increase materially in 2022. Management has made good progress in reshaping the E&C business and has continued to take measures to improve its cost-competitiveness in anticipation of a recovery in market conditions.
E&C financial results for the six months ended 30 June 2021:
Engineering & Production Services (EPS) EPS has grown strongly in the period, driven by higher activity and good cost discipline. Strong growth in revenue in the Operations and Projects service lines resulted from high order intake in the prior year and in Q1, reflecting improvements in both underlying market conditions and EPS's cost-competitiveness. This also resulted in a material increase in net margin.
EPS financial results for the six months ended 30 June 2021:
Integrated Energy Services (IES) IES' financial performance in the first half was driven by lower production following an unplanned outage in the main Cendor field, partly offset by a strong recovery in oil prices and lower depreciation. First oil was achieved on the East Cendor development in June 2021 and peak production is expected to be achieved by the end of the year.
IES financial results for the six months ended 30 June 2021:
Separately Disclosed Items The reported net loss of US$86 million (H1 2020: US$78 million net loss) was impacted by separately disclosed items and certain re-measurements of US$(125) million (H1 2020: US$99 million expense). This is principally comprised of a provision of US$106 million(12) relating to the penalty imposed by the court on 4 October 2021. The total cash impact of separately disclosed items and certain re-measurements was US$6 million (H1 2020: US$11 million).
Financial Position Net debt (3) was US$188 million at 30 June 2021 (31 December 2020: US$116 million net debt). A free cash outflow of US$51 million (30 June 2020: US$13 million outflow) principally reflected the impact of lower EBITDA and an increase in working capital, partly offset by lower interest and tax payments. Liquidity was approximately US$1.0 billion at 30 June 2021 (8) (31 December 2020: US$1.1 billion). The Group's leverage ratio was 2.0x (9) at the period end.
Proposed equity raising and debt refinancing Petrofac announced today a proposed equity raising of US$275 million. The net proceeds of the equity raise, together with other components of the Group's refinancing plan, will be used to reduce indebtedness and to pay the penalty imposed by the Crown Court in relation to the SFO investigation.
The Group's refinancing plan, which becomes effective upon completion of the equity raising, also includes entry into a new US$180 million two-year revolving credit facility and a US$500 million debt bridge to a bond. Furthermore, the US$90 million term loan with ADCB will be repaid and replaced with a new US$50 million term loan, maturing in October 2023.
The equity raising remains subject to approval by shareholders.
Dividend In April 2020, the Board suspended the payment of the final dividend in response to the COVID-19 pandemic and the fall in oil prices. The Board recognises the importance of dividends to shareholders and expects to reinstate them in due course, once the company's performance has improved, in line with our dividend policy. Under the terms of the new debt facilities, the company will be permitted to pay dividends from 1 January 2023, subject to the satisfaction of certain covenant tests.
Backlog The Group's backlog decreased 24% to US$3.8 billion at 30 June 2021 (31 December 2020: US$5.0 billion), reflecting progress delivered on the existing project portfolio and low new order intake in E&C as clients continued to defer awards in response to the COVID-19 pandemic and the uncertain historic outlook for oil demand. Overall, Group order intake year to date was US$0.5 billion, representing a book-to-bill of 0.3x.
Of the total Group backlog, US$1.5 billion is currently scheduled for execution in the second half of 2021, comprising up to US$1.0 billion in E&C and US$0.5 billion in EPS.
Outlook While market conditions remain challenging, we expect the full year net margin in E&C to be in line with 2020. In EPS, strong performance has led to an increase in full-year net margin guidance to 5.0-6.0%.
Petrofac has a US$46 billion bidding pipeline, which includes US$7 billion opportunities in new energies, and contract awards are expected to accelerate in 2022. In E&C, while we are prudently assuming that capital discipline by clients will continue to delay awards in 2021, there is a healthy pipeline of US$32 billion scheduled for award by the end of 2022. This consists of US$10 billion in our core addressable MENA markets (11), as well as significant opportunities in growth geographies including India, Russia and Libya.
EPS is expected to continue to deliver strong order intake in the current year with a book-to-bill for the full year of at least 1.0x. Awards in the second half are expected to be driven by contract extensions in the West and brownfield projects in the East, where we have already secured material contracts in Malaysia and Bahrain since the period end.
We remain confident that the actions we have taken to maximise our cost competitiveness through structurally reducing costs by US$250 million relative to pre-pandemic levels, simplifying the organisation and driving digitalisation will best position us in both divisions for the anticipated multi-year recovery in our traditional markets.
In new energies, near-term awards and revenues will continue to be dominated by offshore wind, with three EPC projects currently in execution and US$3.4 billion of opportunities in the pipeline. Furthermore, there has been strong growth in other new energy sectors with US$3.5 billion of opportunities in the pipeline, supported by the accelerating number of early-stage awards and strategic partnerships secured in carbon capture & storage, waste-to-value and hydrogen.
We have confidence in Petrofac's competitive position and the Group is focused in its pursuit of growth with a strengthened financial position and a clear strategy. Our medium-term ambition is to deliver revenues of US$4-5 billion revenue, including c.US$1 billion from new energies, with a sector leading 6-8% EBIT margin ambition and a return to a net cash position. These medium-term objectives will deliver significant value to Petrofac shareholders.
Notes
Click on, or paste the link below into your browser, to view the Group's financial statements for the six months ended 30 June 2021: '2021 HY Report and Accounts' PRESENTATION Our half year results presentation will be held at 8.30am today and will be webcast live via: https://broadcaster-audience.mediaplatform.com/#/event/6171a8f7868121039348a875
ENDS
Disclaimer: This announcement contains forward-looking statements relating to the business, financial performance and results of Petrofac and the industry in which Petrofac operates. These statements may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast" and similar expressions, or by their context. These statements are based on current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither Petrofac nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.
For further information contact:
Petrofac Limited +44 (0) 207 811 4900
Jonathan Yarr, Head of Investor Relations
Alison Flynn, Group Head of Communications
Tulchan Communications Group +44 (0) 207 353 4200 petrofac@tulchangroup.com
Martin Robinson
NOTES TO EDITORS
Petrofac is a leading international service provider to the energy industry, with a diverse client portfolio including many of the world's leading energy companies.
Petrofac designs, builds, manages and maintains oil, gas, refining, petrochemicals and renewable energy infrastructure. Our purpose is to enable our clients to meet the world's evolving energy needs. Our four values - driven, agile, respectful and open - are at the heart of everything we do.
Petrofac's core markets are in the Middle East and North Africa (MENA) region and the UK North Sea, where we have built a long and successful track record of safe, reliable and innovative execution, underpinned by a cost effective and local delivery model with a strong focus on in-country value. We operate in several other significant markets, including India, South East Asia and the United States. We have 8,500 employees based across 31 offices globally.
Petrofac is quoted on the London Stock Exchange (symbol: PFC).
For additional information, please refer to the Petrofac website at www.petrofac.com Attachment File: 2021 HY Report and Accounts |
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| ISIN: | GB00B0H2K534 |
| Category Code: | IR |
| TIDM: | PFC |
| LEI Code: | 2138004624W8CKCSJ177 |
| OAM Categories: | 1.2. Half yearly financial reports and audit reports/limited reviews |
| Sequence No.: | 125163 |
| EQS News ID: | 1243399 |
| End of Announcement | EQS News Service |
|
|
Latest directors dealings
- 1 day ago Savannah Energy
- 1 day ago Buccaneer Energy PLC
- 1 day ago Savannah Energy
- 1 day ago Carclo
- 1 day ago Schroder Japan Growth Fund