Business

Petrofac benefited from higher oil prices and production volumes

Petrofac was buoyed as higher oil prices and production levels led energy services companies to keep the outlook intact

  • Petrofac expects to produce over 500,000 barrels of oil per day in the first half of the year
  • This compares to just 210,000 daily barrels over the same period in 2021
  • CEO Sami Iskander: “We made good progress in the first half of the year”

Energy services group Petrofac has said trading and forecasts remain in line with forecasts after a sharp rebound in oil prices and oil production.

The London-listed company expects to produce more than 500,000 barrels per day of oil in the first half of 2022, thanks to higher production from two oil fields off the Malaysian coast.

That compares to just 210,000 barrels a day in the same period last year, when Covid-related lockdown rules discouraged travel and halted factory activity, leading to a slump in oil demand.

Forecast: Petrofac expects to produce over 500,000 barrels of oil per day in the first half of 2022 thanks to higher production from two oil fields off the Malaysian coast

Petrofac forecasts that production will continue to increase in the second half of 2022, which will help push the full-year integrated energy services division’s underlying earnings to $80-$90 million, assuming average Oil prices remain around $100 a barrel.

The company also expects revenue from its asset solutions division to continue growing over the next six months, having already earned an estimated $500 million this year from new or renewed contracts.

Recent contracts won by the Company relating to operations in the North Sea include one from i3 Energy to manage wells and a two year extension from Spirit Energy to provide maintenance support for its York platform.

Outside the UK, Petrofac has received contracts from the Australian government to close three offshore fields in the Gulf of Mexico and one in the Timor Sea.

However, while the division has reported robust order intake, it forecasts a slight decline in margins in the second half due to contract mix.

In contrast, the company expects its engineering and construction segment to return to “marginal profit” in the next six months from a loss of about $35 million to $45 million in the first half.

Deals: Outside the UK, Petrofac has been awarded contracts by the Australian government to close three offshore fields in the Gulf of Mexico and one in the Timor Sea

Deals: Outside the UK, Petrofac has been awarded contracts by the Australian government to close three offshore fields in the Gulf of Mexico and one in the Timor Sea

Petrofac acknowledged that such an outcome would depend on certain commercial arrangements, some of which have been described as “relatively unfavorable”.

But it’s optimistic that the division will continue to thrive due to high energy prices, an increased focus on energy security, and a gigantic pipeline of potential new contracts.

Chief Executive Sami Iskander said: “We have made good progress in the first half of the year in strategically positioning the business to benefit from the expected multi-year upward cycle, supported by a strong energy price environment and ambitious growth plans in our customers’ core markets.”

The company also expects to reduce net debt after doubling to $345 million between January and the end of June for paying a $104 million fine to the Serious Fraud Office and receiving slower payments from customers .

Last year, Petrofac pleaded guilty to seven counts of failing to prevent bribes that helped the company secure projects in Iraq, the United Arab Emirates and Saudi Arabia from 2012 to 2015. Chairman René Medori called the incident a “deeply regrettable time in Petrofac’s history”.

Laura Hoy, Equity Analyst at Hargreaves Lansdown, said: “With the Serious Fraud Office investigation finally in hindsight, this year should be a rebuilding year for Petrofac.

“But ongoing supply chain issues from the pandemic and inflationary headwinds have somewhat dampened the group’s engineering and construction business.

‘The good news is that other parts of the business are catching some of the slack – with higher oil prices and strong demand for onshore and offshore wealth management falling short of earnings.’

Petrofac Shares closed Tuesday’s trading down 2.7 percent at 122.2 pence, although its value has fallen by more than a fifth over the past month.

advertisement



Petrofac benefited from higher oil prices and production volumes

Source link Petrofac benefited from higher oil prices and production volumes

Back to top button