Petrofac talks up prospects for growth

Petrofac's Aberdeen office. Picture: Contributed
Petrofac's Aberdeen office. Picture: Contributed
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ENERGY services group Petrofac yesterday played up its growth prospects and said a key gas project in Algeria would restart shortly though its shares remained under pressure.

The FTSE 100 group, which has Scottish bases in Aberdeen and Montrose, has lost about a fifth of its value so far this year, partly in response to a fall in the oil services sector after profit warnings at competitors Saipem and Aker Solutions.

However, chief financial officer Tim Weller said the company was unaffected by the problems facing its rivals, adding that operational performance had been good in the year to date.

Petrofac’s In Salah gas project, delayed due to an attack in January on another Algerian facility, will restart in a few weeks, said Weller, speaking as the group issued a trading update.

“We’ll be starting activity back on the site pretty much as soon as we get into the second half of the year,” he said. “The expectation is we’ll be up to full pace in terms of construction activity by September or early October.”

The company has not put a number on its growth forecast for 2013, though last month it said it anticipated only “modest” expansion due to the delay to the In Salah project, having previously flagged “good” growth.

Net profit is likely to be heavily weighted towards the second half of the year reflecting project delivery dates. The group’s backlog stood at $11.9 billion (£7.7bn) at 31 May, up from the $11.8bn reported at the end of last year.

Weller said the company would not be bidding for projects in Mexico’s Chicontepec basin where it had been carrying out a number of studies.

“The sub-surface infrastructure there is remarkably complex… we’re not looking to expose ourselves to that much risk,” he said.

Helal Miah, investment research analyst at the Share Centre, who has a “buy” rating on the shares, said investors would be reassured to hear of a rise in the order backlog.

“We continue to recommend investors ‘buy’ Petrofac,” he noted. “So long as the world economy is energy hungry there will be a continuous demand for services from this type of company.

“Its share price movement will be very dependent on long-term global energy prices, which should remain supported given the world demand/supply dynamics.”

Jonathan Jackson, head of equities at brokerage Killik & Co, said: “Demand for the group’s services remains strong. This, together with its competitive positioning, should see the group grow its onshore engineering & construction backlog over the course of the year.”

Shares in Petrofac closed down 15p, or 1.2 per cent, at 1,219p, having hit a session low of 1,160p.

Chief executive Ayman Asfari said the firm remained on track to more than double its 2010 group earnings by 2015.