Energy services firm Petrofac will take a £43 million hit on the sale of its stake in a major North Sea project to Ithaca in a move aimed at reducing its debt.
The group, a major employer in Scotland, has agreed to sell its 20 per cent stake in the Greater Stella area development and its 25 per cent interest in a floating rig in a deal worth up to £227m.
Under the disposal agreement, Ithaca will pay £113m on completion of the deal and a further £93m between 2020 and 2023. The remainder will be paid depending on performance.
But Petrofac estimates that the transaction will result in an impairment charge of £43m.
Proceeds from the sale will be used to reduce gross debt, Petrofac said, adding that the deal is dependent on Ithaca also acquiring Dyas UK’s 25 per cent stake in the same Greater Stella area.
Petrofac chief executive Ayman Asfari said: “This disposal marks a further milestone in our journey back to a capital-light business and, along with recently-agreed transactions in Mexico and Tunisia, marks the significant progress we are making on our stated strategy.”
Next Wednesday Petrofac, which in June said it was seeing “early signs of recovery” in the UK North Sea, releases half-year results and analyst George Salmon of Hargreaves Lansdown said the spotlight will be on the latest state of play with its order book.
“A lack of new contract wins means the pipeline of upcoming work is starting to dwindle,” he said.
“An improving oil price is one factor in Petrofac’s favour, and it’s encouraging to see a handful of new wins in recent weeks. However, investors will want reassurance there’s more to follow the new business that’s come in so far.”
US investment bank Jefferies last week downgraded its rating on Petrofac to “hold” from “buy”, over the pace of major contract wins.
Although the company has secured a number of contracts this year, the broker said there had not yet been any very large “anchor” projects. The company has said that a number of major contracts could be awarded in the third or fourth quarter of the year.
Petrofac is currently facing a Serious Fraud Office probe into claims that it secured contracts in Kazakhstan through a corrupt middleman.