Petrofac warns of new hit over Shetland gas plant

Oilfield services contractor Petrofac has warned that it could face a further hit from a delayed gas plant on Shetland on which it has already racked up significant losses.

Petrofac chief executive Ayman Asfari
Petrofac chief executive Ayman Asfari

The firm had been due to complete the Laggan-Tormore project for French energy major Total in July, and fell heavily into the red in the first half of the year after bringing in more subcontractors to get the plant finished.

In yesterday’s trading update, Petrofac also said its integrated energy services (IES) division, whose performance is closely linked to oil prices, will post a “modest trading loss in 2016” due to the fall in crude prices.

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But the company said it had also built up a record engineering, construction, operations and maintenance order backlog of $18.5 billion (£12.3bn), “giving excellent revenue visibility”. Shares in the group closed up 40.5p, or 5.3 per cent, at 804.5p.

It comes just a day after Petrofac announced it had won contract extensions worth $400 million in the UK North Sea. In the update on Laggan-Tormore, the company said it has now completed all “main construction activities” in preparation for gas to be introduced to the plant which is expected to happen before the end of the month.

It told investors: “As we close out the final commercial positions with our subcontractors and our client, there is a potential additional financial exposure of a few tens of millions of dollars over and above the amount provided in the first half of the year and we will update the market on the final position in respect of the project at our full year results announcement.”

Chief executive Ayman Asfari said: “Against the backdrop of a difficult period for the industry, we remain well-positioned. We have taken steps to maintain our cost-effectiveness and sustain our strong competitive position, which gives us confidence that we can continue to deliver value for both our clients and our shareholders.”

In its announcement on contract extensions on Monday, Petrofac said it had won a two-year extension of a deal to provide services on the Rough field for Centrica. The company has also been appointed by Enquest to work on the Kittiwake field for a further five years. Its full-year results will be announced on 24 February.

l An initiative aimed at helping the oil and gas industry become more efficient has been launched by a trade body.

Oil & Gas UK’s efficiency task force has set up an online portal to highlight individual companies’ successful efforts to improve efficiency and shares common challenges.

Stephen Marcos Jones, Oil & Gas UK’s business development director, said the portal will help firms share successes “so that they can be implemented more widely and in communicating challenges for solving through co-operative working”.