Petrofac Limited : Interim Results for Six Months Ended 30 June 2012
08/13/2012| 03:42am US/Eastern
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13 AUGUST 2012
PETROFAC LIMITED
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE
2012
FINANCIAL HIGHLIGHTS
· Revenue up 20%
to US$3.2 billion (2011: US$2.7 billion)
· Net profit(1)
up 32% to US$325.3 million (2011: US$246.3 million)
· Earnings per
share (diluted) up 32% to 94.82 cents (2011: 71.84
cents)
· Interim
dividend up 21% to 21.00 cents (13.45 pence(2)) per share
(2011: 17.40 cents)
· Backlog(3) at
30 June 2012 of US$8.9 billion (31 December 2011:
US$10.8 billion; 30 June 2011: US$11.4 billion); in
addition we secured US$1.5 billion of awards that were
pending contract signature at 30 June 2012 and were not
included in backlog(4)
· Net cash
balances at 30 June 2012 of US$0.8 billion (31 December
2011: US$1.5 billion)
Ayman Asfari, Petrofac's Group ChiefExecutivecommented on the interim
results:
"We have delivered good operational and
financial performance in the first half of the year and
remain on course to delivernet profit growth
in 2012 of at least 15%.
"Our strategy for future growth is based on
three key drivers: geographical expansion; broadening our
offshore engineering, procurement and construction
capability; and implementing our Integrated Energy Services
strategy. As previously indicated, over the past few months
we have seen delays in certain contract tender processes
with a number of anticipated awards moving from 2012 into
2013. Whilst these delays impact the expected level of 2012
new orders for Onshore Engineering & Construction, we
continue to expect our strategy to deliver earnings growth
in 2013 and beyond.
"As a result, we remain confident of achieving
our target of more than doubling our recurring Group 2010
earnings by 2015."
· Good progress
on our portfolio of projects during the first half of the
year
· First oil from
the El Merk project in Algeria expected during the second
half of the year and the South Yoloten gas plant in
Turkmenistan and the Asab oil field development in Abu
Dhabi are both on schedule for completion during
2013
· Introduced
hydrocarbons at the Kauther gas compression project in Oman
and substantially completed the Karan utilities and
cogeneration project in Saudi Arabia
· Awarded the
US$330 million Badra project in Iraq and two packages for
the Petro Rabigh Phase II project in Saudi Arabia(4)
Offshore Projects & Operations
· Awarded a
US$220 million contract to undertake refurbishment of the
Bekok-C platform, offshore Malaysia
· Secured a
US$465 million award to provideonshore
engineering and both onshore and offshore construction
services to all of Apache's North Sea
assets(4)
· Secured
further awards worth approximately US$0.2 billion which
were pending contract signature at 30 June 2012(4)
Engineering & Consulting Services
· Awarded a
number of conceptual studies and front end engineering and
design (FEED) studies in Africa and the CIS, which may lead
to interesting follow-on opportunities
· Acquired KW
Limited, a high-end subsea pipeline consulting and
engineering services business which will enable us to
strengthen our leading engineering proposition
offshore
INTEGRATED ENERGY SERVICES (IES)
· Signed a
co-operation agreement with Schlumberger in early 2012,
which will allow us to pursue larger Production Enhancement
Contracts (PECs) and develop at a faster pace
· Secured our
first joint PEC with Schlumberger on the Pánuco Contract
Area in Mexico, which will add US$0.4 billion to backlog
after formal signing expected later this month(4)
· Made a good
start on the Magallanes and Santuario PECs in Mexico with
three drilling rigs and one work over rig active on the
blocks
· FPSO Berantai
now on location on the Berantai field in Malaysia, with
commissioning in progress
· On Block PM304
in Malaysia, progressing the development of the West Desaru
fault block, with first oil expected before the end of
2012
· Field
Development Programme approved for the Greater Stella Area
development and a profit of US$36 million recognised on the
sale of 75% of the FPF1 floating production facility
OUTLOOK
Based on our good performance in the year to date, we
continue to expectto deliver full year net
profit growth in 2012 of at least 15%. Year-on-year
growth innet profit
in the second half of 2012 will be lower than in the first
half of the year given the phasing of the profit from the
FPF1 transaction and the initial profit recognition in
respect of the South Yoloten project included in the second
half results for 2011.
In our ECOM division, we see a significant number of
bidding opportunities in our core markets in the Middle
East, Africa, the Commonwealth of Independent States,
Europe and Asia Pacific. However, we have seendelays in the award of onshore engineering and
construction projects from 2012 into 2013. We
thereforeexpect Onshore Engineering &
Construction backlog to remain broadly flat across the
remainder of 2012. Looking ahead, based on underlying
growth in industry spend and project awards delayed from
2012, weanticipate a larger addressable
market for Onshore Engineering & Construction in 2013.
Given our competitive positioning and proven track record
in project execution we expect tocapitalise
on the greater level of market opportunities and anticipate
growth in our Onshore Engineering & Construction backlog
during 2013.
In Offshore Projects & Operations, we have good
revenue visibility following a strong run of recent awards
and we are continuing our high levels of bidding activity
on bothlong-term operations support contracts
and offshore capital projects.
In Integrated Energy Services, we are focused on
building upon our execution track record, with important
delivery milestones throughout 2012 and 2013 on our
existing projects. We expect to deliver strong earnings
growth in IES in 2012 driven by: initial profit recognition
on the Berantai Risk Service Contract; the sale of 75% of
the FPF1 floating production facility as part of the
Greater Stella Area transaction; commencement of the
Magallanes and Santuario Production Enhancement Contracts;
and growing production on the Ticleni Production
Enhancement Contract in Romania. Our existing projects
substantially underpin our medium-term growth plans of
generating net profit from IES of at least US$300 million
in 2015(5)and we are engaged in
ongoing discussions with a number of resource holders in
respect of potential additional projects.
Overall, we remain confident of achieving our target
of more than doubling our recurring 2010 Group earnings by
2015.
Notes
(1)
Net profit for the period attributable to
Petrofac Limited shareholders.
(2)
The Group reports its financial results in US
dollars and, accordingly, will declare any dividends
in US dollars together with a sterling equivalent.
Unless shareholders have made valid elections to the
contrary, they will receive any dividends payable in
sterling. Conversion of the 2012 interim dividend
from US dollars into sterling is based upon an
exchange rate of US$1.5609:£1, being the Bank of
England Sterling spot rate as at midday on 10 August
2012. The Group aims to distribute 35% of full year
post tax profits, which will be paid approximately
one-third as an interim dividend and two-thirds as a
final dividend.
(3)
Backlog consists of the estimated revenue
attributable to the uncompleted portion of lump-sum
engineering, procurement and construction contracts
and variation orders plus, with regard to
engineering, operations, maintenance and Integrated
Energy Services contracts, the estimated revenue
attributable to the lesser of the remaining term of
the contract and five years. Backlog will not be
booked on Integrated Energy Services contracts where
the Group has entitlement to reserves. The Group uses
this key performance indicator as a measure of the
visibility of future revenue. Backlog is not an
audited measure.
(4)
Backlog at 30 June 2012 excluded awards of
US$0.5 billion for Onshore Engineering & Construction
and US$0.6 billion for Offshore Projects &
Operations, which were secured, but not signed, as at
30 June 2012. These included the Petro Rabigh Phase
II project in Saudi Arabia and the Apache engineering
and construction services contract. In addition, we
were declared the selected bidder for the Pánuco
Contract Area Production Enhancement Contract in
Mexico on 19 June 2012, which will add approximately
US$0.4 billion to backlog after contract
signature.
Petrofac is a leading international service provider
to the oil & gas production and processing industry, with a
diverse customer portfolio including many of the
world's leading integrated, independent and national
oil & gas companies. Petrofac is quoted on the London Stock
Exchange (symbol: PFC) and is a constituent of the FTSE 100
Index.
The Group delivers services through two divisions:
Engineering, Construction, Operations & Maintenance (ECOM -
comprising Onshore Engineering & Construction, Offshore
Projects & Operations, Offshore Capital Projects and
Engineering & Consulting Services) and Integrated Energy
Services (IES). Through these divisions Petrofac designs
and builds oil & gas facilities; operates, maintains and
manages facilities and trains personnel; enhances
production; and, where it can leverage its service
capability, develops and co-invests in upstream and
infrastructure projects. Petrofac's range of services
meets its customers' needs across the full life cycle
of oil & gas assets.
With around 17,200 employees, Petrofac operates out
of seven strategically located operational centres, in
Aberdeen, Sharjah, Woking, Chennai, Mumbai, Abu Dhabi and
Kuala Lumpur and a further 24 offices worldwide. The
predominant focus of Petrofac's business is on the UK
Continental Shelf (UKCS), the Middle East and Africa, the
Commonwealth of Independent States (CIS) and the Asia
Pacific region.
For additional information, please refer to the
Petrofac website atwww.petrofac.com
.
The attached is an extract from the Group's
Interim report 2012. Page number references refer to the
full Interim report when available.
Results
We have delivered good operational performance across
our portfolio of projects in the year to date and we remain
on course to deliver net profit growth in 2012 of at least
15%.
In the six months ended 30 June 2012, revenue
increased by 19.6% to US$3,241.8 million (2011: US$2,711.1
million) due to revenue growth in all four reporting
segments, particularly in the Onshore Engineering &
Construction reporting segment, where activity levels
remain high.
Net profit attributable to Petrofac Limited
shareholders increased 32.1% to US$325.3 million (2011:
US$246.3 million). The increase in net profit was driven
predominantly by Integrated Energy Services, due to first
time profit recognition on the Berantai Risk Service
Contract in Malaysia and profit from the sale of 75% of the
share capital in the company holding the FPF1 floating
production facility, and Onshore Engineering &
Construction, due to higher levels of activity than in the
corresponding period in 2011.
EBITDA increased 37.0% to US$454.8 million (2011:
US$332.0 million). The increase in EBITDA was greater than
the increase in net profit due to strong growth in
Integrated Energy Services (see above), which has a higher
EBITDA margin than the rest of the Group.
The Group's net cash was lower at US$775.3
million at 30 June 2012 (31 December 2011: US$1,495.2
million) as the net result of:
· operating profits before working capital and other
non-current changes of US$452 million
· net
working capital outflows of US$759 million, including an
unwinding of advances of US$337 million and an increase in
work in progress of US$385 million as we make substantial
progress on our portfolio of Onshore Engineering &
Construction projects
· investing activities of US$156 million, including
capital expenditure of US$204 million, predominantly on
Integrated Energy Services projects, the acquisition of
subsidiaries for US$15 million, including KW Limited, less
US$60 million of proceeds from the sale of75%
of the share capital in the company holding the FPF1
· financing activities, in particular, payment of the
2011 final dividend of US$128 million and financing the
purchase of treasury shares for US$75 million for the
purpose of making awards under the Group's share
schemes
· taxes
paid of US$42 million
Net cash (US$ million)
30 June 2012
31 December 2011
30 June 2011
Cash and short-term deposits
842.0
1,572.3
1,848.2
Interest-bearing loans and borrowings
(66.7)
(77.2)
(80.2)
Net cash
775.3
1,495.2
1,768.0
Net finance income for the period was US$1.1 million
(2011: US$1.8 million). Finance income was lower at US$3.2
million (2011: US$5.2 million) due to lower average cash
balances. Finance costs were also lower at US$2.1 million
(2011: US$3.4 million) due to a lower level of
interest-bearing loans and borrowings.
The tax charge for the six months ended 30 June 2012
of US$88.9 million (2011: US$53.1 million) represents an
effective tax rate of 21.5% (six months ended 30 June 2011:
17.7%; year ended 31 December 2011: 20.7%). The slight
increase in the Group's effective tax rate compared
with the full year 2011 is predominantly due to a higher
proportion of profit before tax being earned by Integrated
Energy Services and Offshore Projects & Operations, which
have effective tax rates that are higher than the average
for the Group. The effective tax rate for Integrated Energy
Services was lower for the first half of 2012 at 26.7%
(year ended 31 December 2011: 55.3%), due to the specific
projects contributing profit, while the increase in the
effective tax rate for Offshore Projects & Operations to
26.2% (year ended 31 December 2011: 22.1%) was due to a
higher proportion of profits earned in higher tax rate
jurisdictions. The effective tax rate for the Group for the
year to 31 December 2012 is expected to be around
22%.
Diluted earnings per share for the six months ended
30 June 2012 increased by 32.0% to 94.82 cents per share
(2011: 71.84 cents per share) in line with the growth in
net profit.
The Group's combined backlog was US$8.9 billion
at 30 June 2012 (31 December 2011: US$10.8 billion). In
addition, we secured US$1.5 billion of awards that were
pending contract signature at 30 June 2012 (31 December
2011: nil) and were not included in backlog (US$0.5 billion
in Onshore Engineering & Construction; US$0.6 billion in
Offshore Projects & Operations; US$0.4 billion in
Integrated Energy Services).
At 30 June 2012, the Group had around 17,200
employees (including long-term contractors), compared with
around 15,400 at 31 December 2011, following strong growth
in headcount in Onshore Engineering & Construction to
support high levels of activity.
Dividend
The Board has declared an interim dividend of 21.00
cents per share (2011: 17.40 cents), an increase of 20.7%,
which will be paid on 19 October 2012 to eligible
shareholders on the register at 21 September 2012.
Shareholders who have not elected to receive dividends in
US dollars will receive a sterling equivalent of 13.45
pence per share. The Board will set the total dividends
payable for the year to 31 December 2012 according to the
Group's earnings and expects to distribute
approximately 35% of full year post tax profits by way of
dividend, in accordance with the Group's dividend
policy.
Segmental analysis
The Group reports the financial results of its seven
service lines under four reporting segments:
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