Ouch: Petrofac predicts $100m loss, causing shares to plummet
Petrofac’s shares slid to a record low on Tuesday after the embattled company forecast an operating loss of $100m in its full-year results.
The oilfield services provider attributed the heavy losses to cost overruns in its engineering and construction (E&C) division, which is expected to report $190m losses for the year.
For context, E&C had posted an operating loss of $14m in 2021.
E&C made up nearly two-thirds of its revenue in 2021, and investors have responded sharply to the latest developments, as shares have dropped 10.3 per cent on the FTSE All-Share this afternoon.
In a statement to the London Stock Exchange, Petrofac said: “Second half performance in E&C was further adversely impacted by the mature, Covid-affected legacy contracts. The additional costs incurred on these contracts due to extended schedules have not been fully recovered from our customers, resulting in net cost overruns. “
Petrofac was fined last year after pleading guilty in relation to bribery allegations in the Middle East.
It has also seen its net debt increase and cash flow hampered by delays in collecting payments from clients.
Meanwhile, Petrofac’s net debt has risen to $396m – up $51m from June.
This is partly due to unrecovered cost overruns in its E&C portfolio and delay in new awards.
The results follow months of underperformance across the company, with Petrofac now making changes at senior level.
Petrofac revealed last month its chief executive Sami Iskander would step down next March, and be replaced by Tareq Kawash, a senior executive at energy firm McDermott.