June 25, 2013 6:44 pm

Petrofac predicts no more shock updates

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Petrofac employee on board the Kittiwake platform in the UK North Sea

Petrofac insisted it would meet both short and long-term profits targets as it played down the danger of shock updates following recent profit warnings from peers such as Saipem of Italy.

The Italian company’s prediction of delivering a net loss of €300m to €350m this year, instead of a previously forecast profit of €450m, prompted Saipem’s shares to fall by a quarter last week as new management estimated the fallout from a deepening corruption probe in Algeria and losses on contracts in Mexico and Canada.

However, the UK’s biggest oil services provider by market capitalisation, insisted it was holding the line on profits growth.

Ayman Asfari, chief executive, said Petrofac remained confident that it would achieve “modest net profit growth” for 2013 as it remained on course for its target of doubling net profit between 2010 and 2015 to more than $850m.

Analysts have pencilled in an increase in net profits from $632m to $650m this year.

First half-performance was hit by the enforced evacuation of staff and contractors at its In Salah onshore gas project in Algeria in January. The interruption to work at In Salah followed the insurgent attack on the remote Algerian gas facility of In Amenas to the east that is operated by BP, Statoil of Norway and Sonatrach, Algeria’s state-owned energy company.

Petrofac expects a return of workers to the In Salah site in July with full-scale activity on the project in the Sahara desert to resume by October. The project has a $1.2bn budget from the same group of oil companies behind the In Amenas project.

Tim Weller, finance director, insisted that Petrofac remained insulated from many of the dangers of cost overruns on lump-sum or so-called turnkey projects pursued by peers such as Saipem.

“The issue you see in the sector is one of project execution – that’s not one we are confronted with in our portfolio,” he said.

He added that, in spite of softening oil and gas prices, the group’s backlog on work had edged up from $11.8bn to $11.9bn in the six months to June – amid good momentum on winning contracts. This had left order levels close to their historic highs.

However, Mr Weller accepted that growing concern over how much momentum remained in expenditure on global oil and gas projects had dragged on oil services companies so far this year.

“In the markets we are, we aren’t seeing pressure [on orders],” he said. “But we recognise there has been significant pressures over shares in the sector during the past few months.”

Shares in Petrofac edged 1 per cent lower to £12.19, down a third from their 52-week high of £17.52 reached in January before the In Amenas attack.

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