Press Release
24 February 2016
PETROFAC LIMITED
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
· Revenue up 10% to US$6.8 billion (2014: US$6.2 billion)
· EBITDA(1)(2) of US$792 million before Laggan-Tormore loss; EBITDA of US$312 million (2014: US$935 million) after Laggan-Tormore loss
· Net profit(2)(3) of US$440 million before Laggan-Tormore loss, in line with market expectations(4); net profit of US$9 million (2014: US$581 million) after Laggan-Tormore loss
· Exceptional items and certain re-measurements of US$358 million (post-tax), primarily due to lower oil and gas prices; net book value of IES project portfolio stands at US$1.7 billion(5)
· Group backlog(6) up 10% to record year-end levels of US$20.7 billion at 31 December 2015 (2014: US$18.9 billion), giving excellent revenue visibility for 2016 and beyond, with embedded margins consistent with guidance
· Net debt decreased over 2H 2015 to stand at US$686 million at 31 December 2015 (2014: US$733 million), reflecting strong cash collection during Q4 2015
· Expect to deliver net profit in 2016 consistent with our previous guidance(7)
· Full year dividend maintained at 65.80 cents per share (2014: 65.80 cents), reflecting confidence in the Group's future prospects
· Maintained focus on operational excellence and cost efficiencies with annual savings of US$80 million delivered in 2015; targeting further annualised efficiency savings of up to US$90 million by the end of 2016, including US$25 million from de-layering and centralising back office services as part of our recently implemented Group reorganisation
Ayman Asfari, Petrofac's Group Chief Executive commented on the final results:
"Petrofac's core proposition is based on strong project execution, clear geographic focus, a disciplined approach to bidding and a sustainable, cost-effective structure. These strengths have positioned Petrofac well in a very challenging period for the oil and gas industry.
"Our results for 2015 were adversely affected by the Laggan-Tormore project on Shetland. However, we faced up to the exceptional challenges we encountered and honoured our commitment to our client. With the plant now successfully operational, these issues are finally behind us.
"We enter 2016 with a renewed focus on our core strengths. The Group's backlog stands at record year end levels, giving us excellent revenue visibility for 2016 and beyond. We remain committed to reducing the capital-intensity of the business and managing the IES portfolio to maximise value. Our balance sheet remains robust, our working capital position has improved and we remain dedicated to delivering shareholder value."
OPERATIONAL HEADLINES
Onshore Engineering & Construction
· Achieved order intake in 2015 of US$6.1 billion, securing major new awards in Kuwait and Saudi Arabia; backlog is secure and stands at record year end level of US$12.5 billion
· Commercial production has now commenced on Laggan-Tormore following completion of construction activities, transfer of care and custody of the plant to our client and introduction of gas before end 2015
· Substantially completed the Bab Compression project and phase 1 of the Bab Habshan project, both in Abu Dhabi
· Completed the second of three trains on the Badra project in Iraq and the third train is expected to be completed shortly
· Completed and commenced production from the central processing facility for the In Salah southern fields development in Algeria
Offshore Projects & Operations
· Secured major new contracts and extensions in the UK North Sea, including for CNR International, Eni, Centrica, Enquest and Oranje-Nassau Energie (ONE) UK limited
· Secured a US$100 million one-year contract extension with South Oil Company to support its Iraq Crude Oil Expansion Project
· Announced our first contract in Bahrain, to supply a new gas dehydration facility for Tatweer Petroleum
· Awarded a lump-sum contract worth approximately US$150 million in consortium with GE, to engineer, construct and install a power system for the Galloper Offshore Wind Farm, UK
· Following termination of the shipyard contract for construction of the proprietary design JSD6000 deepwater multi-purpose vessel due to issues with the shipyard's performance, the Board continues to review its options
Engineering & Consulting Services
· Awarded a US$900m engineering, procurement and construction management (EPCm) contract by Petroleum Development Oman to provide services for the Yibal Khuff project
· Made good progress on EPCm contracts for Petroleum Development Oman and Al Taweelah alumina refinery in Abu Dhabi
· Plant Asset Management, our asset performance management consultancy, was awarded a number of contracts throughout the year
· Utilisation remains high in our engineering offices, particularly in our engineering centres in India, predominantly supporting Onshore Engineering & Construction's activities
Integrated Energy Services (IES)
· Making good progress with topside systems on the FPF1 floating production facility with marine work expected to be completed to enable sailaway during Q2 2016; first production from the Greater Stella Area development expected in summer 2016
· Continue to work towards migration of our Production Enhancement Contracts (PECs) to Production Sharing Contracts (PSCs) in Mexico
· Chergui gas concession in Tunisia continued to produce near capacity, other than when interrupted due to infrequent periods of civil unrest
· Production levels on Block PM304 in Malaysia increased during 2H 2015 as we drilled and tied-back further wells on the field
· Berantai Risk Service Contract operating in line with expectations with high uptime
· Agreed with OMV Petrom to exit Ticleni PEC in Romania in Q2 2016
OUTLOOK
While the operating environment remains challenging, we continue to focus on our core areas of strength, maintaining our bidding discipline and delivering sector leading margins.
We enter the year with a very cost-effective and sustainable structure. We are targeting further annualised efficiency savings of up to US$90 million by the end of 2016, which will help us to protect margins and maintain our strong competitive position, including US$25 million from de-layering and centralising back office services as part of our recently implemented Group reorganisation.
We see continuing investment from our clients in our core onshore markets of the Middle East and North Africa, in both key upstream and downstream projects. Our backlog is secure and stands at record year end levels, giving us excellent revenue visibility for 2016 and beyond. Our overall portfolio is in good shape, with embedded margins consistent with guidance.
We remain committed to reducing the capital-intensity of the business and managing the IES portfolio to maximise value. Our balance sheet remains robust, our working capital position has improved and we remain dedicated to delivering shareholder value.
BOARD CHANGES
Petrofac intends to appoint Andrea Abt and George Pierson as Non-executive Directors at its 2016 Annual General Meeting on 19 May. Andrea spent her executive career with Siemens AG where she held a range of leadership positions. George is the former CEO of Parsons Brinckerhoff, the American multinational design and engineering firm. The consequential changes to Board Committee memberships following these changes will be reviewed in due course.
Notes
(1) EBITDA means earnings before interest, tax, depreciation and amortisation and is calculated as profit before tax, net finance costs, exceptional items and certain re-measurements, but after our share of results of associates (as per the consolidated income statement), adjusted to add back charges for depreciation and amortisation (as per note 3 to the consolidated financial statements).
(2) Before exceptional items and certain re-measurements.
(3) Net profit for the year attributable to Petrofac Limited shareholders.
(4) According to Company compiled consensus of 18 analysts, consensus net profit for 2015 before exceptional items and certain re-measurements and before losses from the Laggan-Tormore project is approximately US$435 million.
(5) Includes the long-term receivable on the Berantai Risk Service Contract, our investment in Seven Energy and receivables in respect of our portfolio of Mexican Production Enhancement Contracts, and excludes oil and gas facilities held under finance leases.
(6) 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.
(7) As per our trading update on 15 December 2015, IES was expected to make a modest loss in 2016, based on the then prevailing oil price forward curve (which averaged approximately US$45 per barrel for 2016). We noted that an increase/decrease of US$1 in the price of oil would increase/decrease IES net profit in 2016 by around US$2.5 million. Guidance for net profit for the rest of the Group for 2016 was to be broadly in line with expectations, which are currently approximately US$450 million.
ANALYST PRESENTATION
Our full year results presentation for analysts and investors will be held at 9.30am today, which will be webcast live via:
http://cache.merchantcantos.com/webcast/webcaster/4000/7464/16532/57525/Lobby/default.htm
NOTIFICATION OF HOME MEMBER STATE
In accordance with DTR 6.4.2, the Company announces that its "home member state" (as defined for the purposes of the Disclosure Rules and Transparency Rules and the Transparency Directive) is the United Kingdom, being the location of its primary listing.
Ends
Disclaimer:
This announcement contains forward-looking statements relating to the business, financial performance and results of Petrofac and the industry in which Petrofac operates. These statements may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast" and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither Petrofac nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.
For further information contact:
Petrofac Limited +44 (0) 207 811 4900
Jonathan Low, Head of Investor Relations
Jonathan Edwards, Investor Relations Officer
Alison Flynn, Head of Media Relations +44 (0) 207 811 4913
Tulchan Communications Group Ltd +44 (0) 207 353 4200
Stephen Malthouse
Martin Robinson
[email protected]
Notes to Editors
Petrofac
Petrofac is a leading international service provider to the oil & gas production and processing industry, with a diverse client 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).
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 clients' needs across the full life cycle of oil & gas assets.
With around 19,000 employees, Petrofac operates out of seven strategically located operational centres, in Aberdeen, Sharjah, Abu Dhabi, Woking, Chennai, Mumbai and Kuala Lumpur and has a further 24 offices worldwide.
For additional information, please refer to the Petrofac website at www.petrofac.com.
Segmental reporting and Financial review
Click on, or paste the following link into your web browser, to view our Segmental reporting and Financial Review for the year ended 31 December 2015 - http://www.rns-pdf.londonstockexchange.com/rns/9362P_1-2016-2-23.pdf.
Group financial statements
Click on, or paste the following link into your web browser, to view the Group financial statements of Petrofac Limited for the year ended 31 December 2015 - http://www.rns-pdf.londonstockexchange.com/rns/9362P_2-2016-2-23.pdf.
The attached documents are extracts from the Group's Annual Report and Accounts for the year ended 31 December 2015. Page number references refer to the full Annual Report when available.
