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Petrofac optimistic despite decline in earnings

Petrofac remains optimistic about profit growth targets in spite of subdued earnings in the first half of 2013.

Petrofac has reiterated its target to double its profits in the five years to 2015, even as earnings declined in the first half of the year.

Net profit in the six month to June fell by a quarter to US$243 million, as revenue dropped by 13 per cent to $2.8 billion.

But the oil and gas construction company, which has a subsidiary in Abu Dhabi, is confident that earnings will rebound in the second half of the year.

"Net profit for 2013 is expected to be significantly weighted towards the second half of the year, reflecting the phasing of Onshore Engineering & Construction and Integrated Energy Services project delivery," said Ayman Asfari, Petrofac's chief executive.

The final six months of the year will help thecompany to achieve "modest" profit growth in 2013, added Mr Asfari.

Petrofac has set itself a target of doubling profit to $862m by 2015, an ambition that remains intact in spite of a subdued half-year performance.

"We remain on track to achieve our 2015 earnings target," said Mr Asfari.

The company's operations are divided into an engineering, procurement and construction (EPC) arm, responsible for building oil and gas installations, as well as maintaining them. Petrofac also directly invests into fields alongside oil companies. Its construction business was affected by the terrorist attack on the In Salah gas field in Algeria in January, where Petrofac is executing a major EPC package. The attack interrupted work on the project, pushing back the completion time.

In Abu Dhabi, the company increased its share in Petrofac Emirates, formerly a joint venture with Mubadala Petroleum. Mubadala's oil and gas subsidiary divested its majority stake in the EPC operator last month, allowing Petrofac to up its share to 75 per cent.

Petrofac Emirates has been successful in scooping up contracts in the emirate. It is part of a consortium that in April won a bid for the second construction package at the Upper Zakum offshore field, where massive efforts are underway to increase production at the world's second largest oilfield by half.

This was followed by two deals to construct gas compression units and add facilities at Bab, one of Abu Dhabi's main onshore oilfields. The three deals are worth a combined $3.6bn, according to Petrofac.

The Abu Dhabi projects and the additional share in the joint venture helped grow Petrofac's order backlog - revenue that is outstanding from uncompleted projects - to $14.3bn, from $11.8bn at the end of the year.



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