Sunday, November 1, 2020

Petrofac expects 2020 sales fall as bribery probe weighs on orders


Petrofac Ltd (PFC.L) on Wednesday reported a fall in first-half order intake and forecast lower 2020 revenue, citing uncertainty relating to an investigation into the oilfield services company’s dealings in Saudi Arabia and Iraq.

Petrofac, which designs, builds and operates oil and gas facilities, said in June it had lost out on $10 billion worth of contracts globally due to the investigation by Britain’s Serious Fraud Office (SFO), which led to a February conviction of its former head of sales David Lufkin on 11 counts of bribery related to Iraqi and Saudi contracts.

The company has said that no charges have been brought against Petrofac or any other employees.

The FTSE 250 company’s shares have lost one-third of their value since Lufkin’s conviction. They were down 2.4% at 396.2 pence at 1056 GMT.

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Petrofac said the investigation, which started in 2017 as part of a wider probe into Monaco-based Unaoil, had hampered its ability to win contracts in Saudi Arabia and Iraq, which accounted for 17% of the group’s revenue in 2018.

“We’re not blacklisted in either Saudi Arabia or Iraq. However, the timing of the fraud office’s announcement in February 2019 did result in a number of bids not being opened at that time,” finance chief Alastair Cochran said on a call.

“We have fully cooperated with those clients in those markets to address their concerns and assure them that their bid processes were completely respected,” Cochran added.

Related: Ex-Petrofac executive pleads guilty to 11 counts of bribery

But the 38-year old company said it expected revenue to fall in 2020 because of low new order intake.

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“Unfortunately less business coming down the pipeline is starting to constrict management’s room for maneuver and that’s made for a pretty gloomy outlook statement,” said Hargreaves Lansdown analyst Nicholas Hyett.

The Jersey-based company expects $13 billion worth of bid opportunities in the second half of the year but Cochran said Saudi Arabia, the world’s largest oil market, and Iraq were excluded from that guidance.

In June, the head of an Iraqi state oil company said it would temporarily suspend Petrofac from new bids.

Related: Petrofac facing £400m legal fight over bribery allegations

Cochran said: “We continue to bid for opportunities in both those markets (Saudi Arabia and Iraq) and we are permitted to do so by both authorities.”

“We are not aware of any official notification… We have not received a formal notification of a temporary suspension in Iraq,” he said on a conference call.

A senior official with Basra Oil Company said this week the oil ministry decision to freeze Petrofac from bidding on new projects in the south of the country was still active.

Petrofac’s earnings before interest, taxes, depreciation and amortization fell to $305 million for the six months ended June 30 from $334 million a year earlier, with $2 billion in new orders, also down from last year.

First-half revenue rose 1.3% to $2.82 billion. The company said it expected $2.6 billion of secured revenue for the second half of 2019.


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