Petrofac says Covid disruption continues to impact construction arm

Petrofac Limited, the international service provider to the energy industry, reported a strong performance from its Engineering & Production Services (EPS) arm for the current calendar year but said Covid-19 disruption continues to impact Engineering & Construction (E&C) project schedules and costs.

The FTSE 250 group said it was able to deliver a "resilient" performance in the second half of 2021 despite the continued challenges and uncertainty related to the pandemic.

Petrofac’s management said it expects to report Group revenue of approximately US$3.0bn and FY net profit “broadly in line with 2020 and with market expectations”, with net margins below the prior year due to unrecoverable Covid-19 related cost increases, partly offset by cost-cutting and tax provision releases.

EPS revenue is expected to be "significantly higher" than in 2020 at roughly US$1.1bn but E&C revenues are expected to be around US$1.9bn compared with US$3.1bn.

Chief executive Sami Iskander addressed the closing of the SFO’s investigation in relation to the company, stating that during the year "Petrofac has taken an important step forward... and embedding a strategy focused on future growth… Earlier this year I set out a plan to rebalance, reshape and rebuild Petrofac. The recent refinancing has provided a long-term, stable capital structure for the business and largely completes the work to rebalance the group.”

He said confirmed the group secured US$1.5bn of new contract awards in the second half to date and that the outlook for awards is improving in a more supportive macro environment.

He said, “Petrofac's cost competitive model and strong client relationships mean that we are well positioned with a healthy pipeline of opportunities scheduled for award in 2022” and with the group on track to reduce gross overhead and project support costs by the target US$250mn by the end of 2021.

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