Petrofac bullish despite slide in firsthalf earnings and SFO investigation

● Oilfield services giant’s CEO says firm put in ‘solid’ operational performance

Oil services group Petrofac has hailed a “solid operational performance” across the business despite reporting a 9 per cent slide in first-half core profit.

The company, which is a key Scottish employer, also revealed a lower new order intake because of an ongoing probe into its contract dealings in Saudi Arabia and Iraq. However, chief executive Ayman Asfari remained upbeat, telling investors: “Petrofac has delivered good results that reflect solid operational performance across the business.

“New order intake year-todate has been impacted by recent challenges in Saudi Arabia and Iraq. Looking forward, the group has a busy tendering pipeline with around $13 billion [£10.5bn] of bid opportunities due for award in the second half of the year. We remain committed to our strategy of delivering best-inclass execution for our clients and enhancing returns for our shareholders by reducing costs, driving digitalisation, increasing local content, improving cash conversion and divesting non-core assets.

“These ongoing initiatives will improve our competitiveness in core and growth markets, as well as best position the business for a return to growth in the medium-term.”

The group said in June that it had lost out on billions of dollars worth of contracts globally due to an investigation by the Serious Fraud Office (SFO), which led to the conviction of its former head of sales on several counts of bribery related to Iraqi and Saudi contracts. The company has stressed that no charges have been brought against Petrofac or any other employees.

Earnings before interest, tax, depreciationandamortisation (Ebita) fell to $305 million for the six months to June 30 from $334m a year earlier. First-half revenue nudged up 1.3 per cent to just over $2.82bn.

David Barclay, head of office at Brewin Dolphin Aberdeen, said: “It’s been a tough 2019 for Petrofac, with its shares dropping as much as 30 per cent betweenfebruaryandaugust. The next couple of years could also prove to be difficult, with net profit declining so far in 2019 and revenues expected to decrease into 2020.

“It’s been a difficult trading environment for oil and gas supply chain businesses like Petrofac for some time – a fact reflected by the more than 60 per cent decline in its share price over the last five years.”

He added: “The ongoing SFO investigation is likely to continue to impact sentiment towards the shares and management will therefore be keen to reach a resolution as quickly as possible.”