Petrofac sees opportunities in Mexico reforms

LONDON Tue Aug 27, 2013 3:49am EDT

LONDON (Reuters) - British energy services firm Petrofac Ltd (PFC.L) said it was well placed to capitalize on increased investment in oil and gas projects in Mexico as the country opens up its energy industry, even if the reforms mean more competition.

Strict restrictions on foreign investment in Mexico's oil and gas industry previously allowed Petrofac to secure profitable production enhancement contracts, in which the firm received a set fee to operate ageing fields.

However, with President Enrique Pena Nieto proposing profit-sharing contracts for private companies, the market is expected to open up to oil majors.

"(The reforms) naturally could lead to more competition in the country," Petrofac CFO Tim Weller told reporters. "But there will be more investment being made in oil and gas infrastructure in Mexico which could be an opportunity for service companies like ourselves."

For Weller, Petrofac's experience in Mexico will be key to making the most of the new opportunities. "We've got to look to build on that strong relationship with Pemex in taking our business in that country forward," he added, referring to Mexico's state oil monopoly.

His comments came after Petrofac reported an expected 12.5 percent fall in first-half revenue, saying earnings would be heavily weighted to the second half due to the timing of key projects.

Revenue fell to $2.8 billion from $3.2 billion and net profit was down to $243 million from $326 million.

The firm's shares were up 5 percent in early trade.

The company, which designs and builds oil and gas infrastructure and also invests alongside oil firms in oil fields, said it remained on track to meet its target of doubling 2010 earnings of $433 million by 2015.

It said it would raise its interim dividend by 5 percent to 22 cents per share.

Delays at the In Salah gas project in Algeria knocked Petrofac's forecasts earlier this year, with the firm altering its expectations for profit growth to "modest" from "good."

Weller said the restart of In Salah was progressing as expected, with full construction underway by September or early October.

(Editing by Rhys Jones and David Holmes)