* Oil services company slashes profits outlook by up to 11 percent
* To cut expenditure in flagship segment after poor performance
* Shares down 15.6 percent at 1,172 at 0947 GMT (Adds quotes, background, details)
LONDON, May 9 (Reuters) - Oil and gas services group Petrofac cut its 2014 profit forecast by 11 percent due to the poor performance of flagship projects, wiping over 700 million pounds ($1.19 billion) off its market value and highlighting the sector's testing environment.
Petrofac, which had pinned many of its medium-term growth projections on its Integrated Energy Services (IES) division, said it now expected to report 2014 net profit between $580 million and $600 million, down from the previous target of little or no growth from the $650 million it reported in 2013.
Shares in Britain's largest oil services company were down 15.6 percent at 1,172 pence per share at 0947 GMT. It was one of the biggest losers in the blue-chip FTSE 100 Index, which fell 0.3 percent.
Service companies, which provide the engineering and construction on oil and gas projects, are increasingly under pressure as big oil companies face huge project delays and tighten their budgets.
The company said it would cut IES expenditure after completing a review of the division in which it invests alongside oil companies and has earnings linked to the volume of barrels taken out of the ground.
The review identified "operational challenges" in key projects, leading the company to seek better operational performance on existing projects and narrow the focus of future business.
The fall in 2014 profits was mostly due to delays in the Greater Stella Area project in the North Sea, lower than expected production at the Ticleni project in Romania, the dilution of equity interests in the Seven Energy project in Nigeria as well as "no significant contribution from new awards".
"In IES, following a review of our existing and prospective projects, we are working hard to deliver improvements in operational performance on the existing portfolio and are re-focusing our IES business development plans," Chief Executive Ayman Asfari said in the company's interim management statement.
Petrofac had for a long time highlighted its aim to double 2010 net income by 2015, with investors and analysts regarding it as a key benchmark for the firm's medium-term prospects. But the group turned more cautious in November last year.
"The profit warning was very unexpected and may lead to a risk on its dividend," said Beaufort Securities sales trader Basil Petrides. He added that if the stock fell below the 1,146 pence price level, it could then drop further down to 1,080 pence.
After a review of the IES division, which takes equity stakes in oil fields, Petrofac said it now expected earnings from the current IES portfolio to be around the low end of the previous guidance range for 2015. It does not expect a significant contribution from new awards in 2015 either.
"Notwithstanding this reduction, given our renewed focus on cash returns, we expect IES to improve from its current net cash absorbing position to being broadly free cash flow neutral in 2015," it said.
Petrofac said its backlog stood at record levels of $18.6 billion at the end of March, mainly in the Engineering, Construction, Operations and Maintenance (ECOM) segment. Petrofac had earlier this year said it expected to return to strong growth in 2015.
In February, Asfari warned that oil services companies will have to assume more risk in the coming years as investor pressure and a flat crude price make oil company clients push harder to avoid delays on mega-projects. ($1 = 0.5899 British Pounds) (Reporting by Kate Holton and Ron Bousso; editing by Sarah Young, William Hardy and Susan Thomas)