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UPDATE 3-Petrofac backs profit forecast despite weaker-than-expected first-half
August 26, 2014 / 7:21 AM / 3 years ago

UPDATE 3-Petrofac backs profit forecast despite weaker-than-expected first-half

(Adds analyst comment, updates shares to close)

By Abhiram Nandakumar

Aug 26 (Reuters) - British oil and gas services company Petrofac Ltd reported a steeper-than-expected fall in first-half profit, raising concerns about its full-year earnings forecast, which was maintained.

Petrofac’s shares fell as much as 3.5 percent on Tuesday after the company said first-half profit almost halved, hurt by slow progress at some of its projects - a warning it had issued in May.

The stock was one of the biggest losers in the blue-chip FTSE 100 index, but recovered to close marginally lower at 1123 pence on the London Stock Exchange.

“Management guidance was for 2014 earnings to be heavily weighted towards the second half of the year, but the effective weighting ... based on full year guidance, is worse than the market expected,” Credit Suisse analyst David Thomas told Reuters. “And that creates uncertainty.”

Petrofac, which designs and builds oil and gas facilities, maintained its full-year profit forecast saying it expected a significant increase in activity at its onshore engineering and construction division through the rest of the year.

“While guidance was maintained, we may see low single-digit downgrades to 2014 consensus towards the lower end of the guided range,” Amy Wong an analyst at UBS wrote in a note.

The company also said its operations in Iraq had so far not been affected by the unrest in the region and that its contract with Gazprom OAO would not be affected by the Russian sanctions.

“Currently sanctions only affect new business so there shouldn’t be any negative fallout from current business in this regard,” Michael Hewson, chief market analyst at CMC Markets UK said.

Petrofac’s projects in Iraq, which include contracts with BP Plc and Royal Dutch Shell Plc, accounts for about 5 percent of the company’s revenue.

The company’s net profit fell to $136 million in the six months ended June 30 from $243 million a year earlier.

Analysts on average had expected a profit of $184.9 million, according to Thomson Reuters I/B/E/S.

The company said it still expects profit of $580 million to $600 million for the full year.

It had warned in May that profits would be hit by delays in the Greater Stella Area project in the North Sea and lower-than-expected production in Romania’s Ticleni project.

The company’s revenue fell 11 percent to $2.5 billion.

Petrofac said its order backlog at June 30 rose to $20.3 billion from $14.3 billion a year earlier. (Additional reporting by Ron Bousso in London; Editing by Sunil Nair and Savio D‘Souza)

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