To describe 2009 as a stellar year for Petrofac (LON:PFC) would be a huge understatement. The group finished the year with an order backlog twice the size than it had at the outset. The group has since been awarded a US 600 million contract and spun off its North Sea assets.
The group’s recently released full year results show a jump in revenues, pre-tax profits and order backlog. Whilst group revenue rose by 10% from $3.3 billion to $3.7 billion, pre-tax profits rose by 25% from $358 million to $448 million. All the more impressive, the group’s order backlog doubled to over $8 billion paying no attention to the 15% cut in capital expenditure witnessed across the oil and gas industry as whole in 2009.
Focussing in on which the underlying performances of the individual segments, the group cash cow, its Engineering and Construction division, saw operating profit rise 33% over the year to $322 million, thanks to US$6.3 billion worth of new contract wins during the year which included a $100 million contract with Turkmengaz, the Turkmenistan national energy company. The division has picked up in 2010 where it left off in 2009 and has been awarded a contract worth more than US600 million for a gas sweetening facilities project by Qatar Petroleum.
Elsewhere the group’s Offshore Engineering & Operations division may have seen a pullback in revenue and earnings vis-a-vis 2008, but it did secure a £75 million contract with Apache to provide engineering and construction services for the Forties field in the UK North Sea. And to underscore the fact that there is life beyond NOC’s for Petrofac (LON:PFC) the division was awarded a £100 million 5-year contract by BP (LON:BP.) to deliver integrated maintenance management support services for all of BP's UK offshore assets and onshore Dimlington plant.
The laggard of the group was the Engineering, Training Services and Production Solutions division. The business suffered as the oil price tailed off and the economic outlook deteriorated forcing a number of major customers to postpone early stage engineering studies or re-phased work upon which the division depends. Although the fall in activity was notable, the division’s operational performance in service operator role for production of Dubai's offshore oil & gas proved a highlight.
Energy Developments meanwhile saw the start of oil production from the West Don field during the first half of the year less than a year from Field Development Programme approval. In addition output from Don Southwest field began in June. Despite considerably lower oil prices in 2009 compared to the prior year, Energy Developments' revenue reached almost US$250 million (significantly higher than the US$153 million of 2008) due not only to the ‘Don fields effect’ but also a full year's contribution from the Chergui gas plant, which began exports in August 2008.
In order to maximize the earnings potential of the division’s North Sea assets, including the Don assets, the group has demerged them providing its shareholders with shares in a newly listed independent exploration and production company called EnQuest (LON:ENQ).
EnQuest is a product of the Petrofac’s North Sea Assets with those off of Swedish explorer Lundin with both companies divesting for different reasons. Upon listing (April 6th), Petrofac (LON:PFC) shareholders owned around 45% of the new EnQuest entity with Lundin shareholders owning approximately 55%.
It is important to note that post demerger the Energy Developments business unit is still a key constituent of Petrofac's business portfolio, and will continue to hold significant assets Tunisia, Malaysia, Algeria and Kyrgyz Republic - sandwiched between Kazakhstan and China.
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