Petrofac shares plunge 25pc after profit warning
Oil price slide and cost increases to hurt Petrofac's 2015 outlook
Petrofac warned that net profits would fall to $500m (£320m) in 2015, well below analysts' expectations of $588m. It also said full-year net profits for 2014 would come in at the lower end of its guided $580-$600m range.
It blamed the expected fall in profits on the lower oil price - which has slid as low as $78 per barrel from a peak of $115 in June - as well as higher-than-expected costs on a number of projects.
The falling oil price alone could put a $45m dent in net profits for its integrated energy services division (IES), which operates and maintains oil and gas fields. Its previous guidance on profits from this division was based on an oil price projection of $100 per barrel.
A number of cost increases will also hurt next year's profits. Petrofac said it would make no profit on a construction and engineering project in Shetland as the costs had increased and its expected returns had lessened.
Petrofac also said it had reduced its profit outlook on the Greater Stella Area development in the North Sea "to reflect reduced oil price and our latest view of overall project cost".
Ayman Asfari, chief executive, said Petrofac and the wider industry were experiencing a "difficult period".
"In the main our project portfolio is in good shape, but it is clear that on a small number of projects our execution has fallen short of the high standards we set for ourselves. We have faced these difficulties and have taken robust action to address them and believe this leaves us on a surer footing for the future," he said.
The announcement sent Petrofac shares down by as much as 25pc to 898p, wiping more than £1bn off its market
- The Telegraph
- Published on:
- November 24, 2014
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