Petrofac Ord USD0.025 (PFC)

Company overview

Petrofac was established in 1981 and has subsequently grown into a major oil & gas support services company. Petrofac was admitted to the London Stock Exchange in 2005. As well as designing and building oil and gas infrastructure, the group also invests alongside producers in oil fields. The main geographical areas in which the company operates are: the UK continental shelf, the Middle East, Africa, the Commonwealth and Asia. In total Petrofac has over 27 offices Worldwide and employs more than 14,500 personnel.

HL Comment (20 October 2011)

The group's third quarter trading update (20Oct2011) saw management highlighting an in line operational and financial performance. In addition, management also expressed its optimism for the longer term, highlighting confidence in achieving its target of more than doubling recurring 2010 earnings by 2015. At its Engineering & Construction division, it continued to make good progress across its portfolio of projects, including the South Yoloten project in Turkmenistan. For its Offshore Engineering & Operations division, activity remained at record levels for both long-term operations support contracts and offshore capital projects. In Engineering Services, it recently entered a strategic joint venture with China Petroleum Engineering & Construction Corporation, the engineering and construction subsidiary of China National Petroleum Company.

Negatives:

• The group focuses on business sectors which are highly dependent on economic growth. The economic outlook remains uncertain, with fears of a 'double dip' recession still persisting. Worries regarding the Chinese economy continue to be heard.
• The Gulf of Mexico oil spill has raised uncertainties over future deep water drilling prospects going forward.

Positives:

• Both near and longer term management forecasts have been reiterated.
• The board also announced plans to acquire a 20% stake in three oil fields in the North Sea by selling an 80% stake in a floating production facility to British explorer Ithaca Energy, the operator of the licences, to help it develop them.
• Investments in new oil fields by the major companies take considerable planning, and once made, cannot easily be withdrawn from – a factor which should provide ongoing business.
• The oil industry generally considers the easier accessed oil fields to have been tapped, leaving the more difficult deep sea fields remaining – a position which should provide a healthy environment for Petrofac.

Consensus

On balance, market consensus opinion currently denotes a buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: US dollar.