Petrofac's first half results are in line with management expectations. The group has secured $1.8bn worth of new contracts so far this year - mostly in the core Engineering & Construction (E&C) business.
The shares rose 1.2% in early trading.
With the oil price looking healthy, and futures markets suggesting they will remain so for some time, these should be good times for oil services.
Unfortunately there's a lurking doubt that improved energy efficiency and increasingly viable renewable energy sources could mean we see demand for oil slides in the coming years. The combination of getting badly burnt when oil prices fell in 2014 and the threat of 'peak oil demand' means energy companies remain cautious when it comes to loosening the purse strings.
That's not great news for companies like Petrofac, which provides the skills and expertise to develop new fields. Still, Petrofac can at least point to an improving operating performance.
The core engineering businesses, which account for the lion's share of profits, are looking healthier, while an aggressive cost cutting programme means cash profits are moving in the right direction. Recent project wins have been weighted towards the Middle East and North Africa, where low production costs mean projects should be easier to commission.
It's even managed to sell the giant JSD6000 rig-lifting barge - which has been a white elephant for years.
Still, with contracts few and far between, competition for business is intense and Petrofac's order book is shrinking. Even impressive cost cutting can't offset a lack of projects to work on.
The situation isn't helped by a wide ranging Serious Fraud Office (SFO) investigation launched in May 2017.
The probe centres on Petrofac's relationship with Unaoil, a company it hired to provide local consultancy services, primarily in Kazakhstan, between 2002 and 2009. Should Petrofac be found guilty of misconduct it could face significant fines.
That has drowned out operating improvements, and the shares are still well below where they were before the probe was announced.
Petrofac shares currently trade on 9 times expected earnings, compared to a longer run average of 12.3. Analysts are forecasting a prospective yield of 5.4%.
We remain cautious on Petrofac at the moment. The SFO investigation makes the company a bit of a black and white bet, and there are longer term headwinds to bear in mind as well.
Half Year Trading Update
$1.2bn of new contract wins in E&C, and a further $0.6bn in Engineering & Production Services, mean Petrofac finished the first half the year with an order book of $9.7bn. That's slightly behind the $10.2bn the group reported in December - with the E&C book shrinking by $0.5bn.
Contract wins have been spread across Petrofac's core Middle Eastern markets - with promising signs in the North Sea and India as well. Around $20bn of bid opportunities will be awarded in the second half of the year.
Integrated Energy Services, which includes Petrofac's own production assets, is operating in line with expectations, with an average realised oil price of approximately $58 a barrel.
Petrofac also completed the sale of the JSD6000 oil rig lifting barge during the period - for $190m.
Net debt stood at $0.9bn at the end of the half, from $0.6bn in December. This is part due to the end of short-term working capital movements and the timing of tax and dividend payments. Net debt is expected to decrease over the year.
Commenting on the group's position CEO Ayman Asfari said "we are well positioned for the second half with good revenue visibility, a strong competitive position and healthy liquidity."
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