Petrofac releases delayed 2023 results

UPDATE: Petrofac trading resumed in early April.

Petrofac, the energy services group whose shares are currently suspended, has released its delayed annual results for 2023, which showed a net loss of more than half a billion dollars

A reformer module (Image: Petrofac) A reformer module is shipped from China to Thailand for the Thai Oil Clean Fuels project. (Image: Petrofac)

Shares have been suspended since April for Petrofac – a global company that designs, builds, manages, and maintains energy infrastructure – after the company delayed the release of its 2023 results to allow for more time for an audit, while the company engaged with lenders to restructure its debt. 

Tareq Kawash, CEO, said 2023 was a “challenging year” for the group as a whole, but the company’s annual report also announced its “strongest year for new orders” in five years in its engineering and construction (E&C) division.

Petrofac said it took in US$5.5 billion of new orders, and its backlog more than tripled to $6.1 billion. As of 31 December, 2023, Petrofac said approximately half of its orders related to energy-transition contracts, including two offshore wind projects and a carbon-capture contract.

About 90% of the company’s existing backlog was secured in 2023, said Petrofac.

Thai Oil Clean Fuels project leads E&C losses

“The two contracts that will continue in execution beyond 2024 are the Thai Oil Clean Fuels project and the Orlen Refinery Upgrade project in Lithuania,” the firm added.

The Thai Oil project is a consortium between Petrofac, Samsung Engineering (South Korea), and Saipem (Italy). Announced in 2018, the scheme seeks to increase an existing oil refinery’s production capacity in Sriracha, Chonburi, Thailand, from 275,000 barrels per day to 400,000 barrels per day.

The entire scope was valued around $4 billion, with Petrofac’s share about $1.4 billion. Construction was expected to last four years, but the completion date was pushed back to 2025.

Petrofac said the continued operations led to a loss of approximately $190 million for 2023 but also stated the company was in talks for reimbursements.

Petrofac E&C 2023 financials

The company reported revenue of $0.9 billion, down from the previous year of $1.3 billion, “reflecting the low opening backlog and the maturity of E&C’s legacy contract portfolio,” said Petrofac.

E&C reported a loss (on earning before interest and taxes) of $422 million, “reflecting losses on the Thai Oil Clean Fuels project, one-off write-downs to protect cash flows of $90 million, and adverse operating leverage, due to the lower levels of activity,” the company said.

Higher activity part of Petrofac’s 2024 outlook

Based on the volume of new orders, Petrofac’s outlook suggested 2024 will be a better year for activity but noted the figures may still be smaller than historic averages.

“Operating activity in E&C in 2024 is expected to be higher than in 2023, but still sub-scale, as the portfolio transitions from legacy to new contracts,” said Petrofac. “With continued backlog growth expected, supported by the strong pipeline of opportunities and further contracts under the TenneT Framework Agreement, the cumulative impact of these new contracts is expected to provide continued revenue growth in the medium-term.

“Margin in the E&C business is expected to improve as new contracts reach margin recognition thresholds and onerous contracts are completed, with the impact of growing revenues improving the business operating leverage.”

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