UK's Petrofac secures performance guarantees, boosting shares

(Reuters) -Petrofac said it received a performance guarantee for the first contract with Dutch electricity firm TenneT and agreed terms for its ADNOC Gas deal, sending the oilfield services provider's shares up as much as 59% on Wednesday.

The company, grappling with payment delays and cost overruns at its largest unit - engineering and construction, had warned earlier this month that it would no longer be able to meet its annual forecast of "broadly neutral free cash flow".

Shares in the Jersey-headquartered firm, which had lost about 68% so far this year, were up 35% to 30 at 0830 GMT on Wednesday, topping the FTSE small cap index.

Active discussions were ongoing to secure guarantees required for other contracts, Petrofac said. Performance guarantees refer to a commitment to honour the terms of the deal.

Petrofac forecast a smaller annual loss of $180 million for the group, compared with a loss of $205 million last year.

It expects to report $2.5 billion in total revenue for the year, compared with the $2.67 billion that analysts expect, according to a company-compiled consensus.

However, it said it expected net debt to be higher at the year-end compared to the $584 million as at June 30, due to some delays in securing advance payments on contracts and a subsequent increase of over $100 million in collateral for the guarantees.

"While we are encouraged that management has been able to secure some advance payments for contracts won in the year, this has required a meaningful level of collateral, and ultimately the group needs to find a solution to strengthen its balance sheet such that banks are able to provide performance bonds without the need for collateral," JPMorgan analysts said in a note.

(Reporting by Eva Mathews in Bengaluru; Editing by Subhranshu Sahu and Louise Heavens)