Petrofac hit by earnings fears - UPDATE

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LONDON (ShareCast) - Petrofac led the FTSE 100 (FTSE: ^FTSE - news) down as Europe's energy engineering majors dropped over fears that industry earnings would be lower than expected.

The industry-wide drop began after Saipem SpA (Other OTC: SAPMY - news) , Europe's largest energy engineering firm, cut its profit forecast.

The announcement that 2013 earnings before interest and tax would be €750m, compared with analyst estimates of €1.7bn, led around a dozen brokers to cut their ratings on the Italian firm.

This helped push Petrofac's price down as much as 7.9% in morning trading on Wednesday.

The news hit Paris-based Technip SA, which also fell 7.9%, while Subsea 7 (Other OTC: SUBCY - news) led Norway's oil services sector down.

Petrofac has been seen as a good bet recently by analysts, with Nomura noting on Tuesday that the firm was well positioned to take advantage of opportunities in the Middle East in the first half of the year.

In a similar vein, on Monday Credit Suisse (NYSE: CRP - news) named Petrofac and AMEC (Other OTC: AMCBF - news) amongst its favourites in the sector (and warned of possible weak guidance from peers).

This morning, however, the Swiss broker wrote to clients that "[Saipem´s profit-warning is] likely to lead the whole sector down: The clearest read-through is to Subsea7, another company with a low level of estimated backlog for 2013 active offshore. Technip (Paris: FR0000131708 - news) 's more cautious comments on 2013 estimates will likely be read even more negatively, and Petrofac may also be affected as the closest peer to Saipem's onshore construction division."

AB