By Geoffrey Smith
Investing.com -- Shares in Petrofac (LON:PFC) slumped to a new all-time low at the open on Tuesday after the company said it will lose money again this year due to cost overruns on past contracts that were badly disrupted by the pandemic.
The latest in a litany of bad news from what was once one of the U.K.'s biggest oilfield services companies drove Petrofac stock down 8.7% in London by 04:00 ET (09:00 GMT). The stock has lost over 90% from its peak in 2017 since being hit with fraud charges over its bidding behavior to win contracts in the Middle East and elsewhere.
Petrofac said it expects to lose around $100 million this year before interest and taxes, due to cost overruns mainly at a clean fuel project in Thailand. In this and a handful of other contracts, Petrofac had agreed to do the required work for a fixed sum, and was subsequently forced to absorb the cost of delays caused by supply chain bottlenecks amid public health measures to contain COVID-19.
New work has also been slower than the company expected at the start of the year. The group estimated this year's revenue will total only $2.5 billion, down from $3.06 billion in 2021, despite a buoyant market for contractors in the oil and gas industry.
The shares fell as much as 10% before paring their losses, with investors taking a little comfort from the company's assurances of light at the end of the tunnel: five of its eight remaining lump sum contracts will close out next year, limiting the scope for future losses. Chief executive Sami Iskander also said Petrofac has around $1.5 billion in bids outstanding in its core Engineering and Construction business where it has preferred bidder status, which it hopes to convert into firm orders next year.
"We expect these opportunities to provide backlog growth in 2023 and lay the foundations for a return to profitability, positive free cash flow and continued recovery thereafter," Iskander said.