Petrofac expects to curb net debt, retrieve delayed payments in second half

By Amna Karimi

(Reuters) -Oilfield services provider Petrofac Ltd said on Tuesday it was seeing a strong intake of orders at its Asset Solutions unit and that it expects group net debt to fall in the second half after doubling to $345 million in the first six months of this year.

The company is seeing rising orders as it benefits from high oil prices but said it expects modest free cash outflow during 2022 due to delays in collecting payments from clients.

Petrofac said its net debt had doubled to $345 million as of June 23, following a $104 million fine paid to Britain's Serious Fraud Office (SFO) and slower payments from clients.

It was fined last year after pleading guilty to bribes related to contracts in Iraq, Saudi Arabia and the United Arab Emirates between 2011 and 2017.

"The jump in net debt will concern some, but management seems confident that working capital flows will help in the second half as customer payments come in," AJ Bell analyst Russ Mould said.

The risk therefore is that those customers continue to be slow payers, but if net debt does come down that could be seen as another positive point for the stock, added Mould.

Petrofac shares were up 4.3% at 124.1 pence at 0920 GMT, after falling 10% over the past 18 months.

In the second half of the year, Petrofac expects revenue for its Asset Solutions unit to be higher, supported by strong order intake in the year to date.

"We have a healthy 18-month Group bidding pipeline and we expect to secure significant new orders in 2023, underpinned by opportunities in the UAE and offshore wind," Chief Executive Sami Iskander said in a statement.

Petrofac, which has drawn a line under the SFO inquiry, said its half-year trading was in line with expectations, as an upswing in oil prices raised demand.

"The good news is that other parts of the business are picking up some of the slack — with higher oil prices and strong demand for onshore and offshore asset management keeping a floor under profits," Hargreaves Lansdown equity analyst Laura Hoy said.

While oil demand plunged during the COVID-19 pandemic, crude prices have been trading well above the $100 per barrel mark after Western countries imposed sanctions on oil producer Russia over its invasion of Ukraine.

(Reporting by Amna Karimi in Bengaluru; Editing by Susan Fenton)