Oilfield services leader Petrofac has warned that delays to projects mean its plan to double profits over five years is unlikely to be achieved, reflecting a deteriorating operating environment as projects are being delayed worldwide and clients demand cost reductions.
Delays to major projects in Abu Dhabi and Malaysia are blamed for a slowdown in earnings growth, which follows earnings warnings from other key players in the sector recently including Aker Solutions, Saipem and Subsea 7.
Petrofac warned that delays to the Upper Zakum project in the Gulf, which is majority owned by the Abu Dhabi National Oil Company along with junior partners ExxonMobil and the Japan Oil Development Company, would mean deferring earnings for 2014 and 2105 and beyond, but the delays could also increase the scale and duration of work there which is currently valued at US$2.9Bn.
Work on product enhancement projects on the Berentai development off the coast of Malaysia, which has been seen as the key driver of the company’s profits growth, has also been deferred which will hit Petrofac’s Integrated Services division.
Chief Executive Ayman Asfari said the five year profits growth target was still attainable but would depend on the timing of contract awards for its engineering, construction, operations and maintenance businesses.
Petrofac has been a fast growing company recently as it follows a policy of taking on more construction and execution risk than its rivals, and taking stakes in some of the upstream assets it is working on, including mature oilfields. The company has an order backlog of some $14Bn.