2nd UPDATE: Petrofac Performing In Line, Sees FY Backlog Growth

24th Jun 2010 11:28

(Adds analyst comment.) By Iain Packham Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Oil and gas services company Petrofac Ltd. (PFC.LN) said Thursday that operations are performing in line with expectations and it anticipates order backlog to end the year higher than the $8 billion it started the year with. "We have had a successful start to 2010 and we remain confident that this will be another year of strong growth, in line with our expectations," Chief Executive, Ayman Asfari, said in a statement. Petrofac estimates backlog at June 30 to be $6.9 billion compared with $8.1 billion at the start of the year. Gross cash balances are expected to be around $1.0 billion at June 30 compared with $1.4 billion at Dec. 31, 2009. Chief Financial Officer, Keith Roberts said on a conference call to journalists following the trading statement that Petrofac continues bidding for projects in Kuwait and North Africa but is also making early inroads into Iraq. Roberts also said the company is working hard to convert its phase one contract in Turkmenistan into the significantly larger phase two. "It could easily be a $3 billion to $4 billion EPC award (engineering, procurement and construction) once converted", he said, adding that progress is going well. Analysts at Credit Suisse said they believe Petrofac is at an earlier stage of growth than larger competitors Saipem S.p.A. (SPM.MI) and Technip S.A. (TEC.FR), illustrated by a single upcoming contract in Turkmenistan that could grow backlog by 30% in the second half of 2010. Credit Suisse also said it thinks Petrofac is able to maintain 10% post-tax margins, as a large opportunity set of $200 billion over the next two to three years means that the energy services company can bid selectively. Petrofac said it continues to make good progress on its portfolio of contracts in the Engineering and Construction unit and Offshore Engineering and Operations activity levels after starting work on major contracts that were awarded in the second half of 2009, Petrofac said. However the firm warned that its Engineering Services business--it's third largest unit in revenue terms--continues to experience subdued activity levels. Petrofac's Production Solutions operation is making good progress in securing its first production enhancement contract, where it aims to improve the performance of marginal or mature fields by bringing together its operations, training, engineering and consultancy skills, the company said. Roberts said Petrofac has a strong background in the middle east and the north sea in helping clients optimize mature production which is on a long term decline curve. Credit Suisse has kept an "Outperform" rating on the stock and maintains its target price at 1350 pence. Shares at 1020 GMT down 30 pence, or 2.4%, at 1221 pence, outperforming a slightly lower FTSE 100 Market--down 0.6% -By Iain Packham, Dow Jones Newswires; 44-20-7842-9269; [email protected] (END) Dow Jones Newswires June 24, 2010 06:28 ET (10:28 GMT)