Petrofac cuts profit outlook on weak oil prices, project timing

24th Nov 2014 07:07

Oilfield services group Petrofac has scaled back its profit assumptions for next year, saying that depressed oil prices and the timing of deliveries will result in a weaker bottom line.Chief executive Ayman Asfari said it has been a "difficult period for Petrofac and the industry" and that the company's execution on a number of its projects has "fallen short of the high standards we set for ourselves".The company on Monday maintained its guidance for net profit of $580m-600m for 2014, but revealed that the result is now expected to come in at the lower end of this range. This compares with the $650m earned in 2013.Looking ahead, while Petrofac had forecast "strong earnings growth" for 2015 earlier this year, net profit next year is now only predicted to be just $500m.The company said the current forward curve for the oil price is expected to reduce net profit at its integrated energy services (IES) division by $45m compared with previous guidance and current market estimates.Every $1 movement in the oil price - currently trading at its lowest in four years - has a $2m impact on Petrofac's net profit, the company said.The new guidance also reflects the timing of first oil from the Greater Stella Area project in the North Sea, the re-phasing of development activities in Mexico and field investment in Romania.Meanwhile, the final commercial settlement in respect of Laggan-Tormore in Shetland is expected to result in no profit, or even a loss, being recognised from the project in 2015."The board has analysed the potential impact of a lower oil price environment on our IES business and also made a critical assessment of our expectations for project delivery in 2015," Asfari said."I am confident that Petrofac will meet the challenges presented by certain projects in our portfolio and the medium-term growth prospects for our business remain strong."