Petrofac Share Discussion Threads

[mj19] 30/8/2017 07:27

Do we think it will open up?

[1gw] 30/8/2017 07:19

Could have been worse. Backlog looks in good shape, term loans have been sorted and suggestions of more disposals to reduce debt.

Apart from the dividend cut the other piece of not-so-good news is the loss of the senior independent non-exec.

[gemlotte55] 30/8/2017 07:14

Agree looks pretty good

[stoxx67] 30/8/2017 07:10

lets see what 08:00 brings

[dealy] 30/8/2017 07:09

Looks good to me. Reducing dividend is sensible.

[callmebwana] 29/8/2017 22:45

No one knows what tomorrow is going to bring in PFC or in life ?? I am interested in the Co for the long haul. I am 99% sure PFC will come good. So I have not traded nor sold any shares.
I am hoping for good news tomorrow, I could be wrong but it is what PFC will be in the long run that I invested here. I don't need the cash and am quite happy holding.
GLA for tomorrow.
Good to know you to are holding for the long run to Madam. Wishing you luck.

[callmebwana] 29/8/2017 18:56

I am holding for the long term.

[paduardo] 29/8/2017 18:09

I reduced my holding by a third. Am a little concerned for tomorrow. Hoped to be proved wrong.

[adejuk] 29/8/2017 16:41

i reduced to 7k
risk off

[1gw] 29/8/2017 16:29

Oh well. I held my nerve in the end and didn't sell any today ahead of the results. Now just have to hope for some shock and awe (in a good way) from the company at 7am tomorrow.

[callmebwana] 29/8/2017 16:26

NY Boy.Enjoy your holiday in France. See what tomorrow brings ??
Not many postings here today!!

[scooper72] 29/8/2017 16:22

Doesn't look like the market is willing to take a bet on PFC either way before tomorrow.

[1gw] 29/8/2017 16:07

Very frustrating that the FCA spreadsheet didn't appear on Friday and still hasn't appeared today, unless it's just my browser - but short tracker is also saying last updated Thursday.

It would be nice to see what the shorts were doing at the end of last week.

[bennodean] 29/8/2017 15:43

Lots of activity at their Woking office this morning circa 6.45am as I was heading for the station.... gathering of 'seniors' in their conference room that overlooks reception and a couple of BMW's pulling in.

Not sure they always start that early !

[ny boy] 29/8/2017 14:59

30mins to close (European time)

[ny boy] 29/8/2017 09:36

Tick tock, last trading day before the results, I'm chilling in Montmartre with legendary views of the City and Tour Eiffel, beautiful day again.

Buy those dips Sir!

[callmebwana] 29/8/2017 08:20

North Korea fires Missile over Northern Japan !!! Not good for the Stock Market !!

Last day for the Shorters to have their fun. Results out tomorrow.
GLA.

[mj19] 26/8/2017 17:27

Can Petrofac Put Its SFO Issues Aside With Half Year Update?Connor Campbell | Aug 23, 2017 11:09 Be the first to commentBy Connor Campbell, Financial Analyst, SpreadexFor the first few months of the year Petrofac (LON:PFC) wasn't doing anything special. The oilfield services firm largely traded between £8.50 and £9.50 from January to mid-April, a period that saw the release of Petrofac's full year results in February – where the company eked out a net profit of $1 million against the $349 million loss seen the year previous, alongside a 15% rise in revenue to $7.87 billion – and the winning of a chunky $1.3 billion project in Kuwait at the end of March.Petrofac LTD ChartPetrofac LTD ChartWhile the stock did start to drift below £8.50 towards the end of April, it wasn't until mid-May that its troubles really began. On 12th May Petrofac plunged 14.5% in a single session, as the Serious Fraud Office announced it was investigating the company in connection with suspected bribery, corruption and money laundering, linked to its ongoing probe into Monaco-based firm Unaoil, who did consultancy work for Petrofac between 2002 and 2009.Petrofac continued to fall in the days that followed, only for things to get even worst on the 25th May as the company suspended its COO Marwan Chedid. This sparked a stomach-churning 30% drop on the day of the announcement, with further losses in the subsequent fortnight eventually leaving Petrofac at an 8 year low of £3.48 by early June.Since then there has been a slight recovery in Petrofac's stock price. A series of contract updates, including most recently a $2 billion Duqm Refinery Project deal in Oman, have lifted the company from its lows, though the dark clouds of the SFO investigation has kept it below £5. Petrofac Ltd now sits at a current trading price of £4.40.In terms of Wednesday's interim results, analysts are expecting a 10.8% fall in revenue to $3.47 billion, but with a 2.6% increase in earnings to $0.40 per share. Of course, what investors will really want is an update on the SFO situation, especially since Petrofac appointed top City lawyer Edward Sparrow for the 'management of, and response to, the investigation' earlier in the month.Petrofac Ltd has a consensus rating of 'Hold' alongside an average target price of £6.70.

[callmebwana] 26/8/2017 15:42

1GW. Thanks for the above posts.

[1gw] 26/8/2017 15:26

Greater Stella Area asset

I still think the sale of one or more of the IES upstream assets might be a quick win if Petrofac wishes to raise cash to counter the debt concerns that arise in articles such as the Telegraph one in my previous post. This might be an effective way to undermine some of the shorts' arguments.

Petrofac should have become a licensee in Greater Stella Area with a 20% equity interest (Stella and Harrier fields plus Hurricane discovery, licence P011) upon first production, which has now happened. However the transfer has to be approved by DECC and it appears it has still not formally gone through as of 21st August.


Petrofac referred to the delay in their 27th June TU "...the ramp up in production and our formal entry onto the licence has been slower than expected."

The asset in the meantime is treated as a financial asset, sitting on the balance sheet:
"The Greater Stella Area (GSA) asset is treated in the consolidated statement of financial position as a financial asset and measured through profit and loss on the basis that there is currently a short-term loan receivable from the consortium partners to fund Petrofac’s share of the field development costs which cannot be converted to a 20% equity share in the GSA licence until the start of production from the field and DECC approval for Petrofac to acquire this interest in the asset."

In the end-year accounts it was carried at $276m ("Receivable in respect of the development of the Greater Stella Area") with a fair value also of $276m.

The asset is arguably now at a point of maximum forward value - the development costs have been spent, the development risk has been removed and it is just ramping up to full production. This strikes me as a relatively easy asset to sell and hopefully it could pull in $300m+ if the 31/12/16 fair value is reasonable. Selling now would mean foregoing upside from future oil prices exceeding assumptions used in current M&A deals, but equally would remove downside price risk as well. It would also potentially save a lot of future management time and resources looking at ownership issues that arise on the field (investment decisions, hedging strategies etc).

Anyway, just thought I'd share the thoughts. I'm really trying to decide whether I ought to take a bit off the table ahead of the results on Wednesday. I think I now feel considerably more comfortable about the debt issue.

[1gw] 26/8/2017 14:15

Did a bit more digging on the liquidity situation.

This Telegraph article following the trading update picks up the squeeze on the revolving credit facility "...analysts at Bernstein warned it would have as little as $100m in liquidity available through its revolving credit facility".



The article goes on to say that "Petrofac countered concern over its balance sheet in an investor call by stating it has around $1bn in cash to support its operations and tendering for contracts."

This is consistent with the annual report on page 51 where it states:

"Excluding bank overdrafts, the Group's total available borrowing facilities were US$2,393 million at 31/12/16...Of these facilities, US$631 million was undrawn as at 31/12/16...Combined with the Group's cash balances of US$1,167 million...the Group has substantial sources of liquidity available."

So if net debt has increased by around $500m in 1H,that could have wiped out all but about $100m of the revolving credit facility, as Bernstein says. But that should still leave the $1.1bn of cash. So even if the $300m of term loans have to be repaid from cash reserves that would still leave $0.8bn of cash (or $0.7bn of cash and a bit more capacity in the revolving credit facility).

This cash reserve would then increase (or the revolving credit facility could be repaid) to the extent 2H does produce a reduction in net debt as per company guidance.

[rhatton] 25/8/2017 18:06

Also last year trading update in June 2016

"Net debt is expected to increase to around US$1.1 billion at 30 June 2016 (31 December 2015: US$0.7 billion), reflecting payment of the 2015 final dividend and capital expenditure"

So I don't think out of the ordinary.

My personal concern is the order backlog. Been declining from over $20 billion a couple of years back to now $13 as per the last update. Possibly $14 billion with the last Oman deal.

Hopefully we get some of that Saudi work

[stoxx67] 25/8/2017 18:03

many thanks 1gw

[1gw] 25/8/2017 17:57

Yes but net debt at year end was only $0.6bn, so that increase to $1.1bn at mid-year (as per estimate in TU) is significant in the context of the spare capacity (at end-year) in the revolving credit facilities.

But they say the increase was expected and that they expect net debt to fall again in 2H (as it did last year), so hopefully all will be well. Presumably at some point their Greater Stella area interest will start generating some welcome cashflow.

It all looks like it might be a bit tight though, particularly if they can't roll over the term loans and I guess it's possible that some of the short positions are at least in part a bet that the company will get into trouble on financing and at least have to cut the dividend.

So a strong statement on 2H cashflow expectations / debt capacity would be good to see.