Petrofac Plunges After Cutting Earnings Forecast on Delays

Petrofac Ltd. (PFC) fell by the most in almost six months in London after saying earnings will be lower than expected because of project delays.

The U.K.’s largest oil and gas engineer will cut capital spending at its Integrated Energy Services division, which takes direct stakes in fields, after reviewing the future of the business.

The stock fell 15 percent to 1,177 pence, the largest drop since Nov. 18, making it the biggest decliner in the benchmark FTSE 100 index.

Today is the second time in six months Petrofac shares have plunged because of a profit warning. The stock fell by a record in November after the company forecast flat to modest profit growth in 2014.

Profit for the year is now expected from $580 million to $600 million, London-based Petrofac said today in a statement. That’s lower than the $667.3 million average estimate of 16 analysts surveyed by Bloomberg.

Some of the Integrated Energy Services projects “need a great degree of management focus,” Chief Financial Officer Tim Weller said today in a phone interview. “We have curtailed some business development activities in the last couple of weeks, terminated some discussions” about contract awards. He declined to name the projects the company dropped.

Record Orders

Petrofac today said its order intake rose to a record $18.6 billion as of March 31, up from $15 billion at the end of last year. The company earnings were curbed by project delays in the U.K. North Sea and Romania, and accounting changes for its investment in Nigeria.

“This is the first time on record that the company has had execution issues of this scale on several of its projects,” Christyan Malek, a London-based analyst at Nomura Holdings Inc., wrote in an e-mailed report. He downgraded the shares to reduce from buy.

“We certainly believe that the results of the management review we have been through have identified all the significant issues we face with,” Weller said. “We do recognize there is a need to refocus our efforts on operation delivery.”

Ithaca Energy (IAE) Inc. fell 11 percent to 135 pence in London trading after Petrofac said that the first oil production from their Great Stella Area fields in the U.K. North Sea will be delayed by about six months until the middle of next year.

The project’s floating production facility will be ready to sail from a shipyard in Poland at the beginning of 2015, Ithaca said today in a statement.

In Romania, Petrofac is renegotiating its contract with OMV Petrom SA at the Ticleni field after the project performed below “original expectations,” Weller said.

“We’ve curtailed significant drilling” work in the past few weeks, he said. “We are expecting a lower level of production.”

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alex Devine

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