Petrofac Falls to Three-Month Low on Offshore Investment

Petrofac Ltd. fell to a three-month low in London as the U.K.-based oil and gas engineering company said it would invest $1 billion in its offshore business.

The company slid 6.3 percent, the biggest drop this month, to 1,497 pence, the lowest level since Nov. 16. Petrofac expects a “capital outlay of around $1 billion over the next five years,” it said today in the 2012 earnings statement.

“We expect a negative reaction to the $1 billion offshore investment announced, despite the fact that this is somewhat anticipated,” Andrew Dobbing, an analyst at JPMorgan Cazenove, wrote in an e-mailed note. “There is little in these results to trigger any meaningful near-term share price upside.”

The company reported that net income rose 17 percent to $632 million and its order backlog expanded by about 9 percent to a record $11.8 billion.

Chief Executive Officer Ayman Asfari, who has overseen a fourfold jump in share price since the start of 2009, said the company is set to meet a target of doubling earnings from 2010 to 2015. Petrofac is spending to build its offshore capabilities and integrated energy services, catering to state oil companies in the Middle East, Africa and Latin America. The offshore unit last year signed contracts in Iraq, the North Sea and Malaysia.

“We’re confident we can generate the same margins,” Asfari said in a Bloomberg Television interview. “We were hoping to grow our backlog a bit more last year, but we’re confident we can increase our awards again this year.”

The integrated energy services unit, which develops and runs fields without booking reserves, tied up with Schlumberger Ltd., the largest oilfield services provider, to enhance output in Mexico. In Cameroon, Petrofac plans to work with BowLeven Plc to provide gas to Ferrostaal AG for fertilizers from 2016.

“We expect to deliver good growth in net profit in 2013 and our strategy underpins long-term earnings growth, including the achievement of our 2015 earnings target,” Asfari said in the statement.