Petrofac Drops Most Ever on ‘Flat’ Profit Forecast

Petrofac Ltd., the oil and gas engineer that’s lost a quarter of its value this year, dropped the most since it listed in 2005 in London trading after predicting “flat to modest” profit growth.

Petrofac fell 17 percent, the biggest slump since October 2005, to 1,200 pence. Trading volumes were six times higher than the three-month daily average.

“We expect group net income in 2014 to show flat to modest growth year-on-year,” Chief Executive Officer Ayman Asfari said today in a statement. Meeting 2015 earnings targets will also be dependent on the timing of potential contract awards next year.

Petrofac is seeking to reach $862 million in post-tax income by 2015, more than doubling 2010 recurring profit. While project delays in Abu Dhabi and Malaysia have slowed earnings growth, the company can still meet its goal in two years, it said. That may require a profit jump of about 30 percent from 2014 to 2015, Chief Financial Officer Tim Weller said today.

Petrofac’s outlook “implies a cut to forecasts of about 15 percent in 2014 and 10 percent in 2015,” said Neill Morton, an analyst at Investec Securities Ltd. in London. “Petrofac now indicates that it will require further new contract awards in order to meet its existing 2015 profit target.”

Worst Performer

Petrofac was the worst performer on the FTSE 100 index today. The London-based company has lost more than 1 billion pounds ($1.6 billion) in market capitalization this year after increasing its value eightfold in the seven years since its 2005 listing.

The Upper Zakum field project in Abu Dhabi has been delayed after studies were conducted to increase its capacity. That will defer income to 2015 from 2014, Petrofac said. In Malaysia, it’s undertaking engineering studies at the Berantai development that also point to a deferral of revenue from 2014 into later years.

Petrofac’s order backlog totaled $14.3 billion as of Oct. 31, the same as at the end of June.

“The large and complex nature of our projects can lead to issues outside of our control,” CFO Weller said on a conference call. “Despite the rephasing of some contracts, we remain confident about the long-term strength of Petrofac.”