Petrofac Plunges by Record on Profit Outlook as Oil SlumpsNidaa Bakhsh and Jillian Ward
Petrofac Ltd. plunged by a record in London after saying earnings will be lower than expected because of project delays caused by slumping oil prices.
Net income this year will be near the lower end of the $580 million to $600 million range previously forecast, the London-based oil-services company said today in a statement. Profit will drop to about $500 million next year, $45 million less than estimated.
Petrofac expects no profit and may incur a loss next year from the Laggan-Tormore project in the Shetlands, it said. The new guidance for 2015 also includes an update on cost and timing for the Greater Stella area project in the North Sea.
“Overall it raises questions about project execution outside the core Middle East and the company’s strategy of diversifying into offshore production and operations,” Sanjeev Bahl, a London-based analyst at Numis Securities Ltd., said in an e-mail.
The shares plummeted 26 percent to 877.50 pence at the close in London, the biggest one-day drop since they started trading in October 2005. Before today’s plunge, the stock had declined 2.5 percent this year, while the key FTSE 100 index was little changed.
“On a small number of projects our execution has fallen short of the high standards we set for ourselves,” Chief Executive Officer Ayman Asfari said in the statement. “This has been a difficult period for Petrofac and the industry.”
A drop in oil prices is causing a wave of consolidation across the sector as major oil companies cut spending. Brent, used to price more than half the world’s crude, has fallen by a quarter this year, eroding earnings for companies including Total SA and BP Plc.
This month, Halliburton Inc. said it would buy out Baker Hughes Inc. in the biggest takeover of a U.S. energy company in three years. Last week, Technip SA of France proposed to buy CGG SA. Ophir Energy Plc, a U.K. oil and gas exploration company, today agreed on terms to buy Salamander Energy Plc.
Petrofac was the U.K.’s largest engineer by value before Amec Plc and Foster Wheeler AG merged to form Amec Foster Wheeler Plc.