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Profits at Petrofac tumble after work in North Sea fields delayed

PETROFAC has suffered a 44 per cent fall in first half profits partly caused by delays in work on a North Sea field in spite of benefiting from a big increase in activity levels West of Shetland.

giant: The oil services firm, which employs a total of around 4,5000 people in Scotland, made £82m net profit after tax in the six months to June.

The oil services giant, which employs around 4,500 people in Scotland, made $136m (£82m) net profit after tax in the six months to June compared with $243m in the same period last year.

In May Petrofac warned 2014 earnings were expected to be lower than last year as a result of factors such as a delay on the Greater Stella Area project east of Aberdeen.

London-based Petrofac is modifying a floating production storage and offloading vessel for use on the Ithaca Energy-operated field.

It had expected to sail the vessel out to the field in time for production to start late this year. However, Petrofac now does not expect to be able to sail the vessel out to the field until spring 2015. The expected date of first oil has slipped to mid 2015.

In May Ithaca said construction work on the vessel had advanced more slowly than planned.

Petrofac said yesterday: "We completed a review of the portfolio during the first half of the year and identified a number of performance issues that are being addressed, in particular on the Greater Stella Area project and the Ticleni project in Romania."

The problems highlight the challenges firms can face when developing new fields.

But Petrofac noted it is benefiting from the ramp up of work on Total's giant Laggan-Tormore development West of Shetland.

Petrofac is working on facilities like a new plant to process gas from the field.

The company said: "Work in progress increased during the first half of the year, with the largest increase in relation to the Laggan-Tormore project in Shetland, UK, following a step-up in activity levels in recent months to address the impact of exceptionally poor winter weather."

Petrofac has 2,000 people working in Shetland including contractors.

Laggan Tormore is one of a number of giant fields that the majors are developing West of Shetland.

BP and Shell are investing billions of dollars developing the Clair Ridge field and revamping the Schiehallion and Loyal developments.

BP has noted the possibility of making more big finds off Shetland.

Petrofac has also benefited from oil and gas firms' efforts to boost output from fields that are already onstream.

In May it won a lucrative ten-year extension to a contract to support Enquest's North Sea Assets.

The operations and maintenance support deal is worth around $630m.

Petrofac said its offshore projects and operations division increased first half revenue by 57% to $1.05bn, with around 70% of revenues generated in the UK.

The company noted it had built up a record group order book reflecting ongoing high levels of investment by customers in core geographic markets. The order backlog rose to $20.3bn at June 30 from $15bn at December 31.

Petrofac said it remains on track to deliver full year net profit in the range $580m to $600m, in line with previous guidance.

Chief executive Ayman Asfari said: "We see significant long-term growth potential for Petrofac."

He said Petrofac is confident of a return to strong earnings growth in 2015.

Petrofac made $650m net profit in 2013.

The company said its operations in Iraq had so far not been affected by the unrest in the region.

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