PETROFAC, the oil services giant has suffered a drop in first half profits and warned its revenues are likely to fall next year as it grapples with the fallout from a bribery scandal.
The company, which is a significant employer in the North Sea, announced that first half profits fell to $154 million (£126m) from $191m.
“Revenues are expected to decrease in 2020 reflecting low new order intake in recent years,” it said.
Read more: West of Shetland win buoys Petrofac as £400m legal claim looms
Chief executive Ayman Asfari noted order intake in the current year has been impacted by the challenges the company has faced in Saudi Arabia and Iraq amid an investigation by the UK Serious Fraud Office.
The SFO announced in February that David Lufkin, the former global head of sales at Petrofac, had pleaded guilty to offering corrupt payments in an attempt to secure contracts in Saudi Arabia and Iraq.
“No charges have been brought against Petrofac, or any officers or current employees,” said the company yesterday. “Petrofac continues to engage with the SFO and will respond to any further developments as appropriate.”
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“We’re not blacklisted in either Saudi Arabia or Iraq. However, the timing of the fraud office’s announcement in February 2019 did result in a number of bids not being opened at that time,” chief financial officer Alastair Cochran told Reuters yesterday.
In June Mr Cochran told analysts the SFO’s announcement had led to Petrofac missing out on an estimated $2 billion to $3bn worth of orders from Saudi Arabia and Iraq in the first half. The company was bidding for $10bn contracts in those countries but did not win any.
Saudi Arabia and Iraq accounted for 17% of Petrofac’s overall contract revenue in 2018.
The company said yesterday it recorded $15m exceptional costs in the first half including an unspecified amount in respect of SFO-related legal fees.
Read more: North Sea oil development setbacks weigh on Petrofac
Petrofac has also faced challenges in the North Sea market in recent years.
The company recorded a $95m hit to profit last year after selling out of the Greater Stella development 175 miles east of Aberdeen
Stella came onstream late following delays in the completion of work in Poland on the giant floating production facility supplied by Petrofac for use on the field.
UK revenues fell 3.5 per cent in the first half of the current year to $273m from $283m.
Total revenues rose one per cent to $2.8 billion.
David Barclay, head of the Aberdeen office of the Brewin Dolphin investment management firm, said: “It’s been a tough 2019 for Petrofac, with its shares dropping as much as 30% between February and August. The next couple of years could also prove to be difficult.”
He added: “The ongoing SFO investigation is likely to continue to impact sentiment towards the shares.”
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