Petrofac's strong operational performance has continued in the second half of the year with sequential growth in revenue and net margin in both the Engineering & Construction and Operations Services divisions. The Board anticipates that, in the absence of unforeseen circumstances, the Group's net profit for 2007 will be ahead of the top end of current market expectations.
The Engineering & Construction division delivered both very strong revenue growth and further expansion of net margins in the second half of the year. The execution of projects in-hand proceeds satisfactorily, in particular with first gas achieved on the Kauther gas plant in Oman in November, two months ahead of expectation, and with the Hasdrubal and Salam gas plant contracts awarded in late 2006.
During the second half of the year, the division secured additional business in a number of its key geographical markets, including the award of a US$600 million lump-sum engineering, procurement and construction (EPC) contract for the In-Salah gas development in Algeria, new lump-sum contracts expanding the scope of its work in the Caspian region worth approximately US$200 million and additional scope under other existing contracts. The division is expected to report an increase of backlog over the year, which, together with a healthy bidding pipeline, should underpin continued strong growth in 2008.
The Operations Services division delivered good operational performance across its portfolio of UKCS and international contracts in the second half of the year and achieved good sequential growth in revenue and net margin. Following a six month period of transition the division assumed full turnkey responsibility for the operation of Dubai Petroleum's offshore oil & gas assets in April 2007. The new contract is the division's largest international contract to date and is proceeding positively and in accordance with expectations. The division has secured new Brownfield and Training contracts in the second half and is expected to report a year end backlog which is broadly unchanged over the year. Further revenue growth and net margin improvement are expected to continue into 2008.
The Energy Developments (formerly Resources) division delivered a strong performance in 2007 and has been active on a number of projects.
The Cendor field, offshore Peninsular Malaysia, which achieved first oil in September 2006 and full cost recovery in March 2007, has produced, on average, in excess of 14,000 barrels of oil per day and has benefited from high oil prices. A further drilling program is currently in progress, with the objective of extending peak production and proving additional reserves.
In Tunisia, construction of the production facilities and associated pipeline of the Chergui development is progressing, with first gas now expected around the end of the first quarter of 2008. A well has recently been drilled within Block 211/18a in the UK North Sea, to determine the limits of the Don Southwest field.
In permit NT/P68, offshore Northern Australia, the division has farmed-in to a two well appraisal program. The first well is nearing completion, has intersected hydrocarbons in the target zones and testing is about to commence. The continued capitalization of drilling and testing costs, which are expected to total approximately US$12 million after tax, will be determined following testing of the well.
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