Petrofac Cuts 2014 Profit Forecast on Project Delays, Shares Slump
LONDON, May 9 (Reuters) – Oil and gas services group Petrofac cut its 2014 profit forecast by 11 percent due to the poor performance of flagship projects, wiping over 700 million pounds ($1.19 billion) off its market value and highlighting the sector's testing environment.
Petrofac, which had pinned many of its medium-term growth projections on its Integrated Energy Services (IES) division, said it now expected to report 2014 net profit between $580 million and $600 million, down from the previous target of little or no growth from the $650 million it reported in 2013.
Shares in Britain's largest oil services company were down 15.6 percent at 1,172 pence per share at 0947 GMT. It was one of the biggest losers in the blue-chip FTSE 100 Index, which fell 0.3 percent.
Service companies, which provide the engineering and construction on oil and gas projects, are increasingly under pressure as big oil companies face huge project delays and tighten their budgets.
The company said it would cut IES expenditure after completing a review of the division in which it invests alongside oil companies and has earnings linked to the volume of barrels taken out of the ground.
The review identified "operational challenges" in key projects, leading the company to seek better operational performance on existing projects and narrow the focus of future business.
The fall in 2014 profits was mostly due to delays in the Greater Stella Area project in the North Sea, lower than expected production at the Ticleni project in Romania, the dilution of equity interests in the Seven Energy project in Nigeria as well as "no significant contribution from new awards".
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