A week after unveiling a plan to spin off its North Sea oil assets, Petrofac has pleased the market with forecast beating figures.
The oil services company said profits had climbed 33% to £353.6m, helped by a record $6.3bn of new engineering and construction contracts, mainly from the Middle East and Turkmenistan. It said it expected to benefit from continuing investment by its customers in oil and gas projects, which would underpin strong growth in 2010. The news has pushed the shares to the top of the FTSE 100, up 47p to £11.19. Analyst Andrew Whittock at Oriel Securities said:
The trading update before Christmas stated that 2009 net income would be at least $330m. Actual net income came in at $353.6m, comfortably beating consensus. The current level of backlog within E&C and Oil Service divisions provides a high degree of visibility through 2011 and Petrofac believes that it is well positioned to secure further new business. In an earlier note we argued that a price target of 1000p-1050p post completion of the EnQuest [North Sea oil] transaction could be realistic as we believe Petrofac should benefit from an upward re-rating with lower exposure to E&P. We retain our add recommendation.
At Evolution Securities, Keith Morris has a neutral rating on the company:
Petrofac's 2010 PE of 13.1 times is below the long run sector average of 15 times. However, we believe investors should wait until the demerger of the Energy Development business takes place before returning to Petrofac as a "clean" E&C company with strong MENA [Middle East and North Africa] region focus.
