Petrofac Limited

Group revenue was $1.2 billion in the first half of 2023. Business performance EBIT was a loss of $96 million. Net debt increased to $584 million, and free cash flow was an outflow of $225 million. In E&C, revenue was $0.5 billion, down 32% year over year, with an EBIT loss of $122 million, including about $67 million of write-downs. In Asset Solutions, revenue was $0.7 billion, up 34% year over year, with EBIT margin at 2.1% and awards of $0.9 billion for a 1.4x book-to-bill. IES revenue rose 13% year over year and delivered EBITDA of $48 million, with net production of 640,000 barrels of oil equivalent and an equivalent realized oil price of $96 per barrel. For the full year, management reiterated broadly neutral free cash flow, E&C EBIT loss of approximately 10% for the year, Asset Solutions EBIT in line with guidance, and IES EBITDA of $65 million to $75 million at an oil price of $85 per barrel.

Tareq Kawash emphasized that Petrofac’s first half was its strongest period for new awards in many years, and said the company has built a strong base with a high-quality backlog, a diverse pipeline, and a growing talent pool. His tone was constructive but realistic: he repeatedly highlighted the need to work through legacy contracts, strengthen the balance sheet, and keep bidding selective. He framed the recent contract wins and operating model changes as evidence that Petrofac is rebuilding toward more predictable performance and medium-term returns to sector-leading margins and free cash flow.

Afonso Reis e Sousa focused on the financial reset underway: Group revenue of $1.2 billion, business performance EBIT loss of $96 million, free cash outflow of $225 million, and net debt of $584 million. He attributed the weak E&C result to low activity, onerous contracts with no margin recognition on about 30% of E&C revenue, adverse operating leverage, and roughly $67 million of write-downs taken to protect full-year cash. He said second-half cash should improve as historical settlements are collected and advances on new awards come in, supporting the reaffirmed expectation of broadly neutral full-year free cash flow.

Analysts pressed management on the size and confidence of the pipeline, especially the apparent drop in the bidding pipeline from $73 billion to $60 billion, and on the timing of working capital unwind. Tareq said the pipeline remains very healthy, that some of the change is timing, and that about $15 billion is scheduled for award in 2023; he also said the second TenneT contract is expected before year-end. On working capital, he reiterated that reversal is gradual and that Petrofac expects it to move back toward more normal, negative levels by 2024. Questions also covered Asset Solutions growth into wells, decommissioning, and new geographies, and management said West Africa and other areas are a focus area for higher-margin expansion. On IES, management said it hedges about 12 months ahead on P90 production and estimated oil-price sensitivity at about $0.7 million per sustained $1 move in oil price for the full year.