Petrofac warns of further gas plant losses

Petrofac is expected to take a further financial hit as it comes close to completing the gas plant development for Total.

The first gas is expected to be flowing before the end of this month. But, in a pre-close trading update, the company has warned of potential losses of “a few” tens of millions of dollars because of complications in its Laggan-Tormore project.

The company made losses of $263 million, or £173 million, on Laggan-Tormore in six months leading up until June, with additional costs recognised of around £30 million.

However, Petrofac’s chief executive Ayman Asfari remained confident about the group’s overall position.

“We have recently achieved a major milestone on the Laggan-Tormore project with the completion of all main construction activities at the Shetland Gas Plant for our client Total E&P UK in preparation for the introduction of gas, which is currently targeted before the end of the year.

“As we close out the final commercial positions with our subcontractors and our client, there is a potential additional financial exposure of a few tens of millions of dollars over and above the amount provided in the first half of the year and we will update the market on the final position in respect of the project at our full year results announcement.

“We continue to make good progress across the rest of our portfolio of engineering, procurement and construction (EPC) projects.”

He said the group had operated during a “difficult period” for the oil and gas sector. But he added the company had built an impressive record engineering, construction, operations and maintenance order backlog of $18.5 billion. That, he said, gave the organisation “excellent revenue visibility”.

“Against the backdrop of a difficult period for the industry, we remain well-positioned. Our ECOM backlog stands at record levels, giving us excellent revenue visibility for 2016 and beyond, and our pipeline of bidding opportunities remains robust, with ongoing investment by our clients in large strategic projects in our core markets.

“We have taken steps to maintain our cost-effectiveness and sustain our strong competitive position, which gives us confidence that we can continue to deliver value for both our clients and our shareholders.”