This morning, the share price of Petrofac, the oil and gas heavyweight, edged up as the firm revealed a new $600m (£466m) engineering contract that came alongside a strong half-year profits report.
The profits in the first six months of the year reached $190m, rising by 20 percent from the same period during the previous year amidst the increasing demand for oilfield services.
The group designs, builds, and operates various oil and gas facilities. This morning, it also disclosed an engineering contract worth $600 million at Sonatrach, the Algerian state-owned company.
In early morning trading, the shares rose two percent and the company announced a dividend return to investors of 12.7p per share.
The Equity Analyst at Hargreaves Lansdown, Nicholas Hyett, stated: “Petrofac had a helping hand from higher oil prices in the first half of the year. That’s not really how it’s meant to work as a services business, but Petrofac actually has a decent slug of oil & gas assets of its own – $794m to be exact.”
He continued: “Headline numbers at the core engineering businesses aren’t looking so pretty, although an improving oil price is helping here too. The order book continues to shrink, but the rate of decline is slowing and there have been substantial contract wins in Petrofac’s core North African and Middle Eastern markets in recent months, as oil companies loosen the purse strings again.”
The said announcement was revealed as the group readjusts the firm’s core focus towards onshore engineering and drilling. It is drifting away from other oil-producing assets.
It said that the group is well positioned on various bids that are due for award before the end of the year.
Ayman Asfari, the boss of Petrofac, stated: “Our focus on operational excellence is reflected in improved margins and continued good progress across our project portfolio in the first half. Furthermore, we are well positioned for the second half with good revenue visibility, a strong competitive position and healthy liquidity.”
The most recent contract win was revealed less than a fortnight after the group was able to secure a $292m deal to sell out of the Greater Stella development in the North Sea. Asfari hailed the deal as a “further milestone in the journey back to a capital-light business.”
This month, Jefferies, a US investment bank, downgraded Petrofac, moving it to ‘hold’ from ‘buy.’ It cited caution over the pace of its major contract wins.