Petrofac shareholders could be set for wipeout as company considers debt swap
Petrofac said this morning it would delay its full year 2023 results, which it now expects to publish by 31 May 2024.
Embattled oil services provider Petrofac has delayed the publication of its annual results and warned on profit amid a funding crunch.
The company said this morning it would delay its full year 2023 results, which it now expects to publish by 31 May 2024.
It also updated investors on the progress of negotiations with creditors. Petrofac said a group of senior secured noteholders have made a proposal to provide the firm with up to $300m (£239m) in further credit to bolster its weak balance sheet. However, the proposal would be dependent on the company securing performance guarantees written into its contracts.
The company’s market capitalisation is £117m, implying substantial dilution if any debt-to-equity swap goes ahead.
Further, the company said it was in discussions with credit providers to obtain the required guarantees, which would also release over $200m (£160m) of collateral and retentions. While it pushes ahead with the restructuring, some of its creditors have agreed to short-term payment deferrals.
The company’s net debt at the end of 2023 was $583m (£464m), which was “lower than guided on 20 December 2023 and in line with the interim results, reflecting the continued efforts of the group to manage its payment obligations.”
Petrofac also updated the market on disposals and current trading.
It said it had received non-binding offers for its share in the PM304 Production Sharing Contract (PSC) in Malaysia. The deal could be completed as soon as the third quarter of 2023.
Meanwhile, the group said it had run into delays to negotiations regarding a clean fuels project in Thailand. That could mean its engineering and construction unit will make a loss in 2023. It has also had to book more costs in its Asset Solutions Unit, which will further harm earnings in this arm.
Tareq Kawash, CEO, said: “Operational activity continues as expected and our teams are delivering well in the initial phases of the contracts awarded in 2023. On the Thai Oil Clean Fuels contract, we are working closely with our client and partners to accelerate delivery of this complex project and conclude negotiations on the reimbursement of costs. While the commercial negotiations will only conclude after our full year reporting cycle, we are making progress.
“Petrofac has a large order book of high-quality projects, strong market positions and compelling future opportunities which are evident from the recently announced awards. We are working to put the performance guarantees and the right capital structure in place, in order to deliver on this potential,” he added.
Shares in Petrofac plunged 22 per cent in early deals after the company published its trading and funding update this morning. Over the past 12 months, the stock has lost 76 per cent.
