![]() Environmental concerns are the primary driver of ESG risk for this group, with carbon emissions and waste disposal being the main issues. The ESG risk to oil and gas service providers runs parallel to those impacting producers. Environmental, social and governance (ESG) risk But given the pressure on cash flows we don't currently see any scope for handouts to shareholders.Īnd in the immediate future we caution that its efforts to shore up the company's finances that are likely to be the key driver of Petrofac's valuation, and here there are no guarantees of success. ![]() Progress toward this could be rewarding for investors with some analysts even forecasting a return to dividend payments. Petrofac has previously set out its stall of achieving $4-$5bn of sales annually and a returning to industry-leading margins over the medium term. The volatility we have seen in oil and gas prices of late makes this equation even harder to balance as Petrofac's customers evaluate whether or not to embark on new projects. Hold back and there could be problems delivering projects. Over-hire and the bottom line gets punished. That also gives it less bandwidth to invest in hiring skilled engineers in anticipation of new business. Petrofac is a relative minnow in the energy equipment and services space. We also see headcount as a key metric to get right. Pricing discipline is essential, to avoid a race to the bottom. Should a solution be found, the key will be not just winning new business, but also securing strong commercial terms. Disappointments on this front would likely cast a shadow over the company's future and therefore sentiment towards the shares. Until clarity emerges on the shape of the business it makes it difficult to form a view about the future prospects for the group.įor now, there is no certainty that any external investment will be secured. The Group's pipeline of potential contracts could well be of interest to industry players with the financial firepower to get the job done. The valuation has staged a partial recovery on the news that talks are under way to sell off parts of the business or attract investment for other activities. Until the balance sheet is strengthened, it may also prove challenging to win further new business. That means recent wins may not convert to revenue. The company's financial position, together with an increasing reluctance by debt providers to fund project workflows, means that there are significant concerns about the group's ability to deliver these contracts. The recent collapse in the valuation suggests that investors may be unsurprised by the revelation that this year's cash flow targets won't be met. ![]() But what investors really want to see is a return to profits and cashflows, and progress on that front has so far been disappointing. It's making solid progress in rebuilding its order book and sales pipeline. And we're impressed with its range of capabilities across the energy mix. Petrofac designs, builds, manages and maintains oil, gas, refining, petrochemicals and renewable energy infrastructure. View the latest Petrofac share price and how to deal Our view These include the sale of non-core assets and discussions with financial investors who may take minority stakes in other areas of the business.Īfter a volatile start, the shares were up 36% by mid-morning. The Board is reviewing a range of strategic and financial options with the objective of strengthening the group's balance sheet. This is because there have been delays in securing advance payments on contracts secured this year. Petrofac has announced that it no longer expects to achieve its previous 2023 target of being broadly neutral at the free cash flow level. Market closed | Prices delayed by at least 15 minutes | Switch to live prices
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