Petrofac’s engineering and construction (E&C) business has reported a $123m loss in the first half of 2022, compared with $13m in net profit for the same period in 2022.
The division recorded a $122m loss in earnings before interest and tax (EBIT) for the period, compared with $4m in EBIT in the first half of 2022.
The financial performance in the first half “reflected low levels of activity on the legacy portfolio of contracts, with the new awards driving the growth in backlog but with minimal impact on other financial metrics in the period”, stated Petrofac.
The first half EBIT loss of $122m included approximately $67m of one-off write-downs on legacy contracts resulting from actions taken by management to protect full year cash flows.
In new energies, within its E&C business, highlights included TenneT selecting the Petrofac-Hitachi Energy partnership for a multi-year framework agreement covering six projects, worth approximately €13bn, with the first contract already awarded and valued at over €2bn, split between the partnership.
E&C has secured revenue of $500m for the second half of 2023, approximately a third of which from contracts with no future margin contribution.
Due to the small portfolio of active contracts, and an adverse operating leverage, Petrofac expects an EBIT loss of approximately 10% in E&C for the full year, before the impact of the $67m of write-downs.