Interim Results 23 August 2010

Transcription

1 Interim Results 23 August 2010

2 Important Notice This document has been prepared by Petrofac Limited (the Company) solely for use at presentations held in connection with the announcement of its interim results for the six months ended 30 June The information in this document has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this document, or its contents, or otherwise arising in connection with this document. This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding g the shares of the Company. Certain statements in this presentation are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward looking statements. t t These risks, uncertainties ti or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Statements contained in this presentation regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. You should not place undue reliance on forward looking statements, which only speak as of the date of this presentation. The Company is under no obligation to update or keep current the information contained in this presentation, including any forward looking statements, or to correct any inaccuracies which may become apparent and any opinions expressed in it are subject to change without notice. 2

3 Headlines Strong financial performance in 1H 2010, including US$126m gain on EnQuest demerger Backlog of US$6.9bn at 30 June 2010, augmented by US$1.1bn of new awards in 2H 2010 to date; gives outstanding revenue visibility Working towards conversion to the second phase of South Yoloten project in Turkmenistan Recently awarded strategically significant Production Enhancement contract in Romania EnQuest demerger demonstrates value of Energy Developments build & harvest strategy Backlog 5 yr CAGR 22% 4,173 4,441 3,997 8,071 7,957 1,100 6,857 New awards (1) Revenue Net profit 5 yr CAGR 25% 5 yr CAGR 46% (2) 1,864 2,440 3,330 3,655 1,586 2, Gain on EnQuest demerger 34% 42% H H09 1H H09 1H10 Note: all figures presented above are for the group s continuing operations and are for financial years ended 31 December and interim periods ended 30 June (US$ millions) (1) US$1.1bn of new contract awards won since 1 July 2010 (2) Excluding the gain on the EnQuest demerger 3

4 Engineering & Construction contract awards US$600m award for gas sweetening facilities awarded by Qatar Petroleum in March 2010 Two contracts awarded by Kuwait Oil Company since 1 July 2010: US$400m, 23.5 month EPC contract for the installation of fuel gas and gas oil pipelines US$430m, 36 month EPC contract for effluent water and sea water injection facilities Submitted technical and commercial proposals following first phase of Turkmenistan project Commenced early stage engineering work for an IOC in Iraq Repeat contract awards demonstrate competitive position in the Middle East Kuwait Contracts Awarded US$60m facility upgrade contract for KOC Maintenance services contract for KOC US$680m facilities upgrade contract for KOC US$52m system replacement contract for KOC US$543m pipeline contract for KOC US$400m pipeline contract US$430 water injection contract both for KOC Qatar Contracts Awarded Utilities upgrade contract for QGPC FEED contract for QGPC Modification works US$175m contract RAG and Flare FEED contract Mitigation project both for QP for QP 3 year consultancy contract for QP US$600m gas sweetening facilities for QP 4

5 Energy Developments build and harvest EnQuest demerger demonstrates value of Energy Developments build & harvest strategy Project IRR of approximately 35%; capital gain of US$126m Ongoing investments are performing in line with expectations; none are yet ready for harvest Seeking further opportunities to co-invest in projects and replicate the strategy 1,500 Share price performance 1,400 GBp 1,300 1,200 1,100 PFC + ENQ PFC FTSE 100 (rebased) 1, Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 5

6 Production Solutions Dubai Petroleum contract A case study of our capability in transition management Awarded contract by Dubai Petroleum in 2006; seamlessly transitioned to full operational responsibility by April 2007 As service operator, we improved production efficiency and slowed the decline rate while achieving an excellent safety record In October 2010 we transition to a Technical Services Agreement with the Government of Dubai s Department of Petroleum Affairs 99.5% Production efficiency (1) Total oil production 99.0% 98.5% Fall in decline rate 98.0% 97.5% 97.0% to Date (1) Production efficiency calculated to 25 July Calculated as 1 (unplanned losses / total oil production) 6

7 Production Solutions Production Enhancement model Market represents an area of significant potential growth over medium-term Innovative contract structures to align us with our customers Value generated through the investment and leveraging of our service capability and expertise Tariff or quasi-equity nature of Production Enhancement contracts ensure they sit further up the value chain Petrofac s commercial flexibility Production Enhancement model indicative production profile Risk Bbls/ day Reim. services Cost plus KPIs m turnkey Lump-su Productio on Enhanceme ent Co-invest stment in in proje ects Incremental production Baseline production Reward Years 7

8 Production Solutions Ticleni contract Ticleni and its eight satellite fields are located in southwest Romania Fields encompass more than 1,000 wells (300 currently active) Pilot water injection programme to be undertaken in selected sectors of field (upfront investment of ~ US$20m) If successful, full field program will be implemented, requiring more significant capex Opportunity to develop a track record for excellence in Production Enhancement 15 year contract with 10 year option Revenue backlog for first five years of US$270m Current production around 4,500 bpd; targeting production enhancement of 50% over first five years 900 local Petrom personnel to transfer to Petrofac by end 2010 Ticleni Field 8

9 Training Services, Engineering Services Training Services has seen improved performance in UK market, mixed performance in international centres Focusing efforts on higher value projects Significant investment in UK and international business development teams Engineering Services continues to experience low activity levels in Woking, UK High activity levels in Indian offices, which support Engineering & Construction Training Services worldwide training facilities Training i opportunities are supported by clear market drivers: Supporting oil & gas companies to prepare for the big crew change Government workforce nationalisation Potential increase in industry regulation 9

10 Offshore Engineering & Operations Activity levels increased due to 2H 2009 contract awards and general improvement in market conditions Tendering activity remains at high levels, both in the UK and internationally Success in securing extensions with major IOCs Britannia operations and maintenance for Central North Sea (5 years) BHP Billiton operations and maintenance for Liverpool Bay Development (5 years) We have completed four small capability- broadening acquisitions in 1H 2010 at an initial cost of US$15m 1010

11 Income Statement 1H 2010 (1) US$m 1H 2009 US$m Revenue 2, , % Operating profit % Profit before tax % Income tax expense (53.8) (28.8) Profit for the period Profit for the period attributable to Petrofac Limited shareholders % EBITDA % ROCE 56.9% 40.6% EPS (diluted) % Interim dividend % (1) Excluding the US$125.6m gain on the EnQuest demerger Note: all figures presented above are for the group s continuing operations and are for interim periods ended 30 June (US$ millions); 11

12 Backlog Backlog of US$6.9bn at 30 June 2010, augmented by US$1.1bn of new awards since 1 July: Engineering g & Construction backlog US$5.4bn (Dec 2009: US$6.2bn) lower due to progress on portfolio of contracts; US$0.8bn of new awards since 1 July 2010 Offshore Engineering & Operations backlog US$1.4bn (Dec 2009: US$1.6bn) decrease principally due to period end exchange rate movements Engineering, Training Services and Production Solutions backlog of approximately US$30m (Dec 2009: US$0.3bn); Ticleni contract awarded in July 2010 adds further US$270m 1H 2010 backlog (US$bn) E&C backlog by region (US$bn) E&C backlog by year (US$bn) % 2% % 2.2 E&C OEO ETSPS Middle East North Africa CIS >

13 Cash flow and gross cash balances Cash position remains strong at US$1.1bn: Net cash outflow from operating activities due to increase in WIP (expected to be temporary) advance payments on Engineering & Construction awards partially unwinding Investing activities include US$78m of capex additions Financing activities include payment of 2009 final dividend of US$85m Gross cash position and cash flow movements (US$m) 1,417.4 (88.8) = Billings in excess of cost (110.6) and estimated earnings less (143.1) amounts billed in advance but not 1,074.9 received = cash advances, measured as Advances received from customers net of any associated work in progress (on a project by project basis) Dec 2009 Operating Investing Financing/Other Jun

14 Engineering & Construction Continues to perform strongly: Revenue 50% - high activity levels due to record order intake in 2009 (over US$6bn) Net profit 49% - due to continued strong operational performance and first time profit recognition Net profit margin maintained at 11.4% Revenue (US$m) EBITDA (US$m) and margin 2, Net profit (US$m) and margin ,994 50% 1, % 49% ,170 1, % 13.8% 13.2% 14.6% 12.0% 10.5% 10.4% 10.6% 11.4% 11.4% H09 1H H09 1H H09 1H10 14

15 Offshore Engineering & Operations Performed better in 1H 2010: Net revenue 17%, net profit 34% increased activity levels from major new contract awards in 2H 2009 general improvement in market conditions Net margin on net revenue improved to 1.6% Passthrough revenue Revenue (US$m) % EBITDA (US$m) and Net profit (US$m) and margin margin (1) % 3.2% 3.1% % 34% % 3.0% 29% 2.9% % 2.5% 2.1% 2.0% 1.4% 1.6% 1.6% 1.0% 1.2% H09 1H H09 1H H09 1H10 (1) Dotted line indicates net margin on revenue net of pass-through revenue 15

16 Engineering, Training, Production Solutions Mixed results across the business units: Revenue and net profit 12% due to continued subdued activity levels in Engineering Services and lower level of drilling management activities on Dubai Petroleum contract Training Services beginning to show an increase in training delegate numbers Net margins held at 8.1% Passthrough revenue Revenue (US$m) EBITDA (US$m) and Net profit (US$m) and margin margin (1) % 2% 12% % 12 60% 73% 8.9% 6.0% 7.3% 8.7% 9.3% 11.8% 12.1% 12.2% 11.5% 13.3% 5.4% 6.5% 8.1% 8.1% H09 1H10 (1) Dotted line indicates net margin on revenue net of pass-through revenue H09 1H H09 1H10 16

17 Energy Developments Growth in revenue and EBITDA: Revenue 29% - primarily due to higher average oil prices (Brent) oil price averaged US$77 per barrel for 1H 2010 (1H09: US$52) EBITDA 49% - driven by increased production from the Don fields prior to the demerger and higher average oil prices Revenue (US$m) 249 EBITDA (US$m) Don assets % 49% H09 1H H09 1H10 17

18 Summary and outlook Strong 1H 2010 performance, with earnings growth of 42% Backlog of US$6.9bn, augmented by US$1.1bn 1bn of awards in 2H 2010 to date, gives outstanding level of revenue visibility for 2010 and beyond Competitive position in our core markets, which have strong growth prospects Confident in maintaining Engineering & Construction sector-leading net margins over medium-term Ticleni Production Enhancement contract indicative of commercially innovative and flexible business model EnQuest demerger demonstrates value of Energy Developments build & harvest strategy We are: confident that we will deliver like-for-like net profit growth, excluding the gain on the EnQuest demerger, of around 20% for the full year 18

19 Appendices

20 Appendix 1: 12 largest current EPC contracts Harweel EOR plant, Oman In Salah gas compression, Algeria Jihar gas plant, Syria Mina Al-Ahmadi refinery pipelines, Kuwait Asab onshore oil field development, Abu Dhabi Karan cogeneration and utilities, Saudi Arabia El Merk gas processing facility, Algeria Kauther gas compression project, Oman 4 th NGL train at Integrated Gas Development, Abu Dhabi Gas sweetening facilities project, Qatar Mina Al-Ahmadi Ahmadi refinery pipelines 2, Kuwait Raudhatain & Sabriyah fields water injection, Kuwait Customer key: NOC/NOC led company/consortium Joint NOC/IOC company/consortium Oii Original contract t value to Petrofac US$983m US$600m US$454m US$543m US$2,300m Undisclosed US$2,200m US$350m US$500m >US$600m US$400m US$430m Dec Dec Dec Dec Dec Dec Dec

21 Appendix 2: Effective tax rate Tax charge by segment 1H reported reported Engineering & Construction 17% 18% Offshore Engineering & Operations 27% 27% Engineering, Training and Production Solutions 0% 2% Energy Developments (1) 50% 31% Engineering & Construction ETR marginally lower due to material changes in jurisdictions in which profits are expected to be earned (notwithstanding adjustments made in prior year re applicability of lower tax rate to group s projects in Oman) Energy Developments higher due to ring fence expenditure supplement no longer being available for claim following the EnQuest demerger (1) Excluding the US$125.6m gain on the EnQuest demerger (non-chargeable gain for UK tax) 21

22 Appendix 3: Segmental performance Engineering & Construction earned 74% of revenue and 84% of net profit Middle East and Africa: a key ygeographic g market for Engineering g& Construction Europe: activity principally in UK North Sea, where majority of Offshore Engineering & Operations revenues are generated CIS & Asia: primarily relates to Engineering g & Construction o activity ty in Kazakhstan a 1H 2010 Revenue 1H 2010 Net Profit 1H 1H Revenue 15% 6% 5% 2% 6% 8% 10% 10% 0% 0% 18% 18% 74% 84% 72% 72% E&C OEO ETSPS ED E&C OEO ETSPS ED Middle Middle East East & Africa & Africa Europe Europe CIS CIS & Asia & Asia Other Other 22

23 Appendix 4: Employee numbers 12,500 people in 6 key operating centres and 19 offices EPC headcount includes the engineering g offices in Mumbai and Chennai, which although reported in ETSPS principally support E&C activities Approximately 4,000 employee shareholders or participants in employee share schemes EPC headcount 4,400 3,300 2,200 2,400 5,600 6, Jun-10 Indonesia India UAE and sites 23 Operating centre Country office

24 Appendix 5: Organisational structure Repor rting Segme ents Engineering & Construction Offshore Engineering & Operations Engineering, g Training Services and Production Solutions Energy Developments Business s Units Engineering & Construction Sharjah Engineering & Construction Ventures Offshore Engineering & Operations Engineering Services Training Production Solutions Energy Developments Key Elemen nts Sharjah EPC business EPC in new markets: Abu Dhabi Saudi Arabia LNG Operations Management Offshore Projects Reimbursable bl engineering Woking Mumbai Chennai Health & Safety training Technical training Consultancy Dubai Petroleum Co-investment t SPD in upstream Eclipse and energy Caltec infra-structure Plant Asset assets Mgmt. 24

25 Appendix 6: EPC risk management 100% Project risk Revenue recognition Profit recognition Manage/ /support local construction contractors Integrated procurement team manage buying, inspection and expediting Well-established procedures assist project team to manage in-house engineering; contractual terms with vendors and subcontractors finalised Review of key technical and commercial risks and mitigants by Risk Committees / Board; negotiation of contract terms Careful selection of partners, subcontractors and vendors build up pricing from ground-up; early stage engineering (many thousands of manhours) Assessment of customer and country risk and development of high-level execution strategy Final acceptance certificate Provisional acceptance certificate Robust Completion systems to facilitate smooth startup 0% 100% Effective Date Mechanical completion Proposal phase Execution phase Warranty phase (typically 2-4 years) 25

26 Notes EBITDA means earnings before interest, tax, depreciation and amortisation and is calculated as profit from operations (excluding the US$125.6m gain on the EnQuest demerger) before tax and finance costs adjusted to add back charges for depreciation, amortisation and impairment. Net profit (for the group) means profit for the period from operations attributable to Petrofac Limited shareholders (excluding the US$125.6m gain on the EnQuest demerger) Backlog consists of the estimated revenue attributable to the uncompleted portion of lump-sum engineering, procurement and construction contracts and variation orders plus, with regard to engineering services and facilities management contracts, the estimated revenue attributable to the lesser of the remaining term of the contract and, in the case of life of field facilities management contracts, five years. To the extent work advances on these contracts, revenue is recognised and removed from the backlog. Where contracts extend beyond five years, the backlog relating thereto is added to the backlog on a rolling monthly basis. Backlog includes only the revenue attributable to signed contracts for which all pre-conditions to entry have been met and only the proportionate share of joint venture contracts that is attributable to Petrofac. Backlog does not include any revenue expected to arise from contracts where the customer has no commitment to draw upon services from Petrofac. Backlog is not an audited measure. Other companies in the oil and gas industry may calculate these measures differently. Od Order intake comprises new contracts t awarded, d growth in scope of existing iti contracts and the rolling increment attributable to contracts which extend beyond five years. The group reports its financial results in US dollars and, accordingly, will declare any dividends in US dollars together with a Sterling equivalent. Unless shareholders have made valid elections to the contrary, they will receive any dividends payable in Sterling. Conversion of the 2010 interim dividend from US dollars into Sterling is based upon an exchange rate of US$1.5482: 1, being the Bank of England Sterling spot rate as at midday, 20 August Operating profit means profit from operations before tax and finance costs. 26

27 Contact information: Jonathan Low Head of Investor Relations