Petrofac Mulls Asset Sale; Warns on Cash Flow

(File photo: Petrofac handout)
(File photo: Petrofac handout)

Petrofac said on Monday it was in discussions to sell some non-core assets and warned it would no longer be able to meet its annual forecast of "broadly neutral free cash flow", dragging the oilfield services provider's shares down nearly 8%.

The London-listed firm blamed delays in collecting advance payments on the new contracts it secured in 2023 for the warning.

Its shares were down to a record low of 15.64 pence in early trading, making it the top loser on the FTSE small-cap index.

"While the group has made progress in reaching contractual settlements and unwinding working capital, given delays in securing advance payment guarantees, it no longer expects to receive these advances before the year-end," Petrofac said in a statement.

After a boom in orders due to high oil prices last year, Petrofac has been struggling with payment delays and cost overruns at its largest unit - engineering and construction. It reported a $165 million loss for the first six months of the year.

The company said it was exploring potential new financial options across all its classes of capital, and was actively engaged in discussions with investors to take a non-controlling position in certain other components of its business portfolio.

The move is designed to strengthen its balance sheet, secure bank guarantees and improve short-term liquidity, the company said.

Last week, shares in London-listed Petrofac dropped to record lows after analysts flagged concerns over its balance sheet. Brokerage Berenberg said the company was in "a precarious position" and placed it under review, scrapping its rating and price target.

The company, which went public in 2005, designs and builds gas processing plants and clean fuels refineries, constructs offshore wind substations and manages clients' infrastructure.

(Reuters - Reporting by Eva Mathews; Editing by Nivedita Bhattacharjee and Emelia Sithole-Matarise)

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