2008 final results presentation new2 - petrofac · 2020-05-21 · this document does not constitute...

1

2008 Final Results9 March 2009

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 results for the year ended 31 December 2008. 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 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. These risks, uncertainties 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

Ayman AsfariGroup Chief Executive

Note: all figures presented above are for the group’s continuing operations and are for financial years ended 31 December (US$ millions) *2008 backlog plus new contract awards in 2009 to date

Headlines

Excellent revenue and net profit growth; driven by Engineering & Construction

Backlog US$4.0 billion at end of 2008, augmented by US$2.8 billion of new contract awards in 2009 to date; gives high revenue visibility through to 2011

Potential for further awards, healthy prospects list and cost-effective structure ensures competitive position

Strong balance sheet; gross cash balances of US$694 million at end 2008

Dividend payout ratio increased from 30% to 35% from 2008 final dividend

952

1,4851,864

3,330

2,440

2004 2005 2006 2007 2008

Revenue Backlog

1,740

3,244

4,173

3,997

4,4412,800

2004 2005 2006 2007 2008

4

5 yearCAGR 37% 2009

YTD awards

46.175.4

120.3

265.0

188.7

2004 2005 2006 2007 2008

Net profit

5 yearCAGR 55%

5 yearCAGR 40%*

6,797*

New organisational structure

New organisational structure implemented 1 January 2009

Maroun Semaan appointed Chief Operating Officer

Seven business units

5

Main drivers:

– Provide a platform for continued growth

– Share best practice

– Improve integration of services and revenue synergies

– Develop the management ‘bench’

Engineering & Construction

Sharjah EPC business

E&C Ventures

Petrofac Emirates

Saudi Arabia

Petrofac IKPT

Engineering Services

Reimbursable engineering

•Woking

•Mumbai

•Chennai

Offshore Engineering & Operations

Brownfield

Offshore projects & engineering

Facilities Management

Training

Health & Safety training

Technical training

Consultancy

Production Solutions

Dubai Petroleum

SPD

Eclipse

Caltec

i-Perform

Plant Asset Mgmt

Energy Developments

Investment

Operating environment

Despite recent economic downturn, long-term drivers remain robust

— Demand for oil & gas expected to increase significantly over medium/long-term

— On supply side, mature production expected to decline by 9% per annum without intervention (IEA, 2008)

— High levels of capital expenditure (capex) required over long-term to replace existing capacity and build new production

6Source: based on IEA data, World Outlook 20082008 2030

0

20

40

60

80

100

120

Oil

Prod

ucti

on &

Dem

and

(mbb

ls/d

)

Existing Production New Production

Existing production base declining at around 8% per year

Existing production base declining at around 8% per year

By 2030, new production capacity of more than 70% of the existing base will be required to meet demand

Demand expected to grow 1.6% per year


Sharp fall in oil price creates uncertainty over timing

— Recent change in global economic conditions, including sharp fall in oil price, creates uncertainty over timing of customers’ capex

— Sector has seen project cancellations, particularly in high-cost production areas which are uneconomic in current environment

— Some delays in lower-cost production areas while customers adjust to recent changes and try to benefit from lower external supplier costs

7

0

5

10

15

20

25

30

35

40

<$60 $60-80 >$80 <$60 $60-80 >$80

mboe/d

Conventional Deepwater LNG Oil Sands

2012E - 20152008 - 2011E

Cost of new productionSource: UBS research, February 2009


Petrofac well-positioned

— Focus on onshore projects in regions with below average development costs

— NOCs are key customers, and are generally maintaining capex plans

— Already evidence that key strategic projects in core markets expected to progress as customers take longer-term view

— Focus on gas prospects which are driven by domestic demand and meeting long-term supply agreements

8

Cost of existing productionSource: Credit Suisse research, 2008, arrow, oval and italicised text added

Gulf OPEC

Curve likely to move to left as mature fields deplete

Core Petrofac markets

0

20

40

60

80

100

120

0 10 20 30 40 50 60 70 80 90 100Hydrocarbon liquids-millions of barrels per day

16%

RO

CE

WTI

pric

e $

per b

oe

Major oils today

Traditional reinvestment (Deep Water & some oil sands)

Unconventional reinvestment(with subsidies)

Marginal cost of supply-less efficient oil sands


Operational expenditures expected to be robust

— Group expects to maintain services to customers as they continue to operate their facilities

— MMO expenditures resilient though customers will look for cost-efficiencies, which may create opportunities

— Some of group’s businesses that are more reliant on customers’discretionary spend are expected to face more challenging environment

9

New awards in 2009 to date

We have been targeting Abu Dhabi and Saudi Arabia as key markets for medium-term growth for some time

Recent success in securing contracts in these markets reinforces the group’s strong position:

– Asab field development, Abu Dhabi, US$2.3 billion, awarded January 2009

– Karan facilities, Saudi Arabia, awarded February 2009 (value undisclosed)

Healthy bidding pipeline expected for our core markets over the medium to long-term

E&C backlog by year*

39%

36%

25%

2009 2010 > 2010

E&C backlog by region*

86%

10%4%

Middle East North Africa CIS

*2008 backlog plus new contract awards in 2009 to date 10

Growing cost-effective capability

Group has grown capacity and capability to undertake larger-scale EPC projects

Out of group’s personnel of 11,100 at 31 December 2008, Engineering & Construction represents around 44%

Majority of recent growth in Engineering & Construction has been in India, where we now have around 1,000 employees; looking at opportunities for new office locations

Joint venture established with IKPT in Indonesia to pursue LNG and other opportunities

Joint venture established with Mubadala, Petrofac Emirates, with primary focus on Abu Dhabi market

Group employees*

8,100

9,80011,100

2006 2007 2008

* Including agency and contract staff and the group’s share of joint venture employees

E&C employees*

2,900

3,900

4,900

2006 2007 2008

11

Energy Developments update

West Don and Don Southwest on schedule for first oil 1H 2009; development on budget

– Northern Producer (NP) floating production facility on location; Petrofac is Duty Holder

– Service businesses managed modifications to NP topsides and subsea infrastructure

– Drilling programme commenced in August 2008; 2nd drilling rig mobilised to maintain schedule despite unfavourable weather

Chergui commenced first exports in August 2008

– Exceeded nameplate capacity by 20% following commissioning of refrigeration unit and debottlenecking of plant

Other assets continue to perform well

12

Keith RobertsChief Financial Officer

Income Statement

55%16.4 cents25.4 centsFull year dividend

41%54.6 cents*77.1 centsEPS (diluted)

45.7%*52.7%ROCE

39%301.3419.0EBITDA

40%188.7265.0Profit for the year

(69.5)(93.4)Income tax expense

258.2358.4Profit before tax

9.72.8Net finance income

43%248.5355.6Operating profit

36%2,440.33,329.5Revenue

2007 US$m

2008 US$m

14*As restated

Cash Flow and Balance Sheet

**Interest-bearing loans and borrowings/total equity

269.8362.3Included in cash balances are advances from customers on EPC contracts of:

471.5551.8Net cash

(94.4)(97.4)Less interest-bearing loans and borrowings

*Excludes restricted cash and is net of bank overdrafts

15%565.9649.2Cash and cash equivalents at 31 December*

128.583.3Net increase in cash and cash equivalents

(63.7)(87.8)Net cash flows used in financing activities

(140.0)*(315.6)Net cash flows used in investing activities

332.2*486.7Net cash flows from operating activities

2007 US$m

2008 US$m

15*As restated

Group Overview

Revenue increased 36%, reflecting growth in all 3 divisions

Principally driven by strong growth in Engineering & Construction due to high levels of activity on lump-sum EPC projects

16

Backlog (US$m) and growth*

3,9974,173 4,441

6,797*

28.6%6.4%

53.1%*

2006 2007 2008

Revenue (US$m) and growth

1,864

2,440

3,330

25.5%30.9%

36.4%

2006 2007 2008

Increase in revenue from Middle East and Africa due to growth in Engineering & Construction

Backlog US$4.0 billion at 31 December 2008, augmented by US$2.8 billion of awards in 2009 to date (2.0 times 2008 revenue)

Geographic split of revenue

52%

24%

24%

Middle East & Africa Europe CIS & Asia*2008 backlog plus new contract awards in 2009 to date

Net profit (US$m) and margin

120.3

188.7

265.0

6.5% 7.7% 8.0%

2006 2007 2008

EBITDA (US$m) and margin

198.3

301.3

419.0

10.6%12.3% 12.6%

2006 2007 2008

Group Overview

EBITDA increased by 39%

EBITDA margin increased to 12.6% due to strong operational performance in Engineering & Construction

17

Net profit increased by 40%

Net margin increased to 8.0%, broadly in line with the increase in EBITDA margin

Net profit by division*

76%

11%

13%

E&C OS ED* Adjusted for non-recurring items

in Energy Developments

Effective Tax Rate (ETR) 2008

Engineering & Construction reported a lower full year ETR due to a higher proportion of profits earned in lower tax jurisdictions

Operations Services’ ETR was slightly higher than estimated due to withholding taxes on its international business

Energy Developments’ ETR was higher due to an US$8.2 million charge in relation to a cash flow hedge deemed ineffective under IAS39, where no tax relief is available

18

Tax charge by division FY 2008 1H 2008 2008 reported reported estimate

Engineering & Construction 21% 18% 23%

Operations Services 27% 27% 25%

Energy Developments 50% 45% 46%

New organisational structure

Maroun SemaanChief Operating Officer


Engineering & ConstructionVentures

Engineering Services

Offshore Engineering & Operations

Training Production Solutions

Energy Developments

Lump-sum EPC Reimbursable engineering services

Training

Dubai Petroleum, SPD, Caltec, Eclipse, i-Perform

Energy Developments

Brow

nfie

ld

engi

neer

ing

Faci

litie

s M

an,

exc

Dub

ai P

et,

SPD

, Ca

ltec

…)

Engineering & Construction Operations Services Energy Developments

Serv

ices

Div

isio

ns

(pre

1/1

/9)

Busi

ness

uni

ts

(pos

t 1/

1/9)

19


Revenue increased 57% due to high levels of activity on lump-sum EPC projects, including new awards in 2008

7 largest projects contributed 88% of division’s lump-sum EPC revenue

Reimbursable engineering service revenues accounted for approximately 13% of the division’s revenue

20


1,0811,415

2,219

26.0% 30.9%

56.9%

2006 2007 2008


Backlog was US$2.4 billion at 31 December 2008; order intake in 2008 was up 23% at US$2.0 billion

Key awards in 2008 were: Jihar and Ebla gas plants in Syria, US$1.0 billion; Mina Al-Ahmadi refinery pipelines in Kuwait, US$0.5 billion

31 Dec 2008 backlog augmented by US$2.8 billion of awards in 2009 to date

Key awards in 2009 to date are: Asab field development in Abu Dhabi, US$2.3 billion; Karan utilities and cogeneration in Saudi Arabia (value undisclosed)

Order intake (US$m)2,800

2,017

1,157

1,637

2006 2007 2008 2009 YTD


2,408

2,2282,540

5,208*

5.0% 14.0%

105.0%

2006 2007 2008

*

E&C backlog by year*

39%

36%

25%

2009 2010 > 2010*2008 backlog plus new contract awards in 2009 to date 21


EBITDA increased by 64% due to revenue growth and margin improvement

EBITDA margin increased to 12.8% due to continued strength in execution performance

Net profit increased by 64%

Net profit margin increased for 4th successive year to 10.1%


95.4

137.1

224.1

8.8% 9.7% 10.1%

2006 2007 2008


127.3

173.9

285.1

11.8% 12.3% 12.8%

2006 2007 2008

22

Operations Services

Revenue increased 8%; net revenue increased 3%

Majority of revenue is Sterling denominated; on a constant currency basis net revenue increased 11%

Growth driven principally by:

– Full year contribution from the Dubai Petroleum contract (commenced April 2007)

– Strong growth in SPD Group

23


222

227 276729

911982

20.5% 24.9%

7.8%

2006 2007 2008

Pass-through revenue

Backlog (US$m) and growth

1,945 1,901

1,589

73.1%2.3% 16.4%

2006 2007 2008

Operations Services

Backlog was US$1.6 billion at 31 December 2008

Majority of backlog is Sterling denominated; on a constant currency basis, backlog marginally increased to US$2.0 billion

Key movements in 2008 were:

– Northern Producer Duty Holder contract award

– Venture Production Duty Holder contract extension to late 2010


1,994 1,901 2,000

50.7%

4.7% 5.2%

2006 2007 2008* On a constant currency basis (at 2007 year end exchange rates)

OS backlog by year

30%

25%

45%

2009 2010 > 2010

24

Operations Services

EBITDA increased to US$53.8 million

EBITDA margin decreased marginally to 5.5%, due to an increase in proportion of pass-through revenue

EBITDA margin on net revenue increased from 7.5% to 7.6%

Net profit increased by 10% to US$31.8 million; net profit margin maintained at 3.2%

On a constant currency basis, net profit would have increased by 23% to US$35.5 million

Net profit margin on net revenue increased to 4.5%* due principally to improved margins in the Facilities Management business

* Excluding amortisation and finance charges due to acquisition intangibles and deferred consideration, underlying net margin increased to 5.1% (2007: 4.7%)


18.1

28.931.8

3.6% 4.2% 4.5%

2.5% 3.2% 3.2%

2006 2007 2008


32.9

51.2 53.8

4.5%5.6% 5.5%

2006 2007 2008

25

Energy Developments

Revenue increased 16% due to:– Commencement of exports from the Chergui gas

plant in Tunisia– Improved performance at the KPC Refinery in

Kyrgyzstan

Cendor field, offshore Peninsular Malaysia, and Ohanet gas plant, Algeria, continue to perform well

EBITDA increased by 8% due to the commencement of exports from Chergui and the improved performance at the KPC Refinery

EBITDA contribution from Cendor and Ohanet broadly in line with 2007


62

133153

34.1%

113.8%

15.5%

2006 2007 2008


40.1

82.889.1

64.6% 62.3% 58.1%

2006 2007 2008

26

Energy Developments

Net profit was US$21.9 million, before adjustment for non-recurring items

On an adjusted basis, net profit increased 25% due principally to Chergui and the KPC Refinery

The principal adjustments to net profit in 2008 were:

– A US$8.2 million charge in relation to a cash flow hedge deemed ineffective under IAS39

– An impairment provision against the division’s investment in Permit NT/P68 in Australia of US$3.5 million (after tax)

– Net (after tax) costs of US$4.9 million written-off in relation to the unsuccessful Prospero well in the Greater Don area

27

Net profit (US$m) and margin*

14.4

30.8

38.5

23.1% 23.2% 25.1%

2006 2007 2008

* Adjusted for non-recurring items

Outlook


– Strong backlog, including new awards, gives high level of visibility of revenue through to 2011

– Potential for further awards: healthy prospects list and cost-effective structure gives strong competitive position

Operations Services

– Despite some pressure on customers’ discretionary spend, operational expenditures expected to remain resilient

– Recent acquisitions to be packaged with other group businesses to deliver solutions to enhance and improve production, particularly in mature fields

Energy Developments

– 1H 2009 first oil on Don remains key objective

– Strong balance sheet will enable division to take advantage of new opportunities in current market conditions

Strong cash generation, dividend payout ratio increased from 30% to 35%

Well-positioned to deliver strong growth in earnings in 2009 and beyond28

Notes

EBITDA means earnings before interest, tax, depreciation and amortisation and is calculated as profit from operations before tax and finance costs adjusted to add back charges for depreciation, amortisation and impairment.

Net profit (for the group) means profit for the year from operations attributable to Petrofac Limited shareholders.

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. Order intake comprises new contracts awarded, growth in scope of existing 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 2008 final dividend from US dollars into Sterling is based upon an exchange rate of US$1.4235:£1, being the Bank of England Sterling spot rate as at midday, 6 March 2009.

Return on capital employed is defined as the ratio of earnings before interest, tax, amortisation and impairment charges (EBITA) divided by average capital employed, being average total assets employed less average total current liabilities.

Operating profit means profit from operations before tax and finance costs.

29

Appendices

7%

13%

16%

48%

16%

Ohanet Cendor

Chergui Don SW

W Don

11%

15%

20%40%

14%

Ohanet Cendor

Chergui Don SW

W Don

7%

15%

17%

48%

13%

10%

16%

16%41%

17%

Appendix 1: Energy Developments reserves

1 Jan 2008: 22.7 mmboe

31 Dec 2008: 21.3 mmboe31 Dec 2008: 33.9 mmboe

1 Jan 2008: 36.7 mmboe

Proved plus Probable ReservesProved Reserves

Appendix 2: Energy Developments reserves

Summary of 2008 Reserves Movements

9.9 9.1

22.7 21.3

36.7 33.9

0

5

10

15

20

25

30

35

40

45

Open Close Open Close Open Close

Oil

Equi

vale

nt (m

mbo

e)

W Don Don SW Chergui Cendor Ohanet

Proved Developed Total Proved Proved plus Probable

Petrofac Energy Developments

2008 Reserves Movements

Detail of Proved Reserves Movements

22.7 (0.1)

0.0 0.0 (1.3)21.3

0

5

10

15

20

25

30

35

40

45

1 Jan 2008 Revisions Additions Acquisitions Production 31 Dec 2008

Oil

Equi

vale

nt (m

mbo

e)


Detail of Proved plus Probable Reserves Movements

36.7 (1.5)0.0 0.0 (1.3)

33.9

0

5

10

15

20

25

30

35

40

45

1 Jan 2008 Revisions Additions Acquisitions Production 31 Dec 2008

Oil

Equi

vale

nt (m

mbo

e)


Appendix 3: 10 largest current EPC contracts

Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11

Facilities upgrade, Kuwait

In Salah gas compression, Algeria

Harweel EORplant, Oman

Hasdrubal gas plant, Tunisia

Salam gas plant, Egypt

US$600m

US$376m

US$410m

US$983m

US$680mOriginal contract value

Jihar gas plant, Syria

Ebla gas plant, Syria

US$454m

US$477m

Mina Al-Ahmadi refinery pipelines, Kuwait US$543m

Asab oil field, Abu Dhabi US$2,300m

Karan utilities, Saudi Arabia Undisclosed

2008 Final Results9 March 2009

2008 final results presentation new2 - petrofac · 2020-05-21 · this document does not constitute...

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