Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Oil services company Petrofac said lower demand in its engineering and construction business had weighed on first-half revenue.
In a trading update, the company said revenue in the division for the six months through June were expected to fall to around $1.0 billion, down from $1.6 billion year-on-year.
The fall, it said, reflected lower levels of activity, a re-scoping of the Sakhalin contract in Russia and other disruption to project schedules caused by the pandemic.
'As expected, the recovery in oil prices has yet to manifest itself in a significant expansion in capital spending by our clients,' Petrofac said.
In the year to date, it had secured new awards worth US$0.1 billion, down from $0.4 billion year-on-year.
On a brighter note, the company said first-half revenue at its engineering and production services business was expected to rise to around $500 million, up from $426 million.
That division's net margin was currently expected to be between 5.25% and 5.75%, driven by an increase in brownfield project contract margins and a lower overhead ratio.
Petrofac's group order backlog had fallen to $4.0 billion at the end of May, down from $5.0 billion year-on-year.
'We remain committed to exercising capital discipline, cutting costs and conserving cash,' the company said.
'We are taking additional measures to reshape the business and continue to target a $250 million reduction in overhead and project support costs in 2021 relative to pre-pandemic levels.'
'In addition, dividends remain suspended pending a recovery in new order intake. These actions seek to protect the balance sheet and improve our cost competitiveness as we seek to rebuild the backlog.'