Petrofac Ltd Tuesday said its engineering, construction, operations and maintenance division has had a good start to the year and the company said its portfolio is performing in line with expectations despite challenges at the Laggan-Tormore project.

Petrofac said construction activities at the Laggan-Tormore project north-west of the Shetland Islands are "substantially complete" and the company is focusing on pre-commissioning work to deliver first gas in the third quarter of 2015.

The FTSE 250 company said additional completion and pre-commissioning costs at the project are expected to lead to incremental pre-tax costs of around £30 million and it will recognise a deferred tax asset for tax losses on the project of around £20 million.

"These additional costs reflect our continuing firm intention to devote the necessary resources to the project," said Petrofac. "The rest of our portfolio continues to perform in line with our operational and financial expectations."

Petrofac said the total loss on the Laggan-Tormore project since the start of 2015 is around £140 million, or $220 million.

Petrofac said its net profit is to be "heavily weighted" to the second half of the year once the Laggan-Tormore project is producing gas. That will be particularly true for the company's onshore engineering and construction activities, where a number of projects are expected to reach their percentage of completion threshold for initial profit recognition in the second-half.

Since the start of 2015, Petrofac's engineering, construction, operations and management division has secured an order intake of $4.70 billion, including the $900 million Yibal Khuff award in June. At the end of may, the company's backlog stood at "record levels" at $20.50 billion, which compares to $18.90 billion at the end of December.

At the end of May, Petrofac had net debt of USD1.20 billion, significantly rising from USD700 million at the end of December, reflecting the company's ongoing investment in the Greater Stella Area project and its offshore installation vessel.

"Putting the challenges we have faced on Laggan-Tormore to one side, the rest of our portfolio continues to perform well. The group's backlog stands at record levels, giving us excellent revenue visibility for the rest of this year and beyond," said Chief Executive Ayman Asfari.

"Our pipeline of bidding opportunities remains attractive, and ongoing investment by our clients in large strategic projects in our core markets, together with our strong competitive position, should see us secure a number of further awards over the second half of the year," he added.

Source: www.lse.co.uk

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