TIDMPFC
RNS Number : 8141I
Petrofac Limited
06 April 2020
PETROFAC LIMITED
ACTIONS TAKEN IN RESPONSE TO COVID-19
Petrofac Limited (Petrofac) is today providing an update on the
actions it is taking to respond to the unprecedented market
conditions affecting our industry, clients and business. These
decisive actions include the following:
-- Protecting the health and wellbeing of our people, clients, suppliers and communities
-- Reducing overhead and project support costs by at least
US$100m in 2020 and by up to US$200 million in 2021
-- Conserving cash and liquidity by reducing capex by 40% and suspending the 2019 final dividend
Ayman Asfari, Petrofac's Group Chief Executive, commented:
"At this unprecedented time, our top priority remains the health
and well-being of our people, clients and suppliers, and ensuring
that we take decisive action to protect the long-term health of our
business. I would like to thank all of our people for their
outstanding response to the crisis, allowing Petrofac to continue
to operate effectively and provide invaluable support to our
clients during this challenging time.
"We have a resilient business model, strong competitive position
and a differentiated in-country value proposition that is highly
valued by our clients. Nevertheless, we are taking swift, decisive
action in response to the COVID-19 pandemic and lower oil prices to
reduce costs, retain our competitiveness and preserve the strength
of our balance sheet. These best position us to protect our
business, stakeholders and the communities we serve."
PROTECTING people, clients, suppliers AND COMMMUNITIES
Petrofac remains focused on taking all necessary steps to ensure
the health and well-being of its employees, clients, suppliers and
communities. Stringent health protocols are in place across all our
operations and we have transitioned quickly and effectively to
remote working to minimise business disruption. Engineering and
construction activity continues at most of our Engineering &
Construction (E&C) project sites and offices, although progress
is being impacted by supply chain disruptions, travel restrictions
and the Government enforced lockdowns in India and Iraq. Operations
and maintenance activity in our Engineering & Production
Services (EPS) business continues in all regions, albeit travel and
social distancing restrictions are having a modest impact on
activity levels.
We are also increasing the support we provide our local
communities. In Kuwait, we have vacated our 1,000 bed Lower Fars
camp to enable the Government to provide healthcare facilities if
required. In Algeria and Oman, we are donating funds for local
hospital equipment and supplies. In addition, we are supporting
employees who are volunteering to join the fight against COVID-19
in the communities where they live and work.
REDUCING COSTS
In this period of unprecedented disruption, we are taking
decisive actions to improve our cost competitiveness and protect
the long-term health of our business. These include:
-- Reducing and structurally rebasing salaries and allowances
for our Board, senior management and most of our employees by
between 10-15%
-- Reducing personnel by c.20% and furloughing staff in
anticipation of a reduction in activity levels
-- Reducing non-staff overhead costs by up to 25%
In aggregate, these measures are expected to reduce overhead and
project support costs by at least US$100m in 2020 and by up to
US$200 million in 2021.
CONSERVING CASH AND LIQUIDITY
Petrofac is committed to maintaining a strong balance sheet and
liquidity. As at 2 April 2020, the Group had liquidity of US$1.1
billion, following the planned repayment of a US$75 million
facility in February 2020. A two-year extension of a US$150 million
term loan in March 2020 has reduced debt maturities in the next 12
months to US$275 million. S&P has recently affirmed the Group's
investment grade credit rating.
In this period of extreme economic uncertainty, management
believe it is prudent to take steps to preserve cash and liquidity,
including cutting capital expenditure by 40% (US$60 million) in
2020 and managing working capital. In addition, the Board is
withdrawing its recommendation of a final dividend of 25.3 US cents
(US$85 million) announced on 25 February 2020. The Board recognises
the importance of dividends to shareholders and will review the
resumption and payment of dividends when the full impact of
COVID-19 and low oil prices is known.
OUTLOOK
We have a global, diversified business, with a strong balance
sheet and we are taking immediate measures to reduce our costs and
protect our financial position. Order intake of US$2.0 billion in
the first quarter has also increased our backlog to US$8.2 billion.
We believe that these factors, together with a capital light
business model and a strong competitive position in the Middle East
where the cost of production is low, will protect us against near
term headwinds.
However, it is too early to ascertain and quantify the impact of
both COVID-19 and low oil prices on financial performance or new
order intake and, as a result, we are suspending our previous
revenue and margin guidance. We will continue to closely monitor
the developing situation and update the market as appropriate.
ANNUAL GENERAL MEETING
The health of the Company's shareholders, as well as its
officers and employees is of paramount importance. It is expected
that the Company's attendance in person at the Annual General
Meeting on 15 May 2020 will be limited to satisfy the requirements
of a quorum and shareholders will not be allowed to attend the
meeting in accordance with UK Government advice. Shareholders are
therefore requested to submit their votes electronically or by post
in advance of the meeting.
ENDS
Disclaimer:
This announcement contains forward-looking statements relating
to the business, financial performance and results of Petrofac and
the industry in which Petrofac operates. These statements may be
identified by words such as "expect", "believe", "estimate",
"plan", "target", or "forecast" and similar expressions, or by
their context. These statements are made on the basis of current
knowledge and assumptions and involve risks and uncertainties.
Various factors could cause actual future results, performance or
events to differ materially from those expressed in these
statements and neither Petrofac nor any other person accepts any
responsibility for the accuracy of the opinions expressed in this
presentation or the underlying assumptions. No obligation is
assumed to update any forward-looking statements.
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regulation.
For further information contact:
Petrofac Limited
+44 (0) 207 811 4900
Jonathan Yarr, Head of Investor Relations
jonathan.yarr@petrofac.com
Aaron Clark, Investor Relations & Communications Manager
aaron.clark@petrofac.com
Alison Flynn, Group Head of Communications
alison.flynn@petrofac.com
+44 (0) 207 811 4913
Tulchan Communications Group
+44 (0) 207 353 4200
petrofac@tulchangroup.com
Martin Robinson
LEI 2138004624W8CKCSJ177
NOTES TO EDITORS
Petrofac
Petrofac is a leading international service provider to the
energy industry, with a diverse client portfolio including many of
the world's leading energy companies.
Petrofac designs, builds, manages and maintains oil, gas,
refining, petrochemicals and renewable energy infrastructure. Our
purpose is to enable our clients to meet the world's evolving
energy needs. Our six values - safe; ethical; innovative;
responsive; quality & cost conscious; driven to deliver - are
at the heart of everything we do.
Petrofac's core markets are in the Middle East and North Africa
(MENA) region and the UK North Sea, where we have built a long and
successful track record of safe, reliable and innovative execution,
underpinned by a cost effective and local delivery model with a
strong focus on in-country value. We operate in several other
significant markets, including India, South East Asia and the
United States. We have 11,500 employees based across 32 offices
globally.
Petrofac is quoted on the London Stock Exchange (symbol:
PFC).
For additional information, please refer to the Petrofac website
at www.petrofac.com
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END
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